Services: Green Square

Holding company restructures and redundancies are producing a new wave of indie agencies. It’s only a matter of time until they herald a new era of creativity, says Green Square’s Tony Walford. At the 2025 Predictions event run by The Drum in February, I was asked what I thought the year would bring for the agency landscape. My response was two things: further consolidation and this will be the year of the indie. Whilst we will see various agencies come together (not just Omnicom/IPG, but think Bauer/Channel Advisor and even Transmission/Earnest), we will also see indie agencies coming into their own, supplemented by a plethora of start-ups. And here’s why. The Omnicom/IPG combination will undoubtedly result in significant job losses as the combined company looks to increase profitability through cost-cutting. The saying “You can’t cut your way to growth” is very pertinent here…improving profitability through rationalization is all that’s being talked about, with seemingly no focus on growing revenues. WPP is shedding staff following its dismal 2024 results and, only this week, announced further consolidation within GroupM as it pulls its four agencies that operate under that banner into one. This is on top of some high-profile departures, including Ajaz Ahmed, founder of AKQA and veteran of 30 years, who recently broke cover on his new Indie startup, Studio.One. As a result, there are a lot of senior players within these groups considering their options even before the axe falls, and many will already be planning their next move – either joining an independent or starting one with a bunch of like-minded talent. Whilst restrictive covenants will prevent many stealing key clients and soliciting fellow staff for a period, client CMOs and brand marketers follow the talent, and it won’t take long for these agencies to thrive – look at Adam&Eve and Uncommon as prior examples of indies that became superstars. Indeed, Richard Brim (CCO) and Martin Beverley (CSO), recently left Adam&Eve/DDB (now seen as a mature agency, given it’s been 13 years since Omnicom bought it), to set up an Indie. But it won’t just be the senior talent on the move. Smart mid-tier and even juniors who understand the incoming impact of AI and can see a way of harnessing this into a differentiated offer will be interested in doing something novel. The issue, as always, will be money. It’s not easy for folks with mortgages and the like, or those on fairly low salaries, to simply walk out of an agency and set up another without a client already in place, and taking clients with them will be a big issue unless it’s with the employer’s blessing. This is something we’ve been involved with at Green Square, but it’s rare, and normally only when a business is divesting of a specific offering, in which case the clients go with the departees. Enter Private Equity. We’ve seen Huge and R/GA both be sold to management by IPG with PE backing and there are rumors that IPG is divesting of the Australasian element of one its other major agencies to avoid falling foul of the anti-trust (monopoly) legislation that could hamper the Omnicom merger. Historically, PE has backed some of the major “independents” we see today – Dept, Brandtech, North Alliance, and Jellyfish to name a few, and there remains a lot of “dry powder” (cash needing deployment) in PE funds. This cash is available for various purposes – to facilitate the purchase of significant agencies from larger groups, augment existing PE-backed platforms through the acquisition of complementary offers, or fund big Indies to accelerate growth whilst allowing owners to take some cash off the table. But backing startups isn’t something PE is interested in – too risky and too long to wait for a return. For startups, it’s back to the blood, sweat and tears of using personal resources and funding to get off the ground. Perhaps turning to friends and family, or indeed peers who have previously sold a business and want to get involved with backing an exciting new venture. But small is beautiful and as the global economy slows, marketing budgets get cut and CMOs and brand managers spend differently, perhaps spreading their reduced budgets across smaller, more agile agencies that specialize in specific areas of expertise, rather than giving it to one of the networks who could be perceived as navel gazing as they try and solve their own problems. On that note, I worry about this rash of consolidation across the ‘Big Three’. Whilst Publicis was ahead of the game in moving to its Power of One, WPP’s restructuring and Omnicom/IPG smacks of crashing things together primarily to cut costs, and I wonder what the results will look like from a client point of view. Will there be any differentiation? If it becomes a bit of a blancmange, with their offers all looking the same, then the only obvious differentiator is price, which will mean a race to the bottom for that gang, whilst fresher, more agile and client-focused indie agencies steal a march. It’s always been the case that indies are fleet of foot and are less restricted by admin, bureaucracy and overhead in delivering their creativity and output. In a world currently characterized by conflict and economic uncertainty, we need to be entertained to take our minds off things. As we see indie agencies flourish, the biggest ray of light will be the uplift in creative output they will undoubtedly bring. Their ability to experiment, push boundaries, and just generally be more innovative without the shackles of “big corporate”, should lead a plethora of new ideas. So, whilst 2025 is already the Year of the Indie, I’m putting my money on 2026 being the year of Outstanding Creativity. Read more

Will S4 Capital sell to a holding company competitor, go down the increasingly popular private equity route or just sit tight? Green Square’s Tony Walford looks at what the future may hold for the marcomms firm following its latest financials. This time last year, S4 Capital’s press release said that for 2024: “We are targeting like-for-like net revenue to be down on the prior year [2023] with a broadly similar overall level of operational Ebitda as 2023, as a result of cost reductions made in the previous year.” And broadly S4 achieved this. Its recently announced 2024 full year results showed net revenue down 11% on a like-for-like basis at £754.6m and operational Ebitda at £87.8m, down 0.6% on a like-for-like basis. So, there was no real surprise for the stock markets with the share price actually going up. Sir Martin Sorrell, executive chairman, said: “The macroeconomic environment in 2025 will remain challenging given significant volatility and uncertainty in global economic policy, particularly tariffs. In geopolitics, US/China relations, Russia/Ukraine and Iran remain volatile issues and therefore clients are likely to remain cautious. With that said, we expect to benefit from new business, especially in the second half and for the full year we expect net revenue and operational Ebitda to be broadly similar to 2024, with a further reduction in net debt.” This guidance for 2025 sounds familiar to a year ago. If this happens the net revenue in recent times will be: 2022 – £891.7m, 2023 – £873.2m, 2024 – £754.6m and 2025 around £750m. Let’s see. The investor presentation that accompanied the results announcement and webcast was as slick as ever and set out S4’s view of the way forward. And AI was very prominent in this as it has been for some time for the firm. The nature of its offer – content, data & digital media and tech services – naturally lends itself to the AI world. But this seems some way from translating into growth. Lots has been done on cost-cutting and operating efficiencies. Headcount is down 7% and net debt is steadily being reduced. But you can’t cut your way to growth and the question still looms in terms of motivating those key employees that sold their agencies to S4 in exchange for 50% cash, 50% shares – the share element being worth vastly less than what they exchanged ownership of their agencies for. Today, at 35p, it’s just above this month’s all-time low of 27p compared to its all-time high of 878p in September 2021. Clearly, as the last S4 acquisition was over two years ago, the impact of this has probably ‘washed through.’ In any event, these employee shareholders will want to see the share price improve and, perversely, may even be more motivated to help drive it up given what they have at stake. Will there be pressure from shareholders, not just the institutional players but particularly key employees, to realize higher value than currently dictated by the market? If a takeover offer emerges, that generally creates an uplift, particularly if more than one suitor enters the fray. So, if we now have a lean, future-facing business with its cost base under control, lower client-attrition and new business coming in (per Sir Martin’s comments), then it could be undervalued. Add to that S4’s investment in where the future is heading, this may well be a compelling addition to a bigger group. So let’s look at the suitors… WPP, oh the irony, but has the sour relationship between the leaders healed with time? Having reported the worst set of results for 2024 of its peers, WPP is putting “everything on red” in backing GroupM and the integration of WPP Open, its AI operating system across the group, to be the growth driver. Adding S4 to the mix could make sense, particularly given it was set up as a “new-age digital advertising, marketing and technology services company” from the start. But WPP may have already caught up. Dentsu could add substance outside of Japan and advance its AI journey forward but as per its results announcement, it seems to be retrenching and stabilizing, much like S4 has been. Havas is another option – perhaps a relatively big and bold move by the recently listed group which would certainly be headline-grabbing. And Stagwell? There were rumors in late 2023 that Mark Penn had tabled an offer which was rejected by S4. Given the fall in share price since then, I wouldn’t be surprised if they were circling again, but Stagwell has invested heavily in AI themselves and could have moved on. Or… Sir Martin takes it private. Despite the current global economic uncertainty, there’s still a lot of PE money looking to find a home and Sorrell has never been a seller – look at how WPP held on to its minority stake in Chime back in the day when it was taken private by Providence Equity. Thus, he may see PE as a good way of taking it out of the glaring spotlight of the markets while retaining control. Whatever route S4 ends up going, given its current share price I think we could see some interesting twists and turns in the next 12 months… Read more

R/GA has become an independent agency again after 23 years under IPG management. With backing from private equity firm Truelink, it plans to create a new model. Green Square’s Barry Dudley looks at the deal. I met Bob Greenberg around 20 years ago during my time at Naked Communications when we discussed how we may work with R/GA. I’ll never forget the unique nature of their New York offices, rabbit warren like, then opening out into big open-plan spaces with a very clear vibrancy and energy. And Bob struck me as someone who was always looking to the next thing, a mix of genius professor, visionary and quiet taskmaster. Almost certainly a rose-tinted perspective. He is said to have commented, “I believe in reinvention. Every nine years, we reimagine the company.” Whether we are at one of these nine-year points, I’m not sure, but the next reinvention is clearly kicking off. But before looking at this it is worth quickly considering a bit more history. It was founded in 1977 by brothers Robert and Richard, hence the original name R / Greenberg Associates, as a production company specializing in motion graphics and visual effects for film and television. Their work included creating visual effects for movies like Superman, and Alien; designing the iconic title sequence for Ridley Scott’s Blade Runner and developing digital effects for Predator. Through the 1990s and early 2000s, its first reinvention took it into becoming a digital agency focusing on interactive and web-based experiences. It then expanded into interactive advertising and became a leader in integrating technology, data and digital experiences. Then came the natural move into consulting and business transformation. Which brings us to current times and today’s announcement that management and private equity have bought the business out of IPG. So, the next chapter and reinvention begins. R/GA’s press release announcing the deal said: “Creative innovation agency R/GA is proud to announce its return to independence as a privately owned company after 23 years as part of IPG, following a new partnership between R/GA’s global management and private equity firm Truelink Capital.” IPG have been looking to sell Huge and R/GA for some time, with Huge subsequently being acquired by AEA Investors, a ‘global private investment firm’. Whilst there are undoubtedly big differences between Truelink Capital and AEA Investors, they are both private capital businesses. I expect to see plenty more of these sorts of transactions as the big holding company shakeout continues. The release went on to say: “R/GA’s global CEO Robin Forbes and chair and global chief creative officer Tiffany Rolfe are two of the global leaders, together with others, who are investing in the company as part of the deal. R/GA’s next chapter will be fueled out of the gate by a $50M Innovation Fund, enabling the company to invest in new skillsets and talent, and acquire new capabilities, emerging tools and platforms. Additionally, R/GA has established a Strategic Advisory Council of senior marketing and technology executives to support emerging AI client transformation opportunities across multiple sectors.” So, it’s going to have a $50m ‘Innovation Fund’. I really like the sound of these two words, not least because it fits with the R/GA legacy for reinvention. More than ever, businesses have to continually challenge themselves, question whether their offer is still relevant, experiment with new services, and innovate. When did you last work through such things? And who would you do this with – R/GA have a ‘Strategic Advisory Council’. If you don’t have one of those, I’m always around for the price of a coffee… The next paragraph of the press release also throws up some interesting questions: “As an independent company, R/GA is activating an AI-enabled model to better serve clients [Are you genuinely AI-enabled?], unburdened by the restrictions and overheads of traditional corporate structures. New remuneration models based on outcomes [When did you last review your pricing?], agile new team structures, and scaling up its flexible talent model ‘R/GA Associates’, are among the initial changes being implemented [Is your organisational structure fit for the future?].” As you would expect AI is marked out to be key. Luke Myers, co-founder and managing partner at Truelink Capital, said: “We see the growth of AI-enabled experiences playing an increasingly important role in unlocking value in marketing services…” And Tiffany Rolfe said: “At R/GA change is a feature, not a bug, and we believe in the power of brands to transform – which is what we do for clients, and now we’re doing it for ourselves…” I am looking forward to seeing this unfold and to seeing other businesses take similar steps. Read more

Green Square’s Tony Walford examines where things went wrong after the holding company’s 2024 results sent shares sliding. 2024 was something of an annus horribilis for WPP and Mark Read, posting the worst figures of the global groups in marcomms with like-for-like net revenue down 1.0% to £11.4bn in the year. This compares to Publicis leading the pack with 5.8% growth, Omnicom at 5.2% (although pre-pass-through costs), and even struggling IPG managing to grow a little at 0.2%. The only other group to report a revenue reduction was Dentsu, and that was only by 0.1%. WPP’s operating profit margin improved 0.2% to 15.0% due to cost savings and it continued to invest in AI and technology. Staff costs remained constant as a percentage of net revenue, which meant overall there had to have been salary savings – 6,000 staff in fact, around 3,000 in each half year. The January mandate that staff had to return to the office four days per week caused a stir internally but any impact this has had in terms of resignations would not be factored into the staff numbers for 2024. The only WPP region that posted positive growth in 2024 was Western Europe (representing 21% of WPP net revenue) with revenue rising 1.7% as Spain, France and Italy offset a 1% fall in Germany. The UK (14% of net revenue) was down 2.7%, North America (39% of revenue) declined 0.7% and China a whopping 20.8% (most of this in Q4) due to ”client losses and macro pressures impacting media and creative businesses.” The “rest of the world,” representing 26% of net revenue (including China) declined 2.6%, with India, LatAm, Middle East and Africa mitigating some of the Chinese hit. Interestingly, Read singled out TikTok as one of WPP’s fastest-growing trading partners, but I’m not sure this is something I would have championed given the fickle nature of US government sentiment that can turn this platform off at a moment’s notice. WPP’s share price immediately fell 20% on the news but has recovered a little to be 15% down at the time of writing. This is still a massive drop.

What’s gone wrong and how can WPP fix it?

Q4 was particularly miserable with net revenue dropping by 2.3%. Read singled out “project-based work across specialist creative agencies” as the main culprits, mentioning AKQA, Landor and Design Bridge in the Q&A that followed the presentation as being “0.8% of the drag”. Hogarth was flagged as a bright point with growth in “mid-single digits,” but AKQA suffered a fall in the “low double digits”. 2024 saw Ajaz Ahmed, founder of AKQA, and other key players within the agency depart. AKQA was combined with Grey in 2022, then rolled up with JWT, Y&R and Wunderman to form part of VML. A £237m impairment charge (basically writing down the value of agencies on the balance sheet) was taken in 2024, most of which related to AKQA. However, in the post-presentation Q&A, Read stated AKQA had “gained three major clients in 2025 so far and a good client win in VML yesterday”, which was some positive news. Q4 saw the disposal of FGS Global, a significant part of WPP’s PR portfolio. While PR only represents 9% of revenue, it fell 1.7% over the year but tellingly 5.3% in Q4, following the disposal of FGS. At 3% of revenue (one-third of the PR discipline), given bedfellow Burson suffered “mid-single digit decline” (Ogilvy PR wasn’t mentioned), we have to ask how much value WPP places on this element of its offer going forward. Key reasons for 2024 being such a car crash were given as the knock-on effect of client losses in 2023, with one particularly large healthcare client impact. The biggest revenue reductions sector-wise were healthcare (down 7.2%) and retail (down 7.8%). The latter is quite surprising as we at Green Square have seen retail as a strong sector for many of our clients in 2024. That said, WPP saw positive growth in CPG, telecom, media & entertainment, financial services, travel & leisure and even automotive, a sector which has struggled in the last few years. Read also made the point that while revenue overall was down, the top 25 clients grew 2% last year. A huge amount of emphasis was placed on the behemoth that is GroupM which is clearly being seen as the saviour for the group. GroupM represents 40% of WPP net revenue, saw 2024 growth of 2.4% and WPP brought back Brian Lesser in September as CEO (he had previously headed GroupM until 2017 and before that was at WPP’s 24/7 Media). Emphasis was placed on the success of WPP Open (WPP’s AI operating system which integrates all its services, data and tech into one application, enabling clients to see results in real time) and how it helped WPP win major new clients Amazon, J&J, Unilever and Kimberley-Clark. A big chunk of the earnings call presentation was effectively a pitch of what GroupM does and how it’s investing in new leadership, integrating WPP Open and building proprietary data assets through AI to integrate and drive marketing across every channel. This compares favorably to Dentsu’s presentation, which made no mention of AI (apart from what others were doing), instead focusing on turning its decline around through greater efficiencies. The GroupM presentation was impressive stuff, but it’s clear there’s still lots to be done here and Read acknowledged that GroupM’s growth had not been as good as its peers being “around 10% down from where it should be”. Given its prominent position within WPP, we have to ask what WPP would be without it – probably not much!

The outlook for 2025

And what of the outlook for 2025? The forecast is for net revenue to be flat at best but could decline by up to 2%. Apparently, the year has started pretty grimly, with the first two months impacted by global uncertainty making clients cautious to spend, together with the run-off impact of client losses in 2024. We were told it will take a little while for new client wins to ramp up, and that H2 will be where the growth will come (if any). The profit margin is expected to be constant at 15%. On staff retention, this “is not an issue, and we look for other ways aside from remuneration to reward staff.” The indication then is there’s not going to be much in the way of pay rises and, coupled with the revolt against the “four days in the office” mandate, I’m scratching my head as to what these “staff retention incentives” could be. As for M&A, there was little mention of this aside from “adding up to 1% of revenues,” so on £11.4bn, that’s up to £114m more revenue from M&A overall then. Not much in the grand scheme of things, so we shouldn’t expect any seismic deal announcements this year. In sum, WPP appears to be putting everything on red in getting behind GroupM and Open, which may not be a bad shout given the issues it’s having elsewhere. In selling off FGS to KKR (and back in 2019, 60% of Kantar to Bain), we’ve witnessed some key assets being divested under Read’s tenure and I’m wondering if we’ll see a number of smaller disposals over the coming months as WPP continues to focus down on its six agency networks. Mark Read has had a pretty tough ride as CEO, and today’s announcement hasn’t helped. I wish I could say it was a rollercoaster, but there haven’t been many “ups” for the guy. I truly hope 2025 is better than the guidance given today, but pinning it all on a hopeful recovery in the second half doesn’t bode well. Read more    

The ad industry is reeling from the collapse of the visual effects giant and its advertising arm The Mill. Green Square partner Nick Berry examines how production is changing and what will fill the void. Many people are still reeling from Technicolor’s sudden fall from grace, going into administration with the loss of up to 10,000 jobs across MPC, The Mill and Mikros Animation globally. Some have been quick to note that the signs were clear for all to see, and warnings such as the collapse of Deluxe Entertainment in 2019 should have acted as a wake-up call. But for most people the loss of a pioneering force with an incredible legacy, still working on the biggest movie titles and advertising campaigns in the world, is an unimaginable outcome. Technicolor’s collapse will continue to be examined for some time. It will be correct to cite the massive impact of the pandemic in 2020, followed by the writers’ strike in 2023. But alongside those hammer blows the unprecedented acceleration in technology, automation and the power of the cloud – allowing immediate scalability without huge tech infrastructure – has resulted in the goalposts being uprooted and thrown away, as opposed to simply being moved. Hindsight is a wonderful thing. The strength of the 110-year-old stalwart of the global movie and advertising industry was once its scale of tech infrastructure along with wonderful offices in the best creative hubs in the world. Unfortunately, this legacy technology and physical infrastructure in expensive locations, became antiquated in what seems like the blink of an eye. All of that said, there can be no question as to the creative quality and talent employed across MPC, The Mill and Mikros Animation, each responsible for iconic work and setting the gold standard across entertainment and advertising right up until the end. My thoughts go out to all of those directly impacted as there will inevitably be life-changing ramifications for many people. For Technicolor’s peers there will be an immediate gold rush opportunity. There are massive movie and advertising projects now in limbo with panicked clients needing quick solutions. There will also be an injection of much sought after talent into the market. As the dust settles, however, I would bet my bottom dollar that the energy, creativity and hunger released into the marketplace, not least from those displaced from Technicolor, will result in a new exciting era for the creative production industry, and further market fragmentation seems inevitable. Smaller independent production houses now armed with scalable cloud-based VFX technology pipelines, lower overheads, access to cost-effective global talent networks that can work seamlessly on projects wherever they are in the world, now have a wonderful opportunity to blaze a new trail. I will also bet on there being a surge of new startups from ex-Technicolor staffers, ready, willing, and able to feed on the insatiable desire for content. So, the King is dead, long live the King(s), along with the princesses and princes… The demand for content across the entertainment and marketing sectors is unrelenting, and in industries driven by craft and innovation, change is the only constant. The question is how production houses can maintain workable margins while still prioritizing and safeguarding creativity. Technology and the cloud have gone a long way to leveling the playing field for smaller independent players. Established divisions and snobbery between different forms of production output are being discarded. Many production companies now seamlessly work across different genres of entertainment and advertising as opposed to being pigeonholed. When managed well, this agility can mean added resilience and opportunity. Compared with a decade ago in the advertising world, production studios no longer feel completely subservient to all-powerful agencies of record. Nearly all production houses now confidently call themselves “Creative Production Studios.” They have less fear of the established advertising agencies when approaching brands directly to offer creative ideation and strategy, as opposed to staying downstream in the shallower waters of execution and post-production. Those that don’t change their operating model may well struggle in the brave new world, but the inherent strength of the US entertainment and advertising markets will be fertile ground for existing and new progressive creative production houses to flourish. The same can be said for the UK, where the incredible growth in new studio facilities can’t be ignored. Increased capacity along with unquestionable levels of talent, is leading some to predict that by 2027, once Sunset Waltham Cross studios are fully open, in addition to established facilities at Elstree and Leavesden, Hertfordshire alone will produce more long-form movie content per year than Hollywood. It’s a shame there’s not many hills in Hertfordshire to put a big sign on. So given the demand and foundations exist in the US and UK, the vital factor in shaping the future of creative production across entertainment and advertising is the shift in balance between artist and technology. Technology is clearly now leading the way, with AI at the vanguard. Artists and producer roles must pivot to manage and harness technology to maximize creativity and efficiency, as well as communicating the art of what is possible to clients in a tangible and meaningful way. The creative production studios that crack this code to maintain healthy margins and protect the perceived value of creativity will be the winners. As sad as it is to see the loss of Technicolor and its family of incredible creative studios, I eagerly await an array of new superstar creative production houses stretching the boundaries of visual effects even further, to fill the void left by Technicolor, and our screens with joy and wonder. Read more

After a thumping $1.38bn goodwill write-off, the Japanese holding company presented a frank three-year plan to rebuild its international business. Green Square partner Barry Dudley assesses its chances of success and what it means for Dentsu’s teams around the world. Much like IPG, Dentsu had a tough 2024 in terms of its general trading – organic net revenue fell 0.1%, having fallen 4.9% in 2023. Its operating margin was ahead of expectations, but at 14.8% I would call that pretty ordinary. Hiroshi Igarashi, president and global CEO, Dentsu, said: “The Group FY2024 results were in line with our November guidance with broadly flat organic revenues, and operating margins higher than expectations. We saw sequential quarterly improvement throughout the year, with strong performance in Japan. There were also some notable global new wins in the International business [everything outside Japan].” So, an OK picture. But Igarashi went on to say: “However, we have reported a significant goodwill impairment in the fourth quarter, reflecting a more conservative outlook in EMEA and the Americas. We believe that recognition of these uncertainties will contribute to a sounder balance sheet and a stronger platform upon which to implement the Mid-Term Management Plan announced today.” That goodwill impairment was a lumpy JPY 210.1bn relating to EMEA and the Americas – that’s an eye-watering $1.38bn. There were two headline reasons given: “…a higher discount rate than previously used based on recent market interest rates [going up], secondly conservative reflection of various risks in international businesses.” What sits behind all this? When a business is acquired, very simplistically, the difference between the net assets on its balance sheet and the actual price paid by the acquirer sits on the acquirer’s balance sheet as an intangible asset called goodwill. As most service-based businesses have few “hard assets” (buildings, machinery, IT and the like), the goodwill number is commonly a very big proportion of what is paid by the acquirer. From time to time, the acquirer must review this asset’s carrying value on the balance sheet – is it still worth what they paid for it and is the value still there? If the business is making losses and its future looks tricky then things get harder to justify and some or all of the value may have to be written off. Similarly, if the name of the asset acquired is disappearing, perhaps it is being merged into another business and taking that business’s name – again, is the value still there? I suspect there is a bit of both going on here. As you’d expect, there is a plan. An “MTMP” no less. Igarashi explained: “In our new Mid-Term Management Plan (MTMP), which will run through the years of FY2025 and FY2027, we plan to achieve organic growth of 4% and 16-17% in operating margin in FY2027. We will conduct a thorough review of our core business strengths, be more selective and focused on what we do, and adopt a differentiated strategy to meet our diversifying client needs. “While we will continue to invest in data and technology and our people and culture, we will also invest into areas where we can increase our media capabilities in our key markets. At the same time, we will reevaluate our underperforming businesses and rebuild our business structure. Our ultimate goal is to regain competitiveness and return to a growth trajectory.” I have commented before on the frankness that Dentsu management often use: “Our ultimate goal is to regain competitiveness.” Crikey! Its results were summarized as Japan “performed very well” and the international business was “challenged overall and we are taking this quite seriously.” Got it. And the solution to the seriousness: In 2025, year one of the MTMP, Dentsu will be “focusing on improving profitability through re-evaluating underperforming businesses and rebuilding our business foundation.” During the earnings call there was another piece of frankness from Igarashi when he said that Dentsu didn’t deliver the last MTMP which ended in 2024, which was built on M&A. The new MTMP to 2027 is all about organic growth, with M&A to be “carried out selectively in line with business performance recovery and under strengthened, disciplined management.” The theme continued with a slide saying: “Our position has become increasingly challenging in the face of intensifying competition”, which went on to conclude that Dentsu’s position is “Inferior in terms of network and resource scaling” with “insufficient technology investment.” Then came the inevitable cost reduction plans and the promise of “thoroughly eliminating inefficiencies.” The aim is to reach an operating cost reduction of up to JPY50bn (US$329m) in 2027. The first thing that was mentioned here was to “simplify operations by integrating the Tokyo and London headquarter functions” and then by “redefining the role of regional offices,” in addition to “implementing cost control measures in the markets.” Watch out senior regional management. And what of that pesky AI thing? It was mentioned once in the press release and that was referencing what others are doing in AI. Mentioned the same way in the investor presentation and then just once more within the cost savings: “Extensively automate with AI and systems.” I have a personal affinity to Dentsu which I won’t bore you with. There are many things that make it unique, but I’d say it has a pretty tough time ahead of it – hunkering down and being efficient will only get you so far… Read more

While all eyes are on its impending merger with Omnicom, IPG is still its own business – for now. Barry Dudley delves into its 2024 results to find out what to expect between now and the new holding company empire taking shape. Two weeks ago, we saw some strong 2024 annual results for Publicis and Omnicom with 5.8% and 5.2 % organic growth and 2025 organic growth guidance of 4% to 5% and 3.5% to 4.5% respectively (‘net revenue’ for Publicis, ‘revenue’ for Omnicom). Now we have IPG’s 2024 results and it has had a rather more bumpy ride. Philippe Krakowsky, CEO of IPG, said: “Today we are reporting an organic revenue increase of 20 basis points for the full year 2024, along with adjusted EBITA margin in-line with our forecast of 16.6%. Our strong margin result reflects continued effective operating discipline by our teams, notwithstanding the challenges of the past year. “Solid new business momentum in the fourth quarter and early 2025 will begin to come online later this year, though it will not offset sizable client losses incurred last year due largely to changes in the media trading environment. Factoring in those headwinds, and with the benefit of otherwise sound underlying performance, we are forecasting an organic decrease in revenue for the full year of 1% to 2%.” The “organic revenue increase of 20 basis points” is a somewhat flattering way of saying they grew by just 0.2%. Disappointing for everyone at IPG, there’s no doubt, but given the “sizable client losses incurred last year” I was expecting a much bleaker picture. During the earnings call, Krakowsky said: “…we were on the wrong side of the outcome in defending a number of very significant media accounts … the decisive factor on those largest decisions was principle media, and specifically the commercial terms enabled by principle media at scale.” One of those accounts being Amazon, which IPG had held for many years – WPP and Omnicom shared this prize. That alone would have been bad enough without losing other clients too. The reference to “principle media at scale” and a subsequent comment that “…a competitor was able to leverage its much greater size…” were telling. Even when you’re IPG’s size, you can still be muscled out of business by people even bigger. Scale and price won’t have been the only factors in those pitches, but they matter a lot more in a media pitch than, say, a creative one. But if the sale to Omnicom goes to plan, it will soon be the biggest dog in the neighborhood and will be able to count Amazon as a group client again. I expected profitability to take a hit as well. Rather impressively, IPG delivered an EBITA margin of 16.6% which was in line with forecast. And it has given guidance that it hopes to match this in 2025. Hats off to Krakowsky and CFO Ellen Johnson for marshaling the maths in among this melee of client losses, at the same time as having a coffee or two with Omnicom. And on the math subject, IPG talked through cost-saving and efficiency initiatives with “…in year savings of approximately $250m in 2025” of which there would be “very limited overlap” with the $750m synergy savings that Omnicom referenced could be delivered as a result of acquiring IPG. A shining light, as you might expect, came from Acxiom which “posted good growth for the full year … with four large new business wins across industry sectors”. And another thing that caught my eye was the statement that: “During the quarter, Golin committed to being the first fully AI integrated PR agency by the end of this year.” Can’t wait to see what “fully AI” means, sounds bloody brilliant and at the same time terrifying… But that’s just the world these days. Read more

As advertising’s leaders of the pack report similarly strong 2024 financials, Barry Dudley decodes their earnings calls and explains how their journeys will drastically diverge in 2025. Given its strong performance over the previous three quarters, it probably comes as no surprise to hear that Publicis continued that momentum in Q4. Indeed, it came in ahead of its own guidance. Arthur Sadoun, chairman and CEO, said: “Thanks to a very strong Q4, Publicis became the largest advertising company in the world in 2024. “We are ending the year in the number one position across the board, growing three times faster than our holding company peers, and five times faster than the IT consultancies. We delivered industry-high financial ratios while stepping up the pace of our investments in AI and talent. Once again, we topped the charts in new business rankings. “But even more importantly, we are accelerating on our status as a Category of One thanks to our unmatched 1st-party data capabilities, our connected media ecosystem, our creative firepower, and our 25,000 engineers, brought together through the Power of One. This makes us confident in significantly outperforming the industry in 2025 for the sixth year in a row.” The key numbers for the year to December 31, 2024: net revenue of €14bn, 5.8% organic net revenue growth, with operating profit of $2.5bn at a margin of 18%. That margin is impressive. Very impressive in fact, given its sheer scale, levels of infrastructure, the investments it’s making in its people, data, AI, technology, the list goes on. So, for those young, fleet-of-foot, dynamic independents out there an 18% margin must be a walk in the park to achieve – are you? Sadoun went on to set out what he sees as the unique competitive advantages that have put Publicis in the “number one” spot:

• “Leadership in first-party and proprietary data”“Thanks to AI we connect this data to our entire media ecosystem and intelligent creativity”
• “Thanks to AI we connect this data to our entire media ecosystem and intelligent creativity”
• “We have 25,000 engineers and consultants … to make sure our clients can integrate those capabilities into their own environments and transform their business model”
• “We operate as an efficient and flexible single platform organization thanks to the Power of One, Marcel and our Country Model to make all of this data and technology seamlessly accessible to all off our clients and teams”

A pretty powerful framework. if you head up to 30,000 feet, what is your equivalent articulation of your competitive advantage(s)? Part of what has driven Publicis, for decades now, has been chasing down the biggest in the pack – WPP. Having an enemy, a Goliath to your David, is very commonly what drives people, drives businesses. This has been the environment that Publicis has been playing within, evolving, looking for new angles, markets, advantages. Now it is the Goliath, or perhaps it’s Leo the Lion. So what’s the goal now? Well, assuming that regulatory hurdles don’t trip up the Omnicom takeover of Interpublic, Publicis shifts back to number two (in terms of revenues). Sadoun is already relishing the hunt for the new Goliath – “this puts Publicis back into the challenger position, which is where we like to be.” But he’s not rushing around trying to find a big lump to quickly fatten the numbers. Instead, Publicis is pointing to its €800m to €900m acquisition budget for ‘bolt ons’. This means buying strategically to enhance what it already has, to bolt things on to existing operations in some very specific areas: first-party data, production, digital media, technology – quite a spectrum. And Sadoun isn’t about to put a banana skin in front of himself at the start of the year – his outlook is for 4% to 5% organic net revenue growth, which is slightly down on 2024. I’d bet on Publicis beating this range, but this old adage still works – under-promise, over-deliver! Later the same day Omnicom’s results landed. It also had a strong year with $15.7bn of revenues, with organic growth of 5.2% over 2023 (the Publicis numbers above were on net revenue, so not quite apples and apples), and an EBITA margin of 15.5% (again not quite a comparison to Publicis – EBITA v operating margin). And the guidance for 2025 sounded familiar at 3.5% to 4.5% organic growth – under-promise, over-deliver. John Wren, chairman and CEO, said: “From this position of strength, we are incredibly well prepared for and excited about the complementary combination of businesses and cultures with our proposed acquisition of Interpublic. Together, clients and employees will benefit from expanded products to deliver superior creativity, innovation and effectiveness. We will also bring together unparalleled data assets to market, fueling leading creative, produced at scale, and activated by the world’s top-ranked media practice to drive measurable sales. We see significant upside potential through expected revenue and cost synergies that can drive growth beyond what Omnicom was delivering alone.” There were winners and losers across the different service lines and also by geography, but for me there were more interesting things that emerged. During the results webcast, Wren unsurprisingly spent most of his time on the Interpublic takeover, a big part of which was around the $750m of annual cost synergies that it is expecting to achieve if the deal goes through. And he sees more synergies on top of these through revenue opportunities, leveraging near and offshore capabilities and utilizing automation, including AI. Wren was keen to make clear that headcount savings “will not impact employees dedicated to servicing our clients and generating revenues.” I can imagine quite a few people trying to work out whether they fit into this definition… And where there is duplication or for people who aren’t ‘dedicated to servicing our clients and generating revenues,’ they will choose “the best individuals across the organization, irrespective of their current affiliation.” These are going to be very uncertain times for people, which will be one of the biggest challenges in the coming months. Shareholder approval is set for March 18, but the deal won’t close until the second half of 2025. Until then, Wren said that they will “continue to operate as independent businesses.” This is one hell of a lot of internal work, spreadsheets, integration planning, legal loopholes to crack. All while Publicis is practicing with its sling to take aim at the coming Goliath. Read more