From M&A buzz to market health – the analyst’s take on Cannes Lions 2024

There was a definite pick-up in activity and buzz compared to the last couple of years. As always, people were there to make the most of the sunshine and entertainment and catch up with industry contacts. But, I’d say there was definitely a sharper business focus. People were meeting not just to catch up but to make deals happen or develop sales leads. There was a lot of hustle.

Underneath all the glamor of the event, what do you make of the sector’s health?

I’d say it’s in reasonable shape. If you take the big holding companies as a proxy, organic sales are up a double-digit percent on a cumulative basis since the pandemic. I think campaign budgets have been more resilient than anybody expected them to be. But the growth rates are starting to tail off, and margin expansion has been pressured by inflation, so I think people are bracing for tougher times. Hence why meetings seemed to have a sharper business focus.

What are your thoughts on how the major players showed up at the festival?

I think that depends on what you mean by the major players. In the traditional advertising space, the big players seem to be keeping a relatively low profile. Publicis’ anti-AI hype activation was a popular topic of conversation and a far cry from the showy activations of old. Stagwell clearly wants to be a company to watch, challenging the status quo. Its Sport Beach activation was a big hit. I saw so many people wearing one of their lanyards. They were everywhere! And they got plenty of profile with the Elon Musk and Travis Kelce visits.

Do you have a view on M&A prospects in the sector?

There was a clear sense from the people that I spoke to that M&A on a more substantial scale could be in the pipeline and, for some players, is very much needed to kick-start growth. As ever, there was a lot of conversation about consolidation of the ad-tech value chain, and if/how some of the big holding companies might look to enhance their technology or data capabilities. The Havas press briefing didn’t shy away from the possible spin-out from Vivendi in 2025. We’ll have to see what happens with that, but it could be a catalyst for industry-wide deal-making.

How do you see AI beginning to impact the sector generally and the media sector specifically?

The media industry has been using analytical AI to great effect for some time, so I don’t think they’re so worried about any threats from generative AI. The mood music on AI, in general, seemed to be positive; everybody seemed to be focused on how AI (analytical or generative) could be a positive, creating new revenue opportunities and making people’s jobs more rewarding. I’d say we’re still in the proof-of-concept phase right now, though. Beyond using generative AI for copy and images, I didn’t really see any new game-changing use cases. I think the next 12-24 months will be an interesting time to see how general-purpose AI tools morph into much more use-case-specific applications that add real value and/or opportunities for differentiation.

Which developments or announcements do you think are worth taking note of?

Without doubt, Elon Musk’s presence and the interview with Mark Read. It will be interesting to see how the charm offensive with advertisers plays out, especially in the context of the uncertain future for TikTok in the US. I’d say X sees an opportunity to win back some media spending. But we’ll have to see if advertisers are sufficiently convinced about brand safety.

Finally, what do you see as the near-term outlook for the sector based on your experience at Cannes?

No real change. We're focused on the Q2 reporting and how the big agencies are trending against full-year guidance. Creative awards might help with longer-term business pipeline but they don’t effect the near-term trend. I guess it’s encouraging that we’ve seen upgrades to the full-year ad spending outlooks from the big media agencies. We continue to think the agencies with strong data and technology capabilities have the best opportunities to lead the pack on sales growth.