Publicis boss Arthur Sadoun on beating growth expectations despite global volatility

Neither political upheaval in the Paris-based firm’s homeland nor macro-economic uncertainty in its key global markets is shaking the chief exec’s confidence that its 2024 results will surpass both its own and analysts’ expectations.

The holding company today told investors it is raising its 2024 net revenue organic growth guidance from 4-5% to 5-6% after reporting organic growth of 5.4% for the first half of 2024 and a better-than-expected 5.6% in the second quarter. The US (up 5.3%) and China (up 10.5%) were among its biggest success stories in Q2.

“I think the current environment makes our performance even more remarkable,” Sadoun says. “It is a very, very challenging context. This is why we [say] ‘against all odds’ because there are many reasons why we should be more conservative.”

Don’t mistake the ‘odds against’ narrative for a sudden dark horse story, however. No serious gambler makes a bet without studying the form and Publicis Groupe has long now been galloping ahead of its holding company competition.

Its recent good fortune means today’s media briefing blitz included a triumphant bar chart heralding Publicis as the world’s most valuable holding company, with its €26.1bn market cap dwarfing Omnicom’s €16.3bn and WPP’s €9.4bn. For those keeping score, Omnicom yesterday released its own set of encouraging financials, though refrained from upgrading full-year growth guidance, while WPP’s results are still to come.

Sadoun says the comparisons are not about belittling competitors but about proving that its own model works.

“You can do all the press releases you want, all the partnerships you want, and announce any win you want. The only thing that matters is whether you are winning market share or not. If you are, it means you have a superior offer compared to your competitors.”

Sadoun cites client demand for personalization at scale, sustained new business success and a rebound in tech sector spending as the forces propelling Publicis’s momentum.

The group does not break down its reported revenues by discipline, but data arm Epsilon and Publicis Media enjoyed double-digit growth working in tandem in the second quarter. As Sadoun puts it: “We see an increasing willingness for our clients to deliver on personalization at scale and we are capturing this demand in a disproportionate manner versus our peers because we have Epsilon data connected to Publicis Media.”

Comparatively, creative revenues were “broadly stable” in Q2 but Sadoun stresses the role of such agencies should not be overlooked. As if to emphasize the point, he singles out Publicis Conseil winning agency of the year at Cannes as his proudest moment this year. It was, after all, the agency he ran on his path to the top of Publicis.

“Creativity is really a differentiator that is absolutely necessary to our overall growth,” he says. “You would be surprised about the number of media pitches that we are winning, in part, because we come with good creative ideas.

“We are not expecting creative to grow at the pace media is growing – as are none of our competitors. We do expect creative to grow – first, because we have an ability to grow market share and, second, because we have production and production is a source of growth within creative agencies. We have been growing at roughly 20% when it comes to production and we are investing massively in capabilities and people at the moment.”

Investment is one of Sadoun’s central themes. This year, the company has set aside up to €800m for acquisitions and pledged €100m of further spending to continue building its AI capability to meet the growing demand for “AI-led business transformation” and “AI personalization at scale.”

“What you see with our margin is we are putting our cost base at the service of our growth. What I mean by that is when we grow, we use this money to get stronger.”

On AI, I suggest to Sadoun that many of his holding company competitors are pledging similar levels of investment to build similar-sounding AI offerings. The market is already beginning to look overcrowded.

Unmoved, he points again to Epsilon, the data behemoth he acquired for $4bn in 2019, as providing competitive differentiation.

“You can talk as long as you want about AI. If you don’t have the data, AI is useless.

“You can do fancy things on content, but you can’t deliver personalization at scale, which is what AI allows you to do. And if you haven’t made the structural investments, that doesn’t work.”

On the acquisition front, Sadoun says there’s a strong pipeline of “bolt-on” targets and that it is “on track” to complete deals before the end of 2024. It has already added comms agency AKA Asia, creative and production outfit Downtown and supply chain specialist Spinnaker SCA to its ranks this year.

“With acquisition, it’s pretty simple: we are looking for technology or IPs and teams and people that can complement the model we are building and open up new areas for us.”

Sadoun suggests the market is now more favorable to M&A again after being deterred by valuations that were too high in 2023. “We decided to wait and we spent less last year. But again, overall, in the last eight years we’ve spent roughly €9bn and we’re going to spend €700m to €800m this year easily.”

Having just returned from a weekend in London taking in Wimbledon, Sadoun will spend the next three weeks in Paris for the Olympics. Those three weeks will be the longest the Publicis chair and chief exec has spent at its headquarters in three years and though the sporting rivalry will be capturing his attention, he won’t be taking his eyes off his own competition.

For the sake of the health of the industry as a whole, is it important that his peers perform strongly also? “Oh, yeah, I do give thought to that,” he says.

“To be clear: I care a lot about the industry doing well because every time the industry is doing better, I am doing better, and we are building something we all want to be in.”

The competitive edge doesn’t leave Sadoun for long, however.

“Now, the reason why market share is important for me, very important for me, is that it is a demonstration of the superiority of our model.”

The investment world’s view

Barry Dudley, partner, Green Square: “Given the mayhem going on in the world right now, these are strong results from Publicis and its financial performance looks set to be at the very top of the pile again during this series of announcements from the big listed groups. But what really caught me was the enthusiasm for the future, both verbally from Sadoun and also in the numbers themselves, with the guidance for full-year organic revenue growth being lifted from 4-5% up to 5-6%. That’s a bold move.

“Fundamental to this is Epsilon and its strength in data. This is an area that isn’t going to slow down. Sadoun referenced some businesses holding back on their AI investments – as this releases it will further fuel Publicis’s strong tech and data offer. Sapient has struggled of late with reductions in IT consulting revenues, but I’d expect this to come around in the future. Feels like the Publicis run of strong performance is going to continue for some time.”