Photographer: Tony Eccles/Moment Open via Getty Images
Photographer: Tony Eccles/Moment Open via Getty Images
Publicis Groupe SA is setting off alarm bells on Madison Avenue as the ad industry’s earnings season gets underway.
The French owner of Saatchi & Saatchi and
Leo Burnett Worldwide suffered a surprise drop in fourth-quarter sales, blaming cuts in ad spending by consumer brands in the U.S. So-called organic revenue fell 0.3 percent in the quarter, missing the 2.5 percent gain that analysts had expected, according to a company-compiled consensus.
Conventional advertising has been in decline as consumers turn away from newspapers and traditional TV, forcing ad companies to market themselves as data-mining experts who can help clients target shoppers more effectively. Publicis’s results suggest marketers have yet to fully embrace the company’s strategy.
“We clearly have a revenue attrition on traditional advertising from fast-moving consumer goods in the United States,” Chief Executive Officer Arthur Sadoun told reporters Wednesday in Paris. Publicis now sees a “bumpy ride” in the first quarter as that loss of business is felt in the first months of 2019, the company said.
The results are “disappointing” after a “weak” performance in the U.S., “where clients are reducing the scope of work with agencies,” said Conor O’Shea, an analyst at Kepler Capital Markets, adding that he expects shares to be down “significantly” when trading opens in Paris on Thursday.
Shares of Omnicom Group Inc. fell as much as 5.3 percent Wednesday in New York, while Interpublic Group of Cos. lost 5.6 percent.
Longer-term success isn’t guaranteed either:
Amazon.com Inc. own lots of consumer data and continue to grow quickly at the expense of traditional players in advertising.
Financial Services
Sadoun said financial services and retailers were showing “perhaps more maturity” than consumer-goods makers in embracing the new paradigm, “but it’s coming.”
“Today, for instance, for fast-moving consumer goods — and it’s quite promising — we’re seeing bigger growth in our capacity to help our clients become more independent from Amazon,” he said.
Publicis made one of the industry’s boldest bets on ad technology with the $3.7 billion purchase of Boston-based Sapient in 2015. Since then, Sadoun has poured resources into what he calls “strategic game changers” — businesses that make better use of data and devise creative digital offerings for clients.
That part of the business grew 28 percent last year to represent 12 percent of revenue. The company said it wants that to grow to 30 percent by 2020.
“Tomorrow, I think players in traditional marketing will get closer to consultants and system integrators,” Sadoun said. “The holy grail is personalization on a large scale.”
Results Highlights
- Publicis announced 400 million euros ($455 million) in share buybacks, using money left over after it made fewer acquisitions than it budgeted for in 2018 (M&A spending was 200 million euros compared with a target of 300-500 million).
- It kept a target of 4 percent organic revenue growth by 2020. Sadoun said recent account wins from companies such as
GlaxoSmithKline Plc andFiat Chrysler Automobiles NV
would boost results from the second quarter. - The company named Publicis Media CEO Steve King to the new role of group chief operating officer.
- Rival
Interpublic
reports results next week, with London-basedWPP Plc
following on March 1.Omnicom
hasn’t given a precise results date.
(Updates with analyst’s comment and shares in 9th, 10th paragraphs.)
