‘Math men’ not mad men rule advertising’s data age- Lévy
Maurice Lévy, the chairman of the supervisory board and former longtime chief of Publicis, defended the company’s recent $4.4bn purchase of Epsilon, arguing that the advertising industry was undergoing a “metamorphosis” that required big bets.
As consumers shift attention away from pricey television commercials and towards the internet, where Facebook and Google dominate, the industry is more “math men” than mad men, says Mr Lévy, who has worked in advertising for 40 years, building Publicis from a middling French agency to a global powerhouse.
“The way we operate . . . it’s a sea change compared to the way we operated even a few years ago,” he told the Financial Times. “We are in a new world where you need to react very fast. We were talking long ago about ‘mad men’ and the idea that we are smoking cigarettes and drinking glasses of whiskey. Now, that’s not enough.”
In light of this disruption Publicis, the world’s third-largest advertising agency by revenues, has made a big bet on data. In April the company made its largest acquisition with the purchase of Epsilon, a digital marketing company owned by Alliance Data Systems.
Years ago we were spending £10m to produce a two-minute commercial. We spent more than Steven Spielberg or James Cameron per second
Rival advertising group Omnicom took a swipe at the move, with chief executive John Wren telling investors last month that the company would not be making acquisitions because it did not “feel threatened in any way” or need to boost its products.
Moody’s downgraded its outlook on Publicis to negative in the wake of the deal, citing increased leverage and the “structural and cyclical challenges that the advertising industry is currently facing”.
However, Mr Lévy, who over the course of his career earned a reputation for dealmaking rivalled only by his long-term rival Martin Sorrell, said the Epsilon acquisition was necessary for the future of Publicis.
“The future is based on data. It is not based on any mass media. We know that mass media is [declining] every day,” he said. “And if an advertising agency wants to have a future, data is absolutely indispensable.”
Mr Lévy’s acquisitive nature has previously seen Publicis gain control of subsidiaries including Bartle Bogle Hegarty, Saatchi & Saatchi and Leo Burnett. He has also made mis-steps: Publicis’s acquisition of digital transformation specialist Sapient for $3.7bn in 2014 resulted in a $1.5bn writedown.
The 77-year-old stepped down as chief executive of Publicis two years ago, but has stayed on as chairman of the group’s supervisory board. He stays out of daily business decisions, but was involved in the Epsilon acquisition from “day one”, he said.
Mr Lévy, the quintessential adman of the previous era, now faces a landscape in which the industry’s previous cash cows, TV commercials, are declining. “Years ago we were spending £10m to produce a two-minute commercial. We spent more than Steven Spielberg or James Cameron per second . . . the costs of a commercial were enormous,” he said. “All that is now part of the past.”
Like its rivals WPP and Omnicom, Publicis is under pressure as Facebook and Google have disintermediated the traditional agency model. The two tech groups account for two-thirds of digital advertising sales in the US.
Publicis in February sparked a sell-off in stocks across the sector when it missed analyst estimates on a key quarterly sales metric, fuelling concerns of a structural slowdown in advertising. In April, Publicis reported similarly grim results for the most recent quarter, with organic revenues falling 1.6 per cent as big consumer goods brands pulled back their spending.
The industry has been consolidating as traditional agencies look to position themselves as data analytics gurus who can help brands target shoppers online. Last year Interpublic bought data business Acxiom for $2bn, while just last month buzzy agency Droga5 sold itself to Accenture, a deal Mr Lévy called a “smart move”.
“There are always excuses not to take risks,” Mr Lévy said, citing Publicis’s acquisition of Razorfish in 2009, as the world was in the throes of a deep recession. Despite lingering fears that an economic slowdown is looming, “the situation is much better now,” he added, making the Epsilon decision easier. “The fastest-growing segment in our industry is data, technology, internet. Period. All the rest is suffering.”
Source: Financial Times