Arthur Sadoun says another year of strong revenue growth at Publicis shows it is reaping the benefits of a transformation that has taken “many years”, and contrasts that with rival Omnicom, which could take “five years” to prove its planned takeover of IPG will work.
Sadoun, who has been the chief executive of Publicis since 2017, claims its record 2024 net revenues of almost €14bn (£11.6bn), up 5.8%, means it is now the “world's largest advertising group”.
However, he also shares that he relishes the fact Publicis will soon become a “challenger” again, as Omnicom is set to become the biggest following the IPG deal, in what Sadoun describes as a “back to the future” moment.
“Omnicom is the new WPP,” he says, because it will be a similar size to WPP under Sir Martin Sorrell at its peak in 2017, with a similar revenue mix. That looked like a back-handed compliment, given WPP's shrinking valuation since then, but Sadoun insists it is not a criticism.
He also confirms in the interview with Campaign that he spoke to IPG when it was exploring a potential sale, and “knocking on everyone's doors, including ours”, but insists Publicis was not interested. “Our strategy is not to buy ‘more of the same’,” Sadoun says.
Sadoun was speaking at Publicis' annual results, where the 108,000-strong agency group reported 5.8% revenue growth, and increased pay ahead of that, giving staff an average salary increase of 7% as it looked to “reinforce our talent pool”.
In addition, Sadoun says he is “confident” about 2025, forecasting growth of 4% to 5% in 2025 despite macro-economic uncertainties, such as US president Donald Trump’s threats to impose trade tariffs. But he adds it is “too early to say” whether tariffs might have an impact, although the subject is included in Publicis' financial guidance.
Sadoun discusses return to the office and the dismissals at Publicis Media US for non-compliance and the merger of the Leo Burnett and Publicis creative agencies to form Leo.
Let’s start with Q4, because Publicis finished the year strongly and it was your best quarter for revenue growth.
It is a stronger than expected quarter, up 6.3%, for a couple of reasons: the first is that we had a new-business tailwind. We had a very strong, new-business track record this year – again. Second, there were less cuts than we expected in traditional advertising. And, third, Sapient came back to flat, with the US positive, despite a negative, overall environment for the IT consultancies – Accenture, CapGemini and so on.
What makes it very interesting is that when you compare our performance to our peers [with 5.8% growth in the past 12 months], we are accelerating on our [compound annual growth rate] in 2024 versus the last four years [at 4.7%]. We are growing three times faster than our [main agency] peers and actually five times faster than IT consultants with a performance that is very strong in every region – in the US, Europe and APAC.
Was there anything notable about 2024 or was it a year where you maintained good growth?
2024 is the year where, thanks to our out-performance for the fifth year in a row [versus peers], Publicis has become the largest holdco [in the world]. It is the accomplishment of a journey that started in 2019 where we have been increasing our revenue by 43% while our peers have neem increasing by [an average of] 6%. There’s a big gap in terms of operating margin, [earnings per share] and free cash flow.
It’s a year that concludes the journey that got us to this position: we have been number one in organic growth for the last five years – the same for new business. We have had the highest margin for 15 years. We have had the largest market cap since 2023. Now we are taking the lead in terms of size [by becoming the largest advertising group by net revenue, according to Publicis]. That’s the big news.
Where you’re right is that the other big news about our KPIs is that there’s no news. Year after year and year, for five years, we have been out-performing on every KPI, that is leading us to this number-one position.
Your outlook for 2025 is similar to 2024 in terms of the growth you expect, of between 4% and 5%. How much is there a Donald Trump bump? Because the US is such a big part of your business and you don’t have to be political to see there’s quite a lot of optimism about US growth.
It's way too early to anticipate any impact from the new administration, so there is no impact in our numbers. The only thing that is really having an impact is our net new business in 2024 [such as Hershey’s media and Pfizer creative]. That’s the reason why we are so optimistic for 2025 despite the macro-economic situation and the [year-on-year] comparables.
When you look at our net new-business record, as disclosed by JP Morgan, it is very interesting to understand the dynamic overall [as Publicis has won the most, Omnicom and WPP are next and IPG lost overall in 2024.]. The reason why we feel confident for 2025 is our ability, not only to win more, but I would say, even more importantly, to lose less.
Publicis is the first of the agency holding companies to report since Trump’s inauguration. So how much are tariffs a worry for a global business like yours and could they have an impact?
Again, it’s too early to say if it will have a direct or, more importantly, an indirect impact on our clients. But for the moment, we are ready to anticipate any positive or negative [impact] and it is definitely in our guidance [in terms of the 2025 revenue forecast].
Your investor presentation mentions the Omnicom takeover of IPG and it seems like you’re criticising it, saying they’re dealing with “restructuring and job cuts” and you’re focused on a “growth journey and innovation” and you see a “market share gain potential” as the number of big players, including Publicis and WPP, shrinks from four to three.
If you look at the industry dynamics [in terms of the stock market valuation of each company], we are definitely “back to the future”.
You're going to have a leader [with Omnicom-IPG] that will be running a business that will be in size and market gap worth $20bn [£16bn]-plus. Which is exactly where WPP was at in 2017 – with a revenue mix that is not that different at all [in terms of reliance on creative and media].
Look at the market in 2017: WPP was the indisputable leader, followed by Omnicom and Publicis. The new Omnicom is matching the [Sir Martin] Sorrell WPP time, but it's also true for Publicis that is back as a challenger.
This is why it's not a criticism of Omnicom. We are coming back to a market where they will be an indisputable leader in terms of size and market cap, followed by a challenger. Which is by the way, a position that we like, and, as importantly, a position where we will be stronger than ever compared to 2017 [when Sadoun took over as CEO].
We are done with our transformation. We have a very different revenue mix versus the "new Omnicom". We have a go-to-market [offer] that we can win more than our competitors, and we already have a platform organisation. So it's not a criticism, it's just a learning. When you look at It bluntly, you see that Omnicom is the new WPP and we are coming back in a challenger position but stronger than ever.
You have said the Omnicom takeover could be a benefit for Publicis. Have you seen any impact on the market so far?
First, it's important to understand that it will take at least five years before we know if Omnicom made the right move. This is purely factual: you will have three years of restructuring, leading to thousands of job cuts, and then, from what we've been told, there will be a chief executive succession. So that's roughly five years. And, by the way, it's fine and it’s normal [to take five years]. If you look at Publicis, it took us at least five years – between our transformation and our succession – to start to see material results.
Second thing, the biggest news about this was in the S4 [stock market] filing done by Omnicom. The reality is Philippe [Krakowksy, the CEO of IPG] made a great deal – not only for IPG shareholders but for himself [he has a potential $48.6m [£39m] “golden parachute” payment]. In the filing, it shows that IPG should decline by 3.7% this year [as its 2025 global revenues are forecast to be $8.86bn [£7.1bn] versus an estimated $9.2bn (£7.3bn] in 2024]. So the deal was timely.
Last but not least, yes, it is a big opportunity for us for sure because on one side you have Omnnicom and IPG, who are going to have to integrate “more of the same”, leading to job cuts, with a single seat at the global new-business table. They’re going to move from two seats to one [in pitches].
On the other side, you have Publicis, continuing to invest in innovation, that will see the competitive landscape reduce by 25% [because the number of global holdcos will reduce from four to three]. Comvergence data shows more than nine out of 10 of new-business reviews in 2024 were won by the top four. It was 10 out of 10 in Q4. So the competitive landscape is going to be reduced by 25%. So for us, it’s definitely an opportunity for us to win more.
In the S4 filing, it shows IPG had exploratory talks and telephone calls with strategic and financial buyers. Did Publicis look at IPG and why did you decide it wasn’t for you?
Of course, Philippe has been thinking about the future of IPG for a while. He has been knocking on everyone's doors, including ours. But as you can see, and we demonstrated again this summer, our strategy is not to buy “more of the same”. It is to buy assets that truly bring innovation to our clients and create new sources of growth. We spent roughly $1bn-plus [£800m] over the summer on [influencer company] Influential and Mars Commerce. So you have a good example of us putting our money where our mouth is.
Your annual revenues increased 5.8% and headcount increased from 103,000 to 108,000. You also raised salaries by an average of 7%. But you’ve held the bonus pot at the same level as last year at €540m.
It [the bonus pot] is roughly equal [with a year ago] because there is some allocation between people who are leaving and people who are joining. It is way bigger than the competition.
The market wants to know how you kept your profit margin at 18%, ahead of rivals, and how you plan to improve margin further in 2025. Looking at costs, your personnel expenses went up as a percentage of revenue and non-personnel expenses declined as a percentage in 2024. What’s happening there?
First, our performance on margin at 18% in 2024 is pretty exceptional. We are delivering the same margin rate as 2023 while investing not only €100m [£83.1m] in our Core AI strategy but also €140m [£116.4m] in restructuring in order to make sure that we improve our talent bench. If you add to that the raises [of 7%], plus the bonuses [of €540m], what you get out of that is that 100% of our growth has been reinvested into talent. That’s our strategy. Our strategy is to say in 2024 all the growth we made has been reinvested into talent, not in margin improvement.
The reason why margin will improve in 2025, as we stated last year, is that when you look at our back office and how AI has allowed us to automatise a couple of things, particularly when it comes to our shared services, we are finding some more efficiencies that will allow us to be slightly above 18%.
How is Publicis Groupe handling its return to office? You introduced Mandatory Mondays as part of a minimum three-day week and this is the first time you're speaking since Publicis Media let go of people in the US who were not obeying the mandate at the end of October. Do you need or want your people in more in 2025?
At Publicis, we have been consistent on our return-to-the-office strategy since day one. When we were still in lockdown in April 2020, I did a film, saying: "We will never, ever become a 'Zoom company'. People will have to come back to the office." We introduced a couple of initiatives to take advantage of working from home such as Work your World, which is still in place, where you are able to work six weeks a year, wherever you want in the world, in one of our offices.
But, at the same time, we said it's time to gradually bring people back to the office – three days a week, with Mandatory Mondays and no two days in a row at home. It has been difficult for some, for sure, but we were convinced at the time that if you want people to really innovate, to create, to progress, they have to come back to the office. And we have stuck to this policy since that time and we believe this is the right balance.
To be clear, some of our managers are coming more than three days a week already, because if you want to see your team three days a week, you have to be there most of the time four days a week. But we believe we have the right balance. We also believe that if everyone has to make an effort to be there three days a week, and most of them are enjoying it, we can't let people not follow the rule. This is why we took the decision to let some go if they were not following the [same] rule as everyone else.
Were the dismissals at Publicis Media US a warning to people in all other parts of your business?
Honestly, it was not a warning because this was really marginal. It was more because you can't have 99.5% of the people coming back to office and 0.5% feeling that they can escape the rule. We haven't had any pushback in any places because it came gradually and we were clear with people that if they wanted to work at Publicis, they will have to come back to the office, because we said it from day one.
The problem is not to bring back people in the office. The problem is to manage expectations because people are organising their life, depending on the vision of the company.
You have recently merged Leo Burnett and the Publicis creative agency brand to become Leo. It seems obvious that you need fewer agency brands and maybe clients are more interested in bespoke client agencies anyway?
No. I come from this world to start with: I worked in creative agencies for most of my career. That’s where I come from. I always said that you need strong brands because brands build culture and culture attracts talent. And this is still true today.
By the way, what we have created with the "country model" is to kill the brand P&L but to keep the brand. This is why we haven’t killed any brands. Yes, there are some shared services that you can have from one brand to another. There are some new-business services that you can have [shared] from one brand to another. There are some comms people you can have from one brand to another. There is some financial backbone. But then you still need very strong leaders incarnating the brand that can develop a creative culture.
And if you look, we haven’t killed one brand – not one, by the way, including Publicis. Because the only brand that is disappearing here, and actually not everywhere, is Publicis. Because there is a truth with Publicis, it's a very particular brand. It was the brand of a creative network and the brand of the group.
And, in the last decade, the Publicis brand at group level became stronger because of the Power of One. And we thought creating Leo will actually create three important priorities: first, clarify and strengthen our brand portfolio. Today, we have four brands. We have Leo, Saatchi, BBH and Le Pub that we just created – we actually created a new brand. And then you have creative shops depending on the countries. Second, the match in terms of geographies and talent, between Publicis and Leo Burnett was, like, there is no clash – nowhere. Where Leo was strong, Publicis was weaker, and vice versa.
And third, we like the idea at the moment – where we believe we still need to stand for creativity more than ever – to launch, in a way, a new, global player that can really have an impact. At least this is what we're experiencing from clients at the moment – the ones that were at Leo are very happy, the same at Publicis. It's created some new-business opportunity.
In your presentation, you’re talking about connected media and intelligent creativity operations. It feels like you’re trying to rebrand your media agency operations and creative agency operations, to make them sound more relevant.
For years, we have been saying, it’s about innovate or die. I think today, it’s really about connect or die. What people don’t understand is that AI for the sake of AI is nothing. Look at what happened with DeepSeek [the Chinese AI start-up], it's a commodity. What AI does is data talking to data, capabilities talking to capabilities, people talking to people. Our necessity in the coming weeks, months, years, is to actually accelerate connecting our capabilities, thanks to AI. And that's why we have a very different strategy from our competitors.
We have spent roughly €12bn [£9.9bn] in data, technology and AI over the last decade. This is why you can't compare our investments in AI with our competition, because our real investment is this €12bn, and now we are adding 300 million just to create this AI layer that's connecting everything together. So yes, this is how we think we will stay very relevant.
Originally published in Campaign U.K.
