This week Arthur Sadoun, the CEO of the world’s third largest advertising agency (Publicis) announced he was betting on a strategic pivot. And most in the industry questioned if he made a good decision.
Simply put, CEO Sadoun announced at the largest ad agency awards conference, the Cannes International Festival of Creativity, that Publicis would no longer participate in Cannes. Nor would it participate in several other conferences including the very large South by Southwest (SXSW) and Consumer Electronics Show (CES.) Instead, he would save those costs to invest in AR (artificial or augmented reality.)
In an industry long dominated by highly creative people who love mixing with other agency folks and clients, this was an enormous shock. These conferences were where award winners marketed their creative capability, showing off how much they were admired by peers. And they wined and dined clients seeking to build on awards to gain new business. No one would expect any major agency to drop out, and most especially not an agency as large as Publicis.
In changing markets strategic pivots make sense.
And strategically this pivot makes a lot of sense. The ad industry was once dominated by ads placed in newspaper, magazines and on TV. But today print journalism is almost dead. The demand for print ads is a fraction of 20 years ago. And TV is no longer as prevalent as before. Today, people spend more time looking at their smartphone than they do their TV. The days of thinking high creativity would lead to high sales are in the past. Fewer and fewer big advertisers care about who wins awards, and fewer are going to these conferences to decide who they would like to hire.
Today advertising is going “programmatic.” Increasingly ads are placed by computers, on web and mobile sites. Advertising is about finding the right eyeballs, at the right time, next to the right content in order to find a buyer. Advertisers no longer spend money lavishly on mass media hoping for good results. Instead ads are targeted, measured for response and evaluated for ROI based on media, location, user and a raft of other metrics.
And the industry has changed. There still is an advertising agency business. But it is under attack from tech companies like Google, Facebook, Twitter and Snap that promote to advertisers their ability to target the right clients for high returns on money spent. The content is important, but today almost everyone in the industry will tell you success depends on your budget and how you spend it, not the creative. And that is a lot more about understanding how we’re all interconnected, knowing how to measure device usage, profiling user behavior and programming the computers to put those ads in the right place, at the right time.
To pivot you must stop doing the old to start doing the new
Publicis has something like $10B in revenue. Thus, dropping $20M on filing award applications at events like Cannes, and sending a contingent of employees to receive awards, meet people and have fun doesn’t sound like a lot. But multiple that across the year and the total amount could well come to $100M-$200M. That’s still only 2% of revenues – at most. It would seem like not that much money given what has been a core part of historical marketing.
But, if Publicis is to compete in the future with the tech leaders, and emerging digital-oriented agencies, it has to develop technology that will make it a leader. Publicis can’t invent money out of thin air, so it has to stop doing something to create the funds for investing in what’s coming next. And stopping investing in something as “old school” as Cannes actually sounds really smart. As boomer ad execs retire the newer generation is not going to conventions to find agencies, they are looking under the hood at the technology engines these companies provide.
In new strategic areas a little money can go a long way
And while $100M to $200M may not sound like a lot, it is enough money to make a difference in creating a tech team that can work on future-oriented technology like AI. If spent wisely, that could truly move the needle. If Publicis could demonstrate an ability to use proprietary AI technology to better place ads and manage the budget for higher returns it can survive, and perhaps thrive, in a digitally dominated ad industry future. At the very least it can find its place next to Facebook and Google.
WPP, Omnicom and Interpublic should take serious notice. Will they succeed in 2025 if they keep marketing the way they did in 1985? Will this spending grow revenues if customers really don’t care about creative awards? Will they remain relevant if they lack their own technology to develop ads, campaigns and demonstrate positive rates of return on ad dollars spent?