The advertising and marketing world was shocked when six months ago Maurice Levy, Publicis Groupe's Chairman and CEO, announced what is now known as 'the merger of equals'. Once it crosses all the regulatory hurdles, the 35 billion dollar deal will see Publicis and Omnicom come together to form 'The Publicis Omnicom Groupe'. Storyboard editor Anant Rangaswami met the 71 year old Levy to find out more, and key in on his vision for 2014.
Q: Try and give us a sense of what is going to happen to this business in 2014.
Lvy: It appears that the next year will be a good year. I hope so. It looks like all the forecasts are aligned in the same direction; that growth next year will be much better for almost all the countries of the world. The US seems to be strengthening, China will pick up again, India seems to have good forecasts, it's the same for Russia, Europe, the Latin American countries and Africa, which is doing extremely well. So we see that next year the growth will resume and everyone is expecting that the worldwide growth with GDP will be above four percent. With that forecast, there is a forecast of our industry which is very good for two reasons - first, there is the amplification of the growth, which is happening next year and second, there are two events that are bringing more revenue. One, which is the Winter Olympics in Russia and there is also the FIFA World Cup which is very big. On top of this, it's happening in the country of soccer which is Brazil. We expect that it will be huge and we expect many advertisers will take advantage of this event. So, the forecast for the next year, on a global basis, will be above five percent for our industry.
Q: While the growth will be there, what we've been seeing over the last few years in this industry is huge pressure on margins.
Lvy: It's not only a problem for our industry. When you look at what's happening since, roughly the end of the 80's, it's a huge pressure on cost. It's the era of procurement and the fact that a lot of industries in the world have outsourced to China, India and other East European countries simply because they had to deal with the cost pressure. What's happening with our clients is also impacting our business and we have the impact on our margin. The only way to face these issues is to invent new approaches and services in order to reduce our costs; otherwise we cannot sustain and cannot get the margin we need to invest. The other thing is to innovate. That's the reason why Publicis has been the very first to invest massively in digital, in order to innovate and bring our service to our clients that they are not used or which were not coming from agencies. For example, we have just won a very large assignment and the competitors in front of us were Accenture and Deloitte. So, it's a new world for us and I believe what we need to do is to broaden our services and to bring new approaches to our clients which will help them to grow faster, building a better brand and benefit from the value that we're creating for them.
Q: Specific to your comment on winning this account from Deloitte, overall in advertising, do you think you have the talent, where everybody can become a consultant and compete with the consultancy business?
Lvy: I think it's starting the other way around. It's the consultants who believe that they have the talent to build brands and they are coming in our field by considering that due to the fact that they're thinking strategically about a company, they can also bring solutions on what the brand should be, what the brand should stand for the consumer and with no knowledge of the consumer. So, we're not trying to go into their field, we're sticking to our field and we're competing against them when they are trying to come into our field. We have no intention at all to go to become a consultant or an IT service company. We want to stick to what is our business, which is to connect brands with the consumers and to make sure that the consumers are using the brand in the best possible way, to the advantage of our clients. That necessitates that we go through a whole new range of services. It's not only strategic thinking and creative; it is also technology. So, it is the alchemy of good thinking, the intelligence, the brain, creativity (which is coming from the heart most of the times), and science and technology. When you have that alchemy, you arrive at something that is quite unique and which is giving you the winning brand. That is what we're trying to do.
Q: Now, you say that you don't want to get into the consultants' business; the consultants are coming into your business. But isn't it a happy place to go, because the margins there are much higher?
Lvy: That's true but you have to do what you know. So, we have some consulting business for some limited area and we do it right but we are not a consulting firm and we don't pretend to be what we are not. They think that the people who believe that one day they can become a chef because they are good at eating, does not work. As French people, we know a little bit about cuisine and we believe that each one has his own specialty.
Q: Where do you see the immediate future panning out? I'm talking about the next 2-3 years. Where will the revenues come from? How much will come from the creative business, the digital business, the media business? How do you see the shifting pies?
Lvy: That's a very good question. It's shifting very fast. If you look a few years back to when we started the journey of digital, we had less than one percent coming from digital. Today, we have 38-39 percent of our business which is generated by digital. Obviously some is coming from acquisition, but a lot is coming from organic growth and the development of start-ups within the agency and the fact that we have hired a lot of digital people, etc. So, we see that we can shift, and that has already shifted a big deal. If we now look at the future, there are 2-3 things that we are sure of. The first one is mobility. We're sure that mobility will grow faster and next year, most of the growth, in our industry it's something like 40 percent, will come from mobility. Mobility is not only the mobile telephone per se, the smartphones, the tablets; a lot of tools that we can carry and which are now a part of our daily life and which we cannot separate ourselves from. We're having everything in these small devices. The other aspect that will come to us as a massive shift is E-commerce. Not only because we have to do the transaction, but also, serving the clients through the line from branding, writing the (web)site, calling the consumer to come and doing the transaction. The only part that we don't do is the logistics aspect which is done by FedEx and other companies.
Q: That's a massive change and if the majority of the business is going to come from these areas, are the legacy network companies prepared for the change?
Lvy: I hate to speak about the past and legacy and the people being part of the past and legacy. I think that they're a part of the communication system and the ecosystem will always give them a share. Maybe some of them will have to transform their business. Their education will have to be trained in order to deal with the new trend and the new sectors. When we hire, we'll look out for different skills. This is how things will happen. But it is a transformation of our industry and we should be looking at this with our eyes wide open. For Publicis we have forecasted before the merger that, in 2017-18, 50 percent of our business will come from there. Obviously, 50 percent of our business will come from digital. What you call 'legacy' and I call 'analog business', will suffer. So, we need to take care of our people, prepare them for the future and educate them so that they have a future. That is also a part of the reason for the merger with Omnicom because we are offering a lot of avenues to our people to grow and have new career developments, etc.
Updated Date: Dec 21, 2014 04:39:04 IST