Publicis CEO Maurice Levy: We Win in Digital but Omnicom Is More Creative

Revenue and Net Income Rise but Growth Slows in India and China

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Revenue at Publicis Groupe increased 5.2% to $9.5 billion in 2013, boosted by a 13.9% rise in digital revenue for the year, the agency holding company said in Paris on Thursday. Organic revenue growth totaled 2.6% in 2013, the company said.

Net income increased 11.5% to $1 billion, or 792 million euros, beating the 763.8 million-euro estimate by analysts in a Bloomberg survey.

Maurice Levy
Maurice Levy

Those figures exclude the costs of the company's planned merger with New York-based Omnicom, which will form a new global agency colossus when it is completed later this year. Publicis Chairman-CEO Maurice Levy took the occasion of the latest earnings release to assert his own group's superiority in digital media and on the balance sheet while conceding Omnicom's creative dominance.

"Not to speak against Publicis agencies, but it's true that we've always recognized that Omnicom creative agencies are more creative than Publicis agencies," Mr. Levy said during a conference call. "There are rankings to show that."

Mr. Levy also seemed to be emphasizing Publicis Groupe's French identity, giving the presentation in French instead of his usual English. He revealed that there were new "rules of the game," and that now, "we speak French in France."

Mr. Levy put a positive spin on the delay of the merger, originally slated to be completed as soon as late last year or the first quarter of 2014 but now slipping into the second half of this year because of what Mr. Levy described as the "longer process" in China and a "bottleneck" of anti-trust filings.

The delay in securing government approvals gives additional breathing room to the company's 70 or more groups working on the merger, Mr. Levy said. "In December, when they were set up, there were so many things to do in closing the accounts and visiting clients, so the work was slowed down," he said. "The fact that we have extra time is a positive because it helps us go very deep into the discovery process and make sure the transition is smooth."

Mergers of agencies within Publicis and Omnicom are not on the agenda, Mr. Levy said. "We certainly do not consider merging major networks -- we don't want to merge Leo Burnett with BBDO or BBDO with Publicis or Publicis with Saatchi," he said. "No, certainly not. We want to preserve the client management and the data protection dimension, this is why we move ahead very cautiously."

The process so far has revealed two "very successful companies with marked profiles," Mr. Levy added. "Omnicom is growth oriented, whereas Publicis is profit oriented -- we have the best margins on the market," he said. "We are also more digital than they are, due to our strategic choice and major investments, and we are more present in emerging markets."

Digital accounted for 38% of Publicis Groupe revenue in 2013 and 40% company revenue in the fourth quarter.

Publicis Groupe's strong balance sheet has long enabled the company to make "bold and courageous" moves, such as the $3 billion deal to acquire BCom3 in 2002, negotiations for which began only 10 days after the Sept. 11 attacks, Mr. Levy said. The company bought Razorfish in 2009 at the height of the financial crisis in the U.S., he added.

Mr. Levy and Omnicom Group CEO John Wren as the companies' merger was announced
Mr. Levy and Omnicom Group CEO John Wren as the companies' merger was announced Credit: Balint Porneczi/Bloomberg

Company revenue grew 4.7% in North America last year as digital revenue increased 13.1% and analog revenue fell 3.1, according to Publicis. Revenue grew just 1% in BRIC nations -- Brazil, Russia, India and China -- and MISSAT -- Mexico, Indonesia, Singapore, South Africa and Turkey.

Revenue in Europe declined 1.6% in 2013, mainly due to an 11.3% drop in southern Europe.

For the fourth quarter of 2013, however, Europe narrowly returned to growth for Publicis, showing a 0.1% improvement. BRIC and MISSAT revenue in the fourth quarter declined 5.9%, hit by the postponement of a number of campaigns, particularly in the luxury sectors.

Mr. Lévy said that management changes in India and China had affected performance temporarily, and that China has undergone a "paradigm change" as well. "The Chinese model has changed from a focus on building infrastructure and being the factory of the world to concentrating on drawing the poorest people out of poverty and improving middle class purchasing power," he said.

But many company executives will be largely occupied with the merger for the near future. "It's a long process," Mr. Levy said. "We do have to work overtime. We have to travel much more and it is quite time consuming on the private lives of all of our staff, but it is a wonderful project, and the enthusiasm we see within teams will spread quickly and easily."

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