Publicis 3Q23 Results Reinforce Positive Expectations for Industry
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Publicis was one of the first ad-supported companies to report third quarter results, and posted very sold – and much better-than-guidance implied – organic revenue growth of 5.3%. With prior guidance of 5% for the year and 7% growth in the first half, guidance implied 3% growth in the second half of the year. An increase in full year growth to a range of 5.5% to 6%, while still conservative, is unsurprising as a result. At this level, Publicis will undoubtedly be the industry leader for organic growth, as I continue to expect the global agency groups will post a mid-single digit growth rate, or probably around 4% growth for the year on a combined basis. For reference, Omnicom’s prior guidance for its gross organic revenue is a range of 3.5-5.0%, while Interpublic’s net organic revenue growth guidance is in a range of 1.0-2.0% and WPP’s is for a range of 1.5-3.0%.
For Publicis, media grew by high single digits – slower than the double digit level of the second quarter, but also against difficult comparables of double digits during 3Q22. As growth continues through the end of the year, Publicis Media is likely closing in on $5 billion in net revenue for 2023. The US-centric Epsilon business accelerated, growing by 10.5%, or much better than the 6.8% growth rate of the second quarter, and building on the difficult comparable of 14% in 3Q22. Publicis Sapient’s 1.2% organic growth rate was a drag on results, although this was up against a 19% growth rate in the year-ago period. Despite ongoing challenges to the sub-sector, creative agencies continued to grow by low single digits.
By region, the biggest one – North America – turned out to be the weakest, only growing by 3%, with the US up 3.2%, led by Epsilon’s double digit growth rate and media which grew mid-single digits offset by slightly negative creative revenues. Comparables for the region were difficult, at 11% in the year ago period. Matching global trends, Publicis Sapient was stable. Looking at other major regions, Europe was up 10.7% led by media and creative (with the UK growing 10%, Germany up 4% and France up 6.5%). Meanwhile, APAC was up 3.8% with India and Singapore strong, but China down 2.5% organically.
What do the results tell us about the rest of the advertising industry? Although Publicis’ results were undoubtedly stronger than other holding companies in the third quarter, the relative strength of media is probably aided as much by ongoing growth in proprietary trading services and market share gains as underlying growth in spending on a like-for-like basis. It’s very plausible that large brand spending grew at a slower pace in the third quarter relative to the second quarter, although I think at a total industry level, spending from marketers not serviced by agencies – in particular, overseas advertisers from China spending outside of their home market – is possibly accelerating, at least based on my interpretation of Meta’s guidance. Meanwhile, I think that global creative services are likely very soft – or possibly declining – so to the extent Publicis grew its creative business, that would imply share gains for Publicis in that business.