EuroBusinessMedia (EBM): Publicis Groupe, the world's fourth largest advertising company, just reported revenue for the first quarter of 2007. Maurice Lévy welcome, you are the CEO of Publicis Groupe. How would you say your business is going in the first quarter of the year?
Maurice Lévy (ML): The first quarter of the year has been exactly as we expected it to be, with a growth of 6.5%, which does include the acquisition of Digitas, which has a very positive effect. And unfortunately we had to suffer from the currency exchange rate, particularly the weakness of the dollar compared to the euro. If we look now at organic growth, it is also exactly as we expected it to be at 3%. Why 3%? Simply because we have a profile of the year which is very different from the year before and particularly 2006.
EBM: Why was Q1 so soft? We're hearing echoes from your peers about softer ad spending in Q1. What are the clients telling you these days about their ad spending?
ML: The full year of 2007 will be a good year. And all the reactions and all the plans that we have to date from our clients are very good and in line with our own projections for the full year. We don't see, with the exception of one or two sectors, any particular weakness. Regarding Q1, the comparison base with Q1 of 2006 is unfortunately irrelevant. Why so? Simply because the first quarter of 2006 was particularly high due to the fact that we were integrating revenues from clients lost at the end of 2005 and at the beginning of 2006, which revenues are no longer in our books. This has been announced, everyone knows everything about these numbers. So we are comparing 2007 with 2006, which are not the right bases for comparison. Regarding the full year, we will have a profile which will be very different from the former year. We will start, as we did, with a relatively soft Q1. Q2 will be slightly better. Don't expect magic. Q3 and Q4 will be excellent.
EBM: As of Q3 last year, you reported sub-par growth in Asia, as you tidy up your client portfolio in the region. Have your remedial actions proven effective, and does Q1 make you confident that your Asia business will pick up this year, as you forecasted?
ML: India is doing extremely well and China growth has picked up, at a level which is satisfactory to us and with clients which are the ones we like to have - solid, who understand advertising, who know how to spend, and who understand marketing plans and marketing expenses. So we are with a situation in China which is far better than the one we had last year, and which is exactly what we wanted to do. So we have monitored the situation in a way which is very satisfactory and we are hopeful to see China picking up progressively in the year. So Asia is doing well. We have some dissatisfaction in two markets. Australia, which is going down. This is due to some market situations as well as to the fact that we have lost some accounts, which was reported last year. And also Korea -- but this is a particular situation of the market.
EBM: The stock market is worried about a US slowdown. Do you see any signs of this in your discussions with clients?
ML: We honestly don't see that. And when we are discussing with our clients we see still a good optimism, and the plans that we have for our clients are very good for the time being. Obviously, as you know, the US is a market that is very reactive, and can react very strongly to bad news. So they can adjust very promptly. But for the time being the plans that we have for most of our clients are good plans, and the expenditures which are planned for the year are very good.
EBM: What is your update on the Digitas integration today? In particular, have you been able to bring a number of Publicis clients to the Digitas offering, and vice versa?
ML: The Digitas acquisition was closed on the 25th of January this year, so we have only roughly two and a half months of experience. But the first quarter has been almost ecstatic, with a growth of 16.8%. We are very happy with the numbers and, as far as clients are concerned, the response from our clients has been hugely positive. More importantly, if I may, the response from our organisation has been remarkable. And the relationship between Digitas and our teams, from all our operations, is doing extremely well. Now what we do expect to do is some synergies. First the creation of Prodigious, as you have probably seen in the press, which is our production platform for digital, and that is first in our industry and I believe that this will be something very, very positive for the group as such, and for our clients. The second thing is that we are working on a different approach for multimedia, and we believe that we will find a solution which will be very good for the clients of multimedia as well as for the Publicis clients. So all in all, the plan is working beautifully.
EBM: Have you now reached critical mass in the digital space, or will more acquisitions be necessary?
ML: We had, before the Digitas acquisition, a critical mass which was approximately in the region of the internet expenditure of the advertising holding company. With the Digitas acquisition, we have now a situation that is indisputably well ahead of the market - so we are more than in relative weight with the internet expenditure or interactive expenditure. So we are well equipped in this field. However, we do believe that this segment will grow very fast and we want to grow faster than the market. For that, we will do three things. The first one is to expand Digitas on a global basis, and we have some plans with some assets that we already own or with some acquisitions that we plan to do. The second thing we would like to do is to contaminate, sorry for the word, to contaminate all our organisation, all our operations with Digitas spirit and Digitas skills. And the third thing we'd like to do is to have a better integration between Digitas and some of our operations to offer to some of our clients this service which is second to none. So we truly believe that the digital frontier or the interactive frontier is something in which we will play a crucial role and that we are probably much better equipped than most of our competitors.
EBM: What are your views on the current wave of consolidation in the new media space, first and foremost of which is the recent acquisition of Double Click by Google? Do you see this as a threat to the ad agency businesses in general?
ML: We can expect much more consolidation, and this is a new market where there are a lot of operations which are either already underway or soon to happen. I don't think that it will be in the interest of our clients and of the advertising agencies to look at this as a threat. This is not a constructive approach and this is not a positive approach. I do believe that the strength of our operation lies in our capabilities in terms of strategic planning, creativity and solutions. This is something which is quite unique, and I don't believe that an algorithm tomorrow will find the solution. I believe much more in co-operation. I think that Publicis as a group can co-operate with Google, with Yahoo, with MSN, with AOL, and with all the media, as we have done during the past 80 years. And I don't see why we should view a media, because of its strength and because its dominant position, as a threat. It is up to us to find the right solutions, the right approaches and the right creative solution in order to be a good partner.
EBM: Precisely, how do you see your role as a partner in this new environment?
ML: The role of the advertising agency has been always to partner with both the clients and the media. Obviously the landscape has changed and people like Google or Yahoo or MSN have this very special position, due to the scope of Internet and its globalisation. Therefore their position can be looked at as something dominant. It is up to us to look at this as something very constructive and very positive, because what we can bring to our client is something which is quite unique. First, we are the only one who can help the client to better understand this fit, because we are not working with only one Google or one Yahoo. We are working with all of them. Second, we are bringing strategic solutions for the brands and we understand the consumer. And I believe that we understand the consumer better than many of our competitors and far better than most of the media. The most important aspect is that not only are we the steward of the brand, but we are the creative force which can make the brand appealing and which brings value to the brand for our clients. And this is something that has -- sorry to say that to our friends -- much more value than any algorithm. So I do believe that we, Publicis Groupe, we are the natural partner of people like Google, like Yahoo, MSN, AOL, or any of the media on Earth. That is our natural role, because we are there to defend and to support our clients, the brands.
EBM: The pace of consolidation also seems to be picking up in market research, as illustrated recently by Ipsos who say they are open to talks. Is this prompting you to revisit your acquisition strategy in market research?
ML: Market research is a very interesting area which complements the role of marketing services in our group. Obviously we are looking at this with some distance, simply because it is a market that we still do not understand very well. We have no market research capability, so we are not going to make a step in that direction before having a minimum of understanding of how this market works.
EBM: How is your Project Horizon restructuring program coming along? Is Publicis still on track to meet its 2008 margin target as a result of this optimization program?
ML: The Horizon programme is on track. In 2006 we have posted a margin which is ahead of our own objectives thanks to the savings that have been developed by the Horizon programme, and we will definitely deliver our objective at the end of 2008. Regarding 2007, due to the Digitas integration, we will have some exceptional costs and this obviously should not be seen as a benchmark
EBM: And finally, what about the full year? Do you feel confident? What is your outlook for the rest of the year?
ML: We have an ambitious objective of delivering 5% organic growth. When we look at the year and some weaknesses in some regions, it is quite a challenging objective. We feel confident that we will deliver this. We feel good about the year. We have started the year with a very good portfolio of new business reaching the level of 2.5 billion US dollars net. So we are quite confident, and we believe this year will be another good year for Publicis and its stakeholders.
EBM: Maurice Lévy, CEO of Publicis, thank you very much.
