Q&A: Publicis CEO Argues Epsilon Acquisition Is Really All About Powering Creativity

Arthur Sadoun 'on the same page' as Accenture and Droga5

Publicis will enter a partnership with Epsilon parent company Alliance Data. Getty Images
Headshot of Patrick Coffee

Data is the future of marketing—but only when used to enhance the core creative services that agencies sell to their clients.

This is the argument Publicis Groupe CEO Arthur Sadoun advanced to support the largest acquisition in his company’s history, confirming that it had agreed to buy Epsilon for $4.4 billion.

First, however, he used an internal video to explain what Epsilon will mean to the holding group and to apologize for breaking the news on a sleepy Sunday morning.

After the announcement went live, Adweek spoke to Sadoun to learn more about why he and his board moved to buy Epsilon after eyeing the company for years, how they arrived at a price that is “more than reasonable,” and whether this deal is, in some ways, a mirror image of Accenture Interactive’s recent decision to buy creative agency Droga5.

This interview has been edited for length and clarity.

Adweek: Is Publicis a data marketing business now?
Arthur Sadoun: No, Publicis is literally a creative business. [But] the world is changing so fast now. Do you know how many digital interactions someone between the ages of 17 and 75 does on average before buying a car today?

I would guess dozens.
Nine hundred digital interactions. So if we continue to believe that we can manage car advertising in the same way that we were doing it 10 years ago, we are wrong. And the reason why we are doing this deal today is to continue on our strategy to be at the core of our clients’ digital transformations, bringing them, roughly, the best of creativity. In a dynamic world, this is something that is not easy.

Creative is of course still the core of our business, although it is being challenged for the reason I just mentioned. With Epsilon, we have today a clear leader in data and platforms that will, again, accelerate our strategy and boost our creative product.

Every creative will tell you the same: data is a means, not an end. But understanding consumer insights, being able to ideate in this way and deliver dynamic content optimization, will make the difference between convincing someone to buy a car after 900 digital interactions or falling flat.

"We believe you can have all the data and tech in the world, but if the message you're delivering has no impact, you won't sell anything."
Arthur Sadoun

Ultimately, as always, you want to help clients maintain and grow their position in the marketplace. 
When you look at how fast the direct-to-consumer brands are gaining market share, it’s insane. And when you look at the big topics of data regulation, the only way for clients to continue to grow is [by delivering] personalized experience at scale. So we have decided to move on this deal.

At the moment, by the way, Accenture is moving in the other direction with exactly the same goal [by acquiring Droga5].

I think we are taking a stand here for our creative business and our business in general and, more importantly, making sure that our clients can still be relevant.

This deal, along with IPG’s acquisition of Acxiom, seems to confirm that consumer data will underlie all the decisions your company makes.
We believe you can have all the data and tech in the world, but if the message you’re delivering has no impact, you won’t sell anything. And again, this is why it’s interesting to see what Accenture is doing. They are buying a company that is declining by 10% on a very high multiple, because they know that creativity is important. It’s obvious we are on the same page.

Also, Acxiom is only about data. Epsilon is way more. They are, as you know, first in CRM, with an outstanding way of putting together and building ID around first-party data. That is a business that has nothing to do with Acxiom. Every year they are sending 71 billion personalized emails. They can identify 225 million consumers in the U.S. with 7,000 attributes. Last but not least, they have a platform called Conversant, which is a big part of their business, that can deliver personalized messaging at scale.

And to be clear, we had 50 meetings with those guys before making our decision, because I wanted everyone in the first line of management to feel that it was the right thing to do. The fact that there’d been a leak [to news organizations] two weeks ago helped us to gather information.

If we forget for one second that we are a creative company, not only will we lose our edge, but we will lose our competitive advantage.

At the same time, Publicis has recently made cutbacks in areas including creative and production.
I don’t see any cutback in creative; actually, we’re going to announce some new hires in the next few weeks. We are investing in creativity more than anywhere else. [Chief creative officer] Nick Law is re-organizing agencies and things are shifting, but cutbacks? Absolutely not.

How do you want investors to receive this news, given the hit your shares took after the fourth quarter earnings call and the pressure to deliver for them?
The question that keeps me awake at night is, how fast can we transform to be leading the markets? Every player can become irrelevant very fast. I’m more concerned with the rise of consumer expectations and how I can help my clients fight against the direct-to-consumer brands than anything else.

You’re right, we didn’t have good organic growth in Q4. But two things need to be mentioned. First, we were by far No. 1 in new business, which shows we have the right model connecting data, creativity and technology. And second, when you look at our financial results, we are by far the most robust. This is why we are capable today of making such a big acquisition.

It’s a bit like the music industry: 15 years ago you focused on how many CDs you sell. We believe that with Epsilon, we are able to deliver the equivalent of streaming for our industry.

I am extremely optimistic about how the market will perceive the deal, because it’s a very compelling transaction that will create shareholder value for sure. The price is more than reasonable. You also need to know that the Epsilon team did recommend Alliance Data’s board to go with us. And we are sharing a lot of clients.

The big question is integration, and that is going to be critical.

"If we forget for one second that we are a creative company, not only will we lose our edge, but we will lose our competitive advantage."
Arthur Sadoun


@PatrickCoffee patrick.coffee@adweek.com Patrick Coffee is a senior editor for Adweek.
Publish date: April 14, 2019 https://dev.adweek.com/agencies/qa-publicis-ceo-argues-epsilon-acquisition-is-really-all-about-powering-creativity/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT
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