What's going on?
Publicis, a global advertising giant, said on Thursday that one of its digital advertising businesses is worth much less than it had previously thought – and unimpressed investors sent its stock down 1.5%.
What does this mean?
Publicis is reeling from its decision in 2015 to acquire Sapient, a US-based digital advertising company, which was supposed to help Publicis (a 91 year-old company) transform into a 21st century digital advertising behemoth. However, Sapient hasn’t managed to grow as much as Publicis hoped, and its CEO admitted on Thursday that his plans for Sapient had been far too optimistic.
Why should I care?
The bigger picture: The continued shift to digital advertising poses both a threat to and an opportunity for traditional advertising agencies.
Publicis’ acquisition of Sapient was meant to jumpstart the company’s digital advertising efforts. Agency-based firms like Publicis may face challenges as they enter the digital advertising space, particularly if companies are tempted to turn directly to platforms like Facebook and Google for their advertising needs. However, some agencies have smelled opportunity in the digital disruption – WPP, for example, has invested big in data analytics as a way to unlock value for their customers from consumer data.
For markets: Advertisers should benefit from an improving economy and stronger business confidence.
Companies use advertisers to connect with consumers through creative campaigns. If the economy is improving (as it seems to be), companies should be gung-ho to launch new advertising campaigns, since consumers are more willing to open their wallets. In turn, advertisers like Publicis should benefit from the pickup in spending. So it’s not all bad news for Madison Avenue!