Publicis has outperformed its agency holding company peers, including WPP, Omnicom, Dentsu and IPG, largely due to the strength of its retail and e-commerce acquisitions.

Publicis’ commercial strategy is being tested, however, as agencies plan to limit their spending on Publicis-owned companies – you read that right: agencies.

Many of Publicis’ fastest-growing and most strategically important business units – including CitrusAd, Profitero, Epsilon and Conversant – derive a large portion of their revenue from other agencies.

Although investors welcomed Publicis’s spending spree on new companies focused on retail media and e-commerce, some of these companies also count numerous other agencies among their client bases.

AdExchanger spoke with executives from all of the major agency holding companies, as well as prominent independent advertising agencies and three marketing executives from major consumer goods brands, all of whom said they are rethinking their work with Publicis-owned companies.

The trade boast

Other agencies are being spurred into action by Arthur Sadoun, CEO of Publicis, in the company’s earnings report last month, who highlighted the company’s retail ad tech and SaaS businesses as key differentiators for winning clients and capturing strategic data.

He boasted to investors that the holding company is a leader in CTV and retail media thanks to Epsilon (acquired in 2019) and CitrusAd (acquired in 2021).

Sadoun also said that Profitero, the e-commerce SaaS analytics company that Publicis bought in 2022, had been key to winning new business by “linking our identity to the client’s inventory.”

Prior to its acquisition in 2022, Profitero’s status as a widely available agency tool was a key element of its value proposition. Dentsu, IPG, MDC Partners, VaynerMedia, Horizon Media and Publicis all used and contributed data to Profitero.

But according to one Fortune 50 consumer goods marketer, the tool is less valuable today than it was when it was independent. All those involved spoke to AdExchanger on condition of anonymity.

This is particularly frustrating, says the marketer, because Publicis only identifies promising technology companies and then practically takes them off the market.

Profitero was one of the most innovative e-commerce software providers four years ago, she said, while CitrusAd also tried to become an open competitor to Criteo and the walled garden platforms.

A quick look showed that “none of these companies has changed course since the acquisition,” the marketer said, and Citrus lost leading retail customers such as Albertsons and GoPuff.

Criteo, which has historically targeted brands directly, lost ground to Citrus because the latter’s solution was designed for agencies. However, since the CitrusAd deal, Criteo has been able to consolidate agency budgets and its revenue from large holding companies has increased 50% year-on-year, CEO Megan Clarken told investors in July.

One reason Publicis hasn’t innovated in its acquisitions is that technology is difficult, said an agency buyer with experience in advertising technology, pointing to Criteo and other retail retargeting companies like RTB House that are active in the Chrome Privacy Sandbox, IAB Tech Lab working groups and other technology forums.

“Publicis is not made for this,” he said.

The data edge

The other problem – one that has been relayed by buyers of mid-sized agencies to holding company executives – is that Publicis’ SaaS and ad tech businesses collect valuable data from agency clients.

Profitero, for example, is a live wire that is directly connected to a brand’s pricing and promotions.

And then there’s Conversant (the DSP created when Publicis acquired Epsilon in 2019), which collects data from the agencies it works with about creativity, targeting parameters, the successful and unsuccessful aspects of a campaign, and more.

This data is all just sitting in the ad server and delivery system. And it could be very useful in a bakeoff or RFP, said a data analyst at a holding company – but without hesitation.

“I do not believe that these data does get used to this style,” he added.

Withdrawal of Publicis

Nevertheless, the agencies are becoming increasingly cautious.

Media retailers at three holding companies told AdExchanger they plan to stop or significantly reduce their spending with Conversant.

One buyer said his agency began an internal review in February, with Sadoun also highlighting Epsilon’s growing importance to the business – as well as its access to valuable data sets on its competitors in the market.

Another buyer said he recently stopped spending money with Conversant altogether and now classifies the company internally as a poor-inventory reseller (a category actually used internally, he added, not just a casual adjective).

Should Publicis care?

Publicis could continue to grow even if other agency holding companies stop investing in Citrus, Profitero, Epsilon and Conversant.

The budgets of external holding companies are “immaterial” to Publicis’ ad tech and SaaS businesses, a Publicis spokesperson told AdExchanger in an email.

That depends on how you define “material.”

For example, Omnicom Commerce and Flywheel, a retail media agency acquired last year, spent nearly $250 million at Conversant last year, according to an Omnicom executive who spoke on the subject. That may sound like a lot, but it has dropped dramatically over the past year and will soon drop to zero, they said.

However, for Publicis, the budgets of external agencies are irrelevant because “these services are primarily dedicated to our clients,” said the Publicis spokesperson. They added that new business may now go directly to the brand rather than through the holding company.

And another plus point for Publicis: investors like this trend.

Publicis’ profit margin is now three percent higher than that of any other agency holding company, Sadoun boasted last month. That’s because Publicis is now seen more as a “transformation partner,” he said.

However, margins in SaaS and ad tech are better than agency margins, so the new retail deals will boost Publicis’ overall margin.

In other words, call the ambulance, because Publicis is simply adopting a new approach to technology and data acquisitions that sets the company apart from traditional agency business models—and there’s more to come.

Publicis has a total M&A budget of $750 million to $900 million, Sadoun told investors in July, and the holding company currently has other potential trade-related deals on the table.

“Trade is a big area for us,” he said. “It’s definitely an area we’ll continue to invest in.”