Adland’s AI winners are already on the podium

Publicis Groupe

18/06/2025 10:04

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, June 18 (Reuters Breakingviews) - Silicon Valley has declared Madison Avenue obsolete. If Meta Platforms META.O boss Mark Zuckerberg is to be believed, the teams of creatives who spend their days honing ad concepts and copy are about to be replaced by machines. Given the rapid progress in AI-powered image and video generation, that's a cause for concern for the industry leaders gathering in Cannes this week.

The advertising business has never just been about making commercials. Ensuring they are seen by the right people is a key discipline. This is where media agencies, which specialise in planning campaigns and measuring their success, come in. The world’s largest advertising groups, including Publicis PUBP.PA, Omnicom OMC.N, Interpublic IPG.N (IPG) and WPP WPP.L, are idiosyncratic collections of media, creative and public relations outfits. As a result, they don’t all face the same automation risks.

AI will make the creative part cheaper. Large-scale models can conjure up realistic pictures and movies, dispensing with expensive photographers and film crews. The technology can also generate hyper-personalised ads at a fraction of the time and cost of regular campaigns. That’s pressuring a business already facing macroeconomic woes and increased competition. UBS analysts predict none of the big agency groups will see revenue growth in their creative divisions this year.

Machine learning should also be able to automate some media planning and buying functions by analysing masses of consumer data to determine when and where to serve an ad. But for this to be successful, an agency will need access to plenty of information. Publicis, which acquired data collection specialist Epsilon in 2019, already has an advantage in this department. Throw in its recent acquisition of data manager Lotame and the $29 billion company run by Arthur Sadoun says it will have access to the “unique profiles” of some 90% of internet users.

Analysts at JPMorgan predict AI will drive “a decade of unprecedented account consolidation” where agencies with the best data capabilities take clients from less-savvy peers. Omnicom is in the process of acquiring smaller rival IPG to bulk out its data trove.

All this means companies more dependent on creative revenues will likely underperform. The $8 billion WPP, which said creative made up 45% of its business in 2023 and whose boss Mark Read will retire by the end of the year, looks vulnerable. Publicis stated on a third-quarter 2024 results call that 20% of its revenue is derived from its creative agencies and production studios. Meanwhile, its connected media businesses brought in 65% of sales. That divergence, and Sadoun’s winning bet on big data, is reflected in stock market valuations: Publicis trades at over 12 times analysts’ expectations for earnings over the next 12 months, according to LSEG data, ahead of Omnicom on 8 times and WPP on a multiple of just under 7 times.

The industry still faces an onslaught from Silicon Valley. But in relative terms, the ad industry’s winners are already on the podium.

Follow Jennifer Johnson on Bluesky and LinkedIn.

Diverging valuations for major ad agency holding companies https://www.reuters.com/graphics/BRV-BRV/klvybedknpg/chart.png

(Editing by Peter Thal Larsen; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))