Publicis Groupe’s performance dipped in Q2 as clients pulled programmatic spend in response to GDPR.
Organic growth was down 2.1% for the quarter and 0.4% for the half-year. Net revenues for the first half of the year dropped 8.2% to $5 billion.
In Europe, net revenues were down 3.6% YoY to $745 million. Overall, Publicis estimates it lost $11.5 million in revenue in the quarter to GDPR-related spending pauses.
“GDPR has had an impact on revenue in Europe in media,” CEO Arthur Sadoun told investors on the earnings call Thursday. “We’re fully compliant with GDPR, but we want to make sure that the publishers with whom we are working are also compliant.”
Shortly after GPDR went into effect on May 25, European clients pulled back spend in programmatic as publishers and vendors finalized their own compliance efforts. Other clients stopped spending out of caution, unsure if their targeting strategies would be compliant.
“Advertisers and some agencies paused or pulled ad tech activity as we waited to see the impact of the new regulation,” said Publicis Media CEO Steve King. “Many publications noted a significant drop in EU advertising demand.”
But Publicis has since rebounded from the GDPR dip and is expecting to perform on track with its growth guidance for the year as clients get more familiar with the regulation.
“The good news is the DPA requirements we have with publishers have now been satisfied,” King said. “That decline we saw at the end of May has come to the end.”
But other factors contributed to a slow quarter for Publicis, including a decline in its health business and continued restructuring costs, which total $128 million so far this year. Growth in North America declined 2.3% YoY against difficult Q1 comps.
Silver linings playbook
Publicis Groupe saw some positive trends despite the weak quarter.
At an investor day in March, Publicis laid out a plan to evolve around data, dynamic creative and business transformation. Services in those areas grew 27% in the first half of the year to make up 18% of revenue from Publicis’ top 100 clients.
Publicis’ goal is to save roughly $523 million in the next three years and reinvest $350 million in those three strategic areas.
“There is no need to comment on how much our industry is being disrupted,” Sadoun said. “Agencies must transform, and they’d better to do it fast.”
The transformation is starting to pay off. This year, Publicis has scooped up clients like Daimler, Marriott and Campbell’s globally, and McDonald’s, Macy’s and Nestle regionally.
“Our game-changers are having a halo effect on the entire relationship and helping us win new business in new ways,” Sadoun said.
“Data isn’t valuable because you own it. It’s valuable when you apply it intelligently,” King said. “We continue to believe in being data-agnostic and leveraging the best data sources around the world, along with client first-party data.”