Citing Obama's Win, European Ad Chief Is Hopeful

By ERIC PFANNER
The New York Times
Published: Jan 02, 2009

PARIS — The morning after Barack Obama was elected president of the United States, Maurice Lévy, chief executive of the Publicis Groupe, the advertising company based in Paris, sent an e-mail message to the 15,000 Publicis employees in the United States.

“Congratulations on such a great choice,” he wrote. “Once again the American people have proved that they are right there when it comes to turning points in history — and they know how to make history.”

In his support for President-elect Obama, Mr. Lévy had plenty of company in Europe, of course. And he understands the value of friendly relationships with politicians; associates say he uses the informal French “tu,” rather than the formal “vous,” to address President Nicolas Sarkozy of France.

But openly gushing about the results of another country’s election is unusual for any chief executive, let alone a discreet Frenchman whose company’s commercial messages go out to Americans of all political stripes.

“I have always thought politics, that is something I should not get involved in,” Mr. Lévy said during an interview in his Paris office. “But I had to because this is so fantastic.”

“It erases all the bad images, the bad pictures of the last eight years with one vote,” he added. “It is a wonderful demonstration of the strengths of America, a formidable lesson for the world.”

Like many Europeans of his generation, Mr. Lévy said, he has always admired American culture. But it is also clear that the prospect of trans-Atlantic rapprochement makes good business sense to an executive whose clients include McDonald’s, Procter & Gamble and General Motors, especially when the economic news is going from bad to worse. Since the election, forecasters have predicted that ad spending will fall in most major developed markets next year.

Analysts at Morgan Stanley predict that revenue from Publicis’s existing businesses will fall 4 percent next year. The group’s subsidiaries include the ad agencies Saatchi & Saatchi and Leo Burnett, as well as the media buying operations ZenithOptimedia and Starcom Mediavest.

The automotive industry, along with two other sectors hit hard by the downturn — health care and financial services — account for about a third of Publicis’s revenue. In addition to G.M., its clients include Renault, Toyota and Fiat. G.M has been cutting its ad spending as its woes have deepened over the last year, Mr. Lévy said. Publicis expects further reductions from G.M. and other automakers as they streamline their product offerings, he added.

“Nobody should think they are not conscious of cost,” Mr. Lévy said of G.M. “They are very tough on us.”

As carmakers and other advertisers look for more efficient ways to get their messages across, Mr. Lévy said, the economic crisis will hasten the shift of advertising to the Internet and away from traditional media. By 2010, he said, 15 percent of global ad spending will be online.

Mr. Lévy has tried to prepare Publicis for this shift by beefing up its digital capabilities. Two years ago, the company acquired Digitas, a specialist in online marketing, for $1.3 billion. Publicis has also invested substantially in emerging markets, where ad spending has been growing more rapidly than in Western Europe, Japan or North America.

“This has recently become a higher-risk strategy,” the Morgan Stanley analysts wrote in a recent report. Indeed, the notion that Internet ad spending will be less affected by the downturn, which has become something of a mantra in the industry, remains unproven. During the last downturn, Internet spending suffered the most. Emerging markets can also be volatile.

But Mr. Lévy said Publicis would stick with its approach. This month, the company acquired W&K Communications, an agency based in Beijing. In November, it acquired Tribal, a Brazilian agency specializing in digital advertising.

“We have other negotiations under way in China; we have contacts in India,” Mr. Lévy said.

Might he be planning a bigger move? There has long been speculation in the industry about the possibility of a merger between Publicis and the Interpublic Group, based in New York. Those companies are neck-and-neck for the No. 3 position in the industry, after the Omnicom Group and the WPP Group.

Publicis previously made an unsuccessful run at the Aegis Group, a company based in London specializing in media buying and digital advertising. There has been renewed talk in the industry that Aegis might be for sale, following the recent resignation of its chief executive, Robert Lerwill.

But Mr. Lévy said his company was not holding discussions with Interpublic. And he said the fate of Aegis was out of his hands because the French investor Vincent Bolloré holds a stake of nearly 30 percent in that company, allowing him to keep other potential suitors at bay. Mr. Bolloré is also the chairman of the French advertising company Havas, in which he owns a 32.9 percent stake.

“It is important at a time like this not to spend a lot of time on chess games,” Mr. Lévy said. “We are not looking at any game-changing operations.”

He said big, geographically diversified advertising companies like Publicis, alongside small agencies with a creative reputation, would fare better than midsize companies in the downturn.

“There will be casualties,” he said, without citing names. “There will be consolidation. There will be companies that will not be in business when this crisis is over — advertisers, advertising agencies and media.”

While Mr. Lévy is ebullient about the election of Mr. Obama, his admiration for the United States has its limits. In deploring what he sees as the root of the crisis — a “perversion” of capitalism that drove Wall Street to try to profit from the idea of extending home ownership to the masses — he echoed a widely held French view.

“Capitalism cannot be only about maximizing profit,” he said.

But are not advertising and marketing all functions of capitalism — about making people want bigger houses, and things to fill them with?

“We don’t lie to them, we don’t cheat them,” he said. “We don’t tell them something is a triple-A product when it is not a triple-A product.”

© The New York Times. All rights reserved. This article originally appeared in The New York Times.