Stagwell shows that tech focus is no magic formula for agencies

Mark Penn’s Stagwell, which thought it had solved the age old agency conundrum by bolting creative onto tech, has joined the chorus of dismal tidings with revenue falling 6% in the first half of 2023 and hundreds of job losses.

Penn, as ever, put a brave face on things but highlighting new business gains of a somewhat modest $75m shows how tough life is. Penn reckons AI will provide lots of opportunities in the future – but is there money to be made out of it?

Media agencies have been driving what growth there is among the ad holding companies and those underweight in the sector, Stagwell obviously but also Sir Martin Sorrell’s S4 Capital, are struggling.

Historically agency groups have grown by handling FMCG clients and legacy businesses like oil. McCann, the engine room of Interpublic’s growth, grew on the back of Coca-Cola, Exxon (Esso), Martini, Unilever and Nestle. These companies were never likely to replicate creative agency functions, why would they?

But tech companies have taken over as the world’s biggest so supposing an agency business can be sustained on selling tech-based services and expertise to tech companies whose R&D budget is hundreds of time bigger than yours is optimistic, to put it mildly.

Publicis Groupe finds itself (for now anyway) in a sweeter spot, in part thanks to its $8.8bn acquisition of data businesses Sapient and Epsilon, which gives it something the tech client’s don’t have. For now anyway.

The rise of AI could make all such assumptions redundant, including the primacy of media agencies.

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