Despair and shock: How advertising chiefs have been grappling with Russian exits

As agencies and brands continue to close down Russian operations and sanctions start to bite, many fear that it will be a long time before anyone can even think about reopening.

Despair and shock: How advertising chiefs have been grappling with Russian exits

“I know all of you hate us.” Talking to international colleagues on a recent call to discuss her employer's exit from her country, a Russian agency executive was in despair.

Concerned colleagues from the rest of the world tried to reassure her, saying they know many Russians do not support Vladimir Putin’s invasion of Ukraine, but that will have provided limited comfort. 

In the fog of war, it is almost impossible to know how the conflict will play out, but is now highly likely that most global advertising businesses will cut their links with Russia – with Publicis Groupe, Dentsu and Interpublic among those exiting this week.

Just hours after this piece was first published Omnicom joined the exodus. 

WPP moved relatively quickly to condemn the invasion after it began on 24 February and announced it was shutting down its wholly owned Russian operation with permanent effect on 4 March.

To continue to operate in Russia and keep advertising on pro-government media channels would be tantamount to supporting Putin’s disinformation efforts, WPP concluded.

Exiting Russia means that WPP will no longer employ 1,400 people in the country and is giving up 0.6% of annual revenue globally.

The feedback, particularly internally, that WPP received from around the world was extremely positive – unlike anything that senior executives had previously encountered on a corporate issue.

Many brands including Coca-Cola, McDonald’s, Starbucks and Unilever also suspended some or all of their operations and pulled their advertising in Russia within the first two weeks of the war.

Boycott Russia, a new campaigning group set up by the members of the Ukrainian diaspora in the West and their supporters, produced a video of international brands that were still running spots on Russian TV at the beginning of March to increase the pressure on advertisers.

“It is surprising that some people [at the top of big brands] think they can hunker down and no-one will notice their brand is still advertising,” Owen Dowling, a member of Boycott Russia and a marketing professional, says.

“These companies spend many millions of dollars on brand purpose and at the same time they’re spending on Russian propaganda channels.”

A top media buyer says that many Western brands that were still running ads in Russian media in early March have pulled their spend. “It’s very different from 10 days ago,” this buyer says, while noting there was nothing to stop brands advertising because it is not illegal.

Another source says a Ukrainian minister has written privately to some major international advertising companies in recent days to keep up the pressure about not airing ads in Russia.

In a vivid sign that TV news is a battleground in the information war,  Marina Ovsyannikova, a Russian journalist, went on a live evening news programme to hold up an anti-war message during the middle of the broadcast earlier this week.

More global agency groups are pulling out of Russia

Agency groups have come under scrutiny because of the direct link between advertising and the risks of funding Russian disinformation but most of them moved more slowly than WPP – at least in public.

That prompted a story in The Times on 10 March in which one unnamed ad industry executive said they were “staggered” that no agency had yet followed WPP’s lead and Bill Browder, a leading anti-corruption campaigner and critic of Putin, accused agencies of taking a “cynical attitude”.

The reality was that practically every major agency group, if not all of them, was already preparing to withdraw from Russia on a temporary basis – and, in all likelihood, for an extended period that could last as long as Putin remains in power.

Economic sanctions that have been imposed by both sides – by Western governments and by Putin’s regime – make it difficult to do business in Russia.

“It’s very difficult to get [bank] liquidity,” one agency chief says. There will soon be practically “zero revenue” for international client work, another global leader says.

Most of the big global agency groups have had a presence in Russia for more than 25 years and some such as Omnicom, Dentsu and IPG have joint ventures with local agency partners, which also makes it more complicated to exit.

The Putin regime drew up a law last week that allows the government to seize the assets of any company that is more than 25% owned by foreigners from “unfriendly states”.

This week has seen a flurry of departures: IPG announced it was suspending its Russian joint ventures with a local partner on Monday (14 March) in a move that affects 200 staff.

A day later, Publicis Groupe shut down its wholly-owned Russian business and handed ownership of its agencies, which employs 1,200 people, to local management on Tuesday (15 March).

Dentsu announced it was in process of exiting its joint venture, which has 1,500 staff, and transferring ownership to its local partner on Wednesday (16 March).

And today (17 March) Omnicom, the biggest agency employer with 2,000 people in Russia, said it has been working with local partners to dispose of all of its investment positions there.

Havas has an affiliate relationship but no employees in Russia.

While WPP won some plaudits for its speedy move, some of its peers say they wanted to do what they could to put new arrangements in place first – such as transferring ownership to local management, arranging new financial lines of credit to keep the agencies afloat, and supporting long-serving staff – before publicising any suspension or withdrawal.

“We were determined to take the necessary time to come with a solution that was truly people-first, because our 1,200 employees in Russia are our people too,” Arthur Sadoun, the chief executive of Publicis Groupe, said, adding: “I wasn’t ready to abandon them with a short email and a few roubles in compensation.”

Financial cost

Some agency groups will need to write off the financial value of their Russian businesses – probably by the end of March in time for their Q1 results – albeit the cost may be relatively low.

Publicis Groupe generated less than 0.5% of global revenues in Russia. Another group is believed to have higher exposure – perhaps upwards of 2% globally.

That reflects the fact that Russia is not a major global market – “I’ve never lost or won a piece of global business because of Russia,” one international agency executive says.

Even as they pulled out, some advertising insiders have been looking into the future when there might be a possible return to Russia one day.

A senior marketing figure with global experience recalls the past experience of Myanmar where their company mothballed operations, rather than shut them down, in the knowledge that the market would re-open, but the environment in Russia has become more hostile – almost by the day since the war began as Putin’s rhetoric has hardened.

The wider repercussions of the war and sanctions are likely to be significant as global economic growth, including advertising spend, will take a hit, drive energy prices higher and slow the expected financial recovery from the pandemic. Agency groups had been forecasting growth of 4% to 6% in 2022 before the war.

Amid the terrible human suffering and sombre financial calculations, there have been some uplifting stories.

Thousands of employees at agencies and advertising companies have been making financial donations and offering their homes to Ukrainians, who have been fleeing the region.

Initiatives such as AdAid.EU have launched with the aim of finding work for advertising people who have left Ukraine and Russia.

The media industry remains embroiled in this war, not least because of the importance of the global tech platforms in the communications fight – some companies say they are drawing on their experience of handling fake news and disinformation during the 6 January insurrection in the US in 2021.

But as one advertising chief who has been dealing with the crisis for the last three weeks says: “There’s nothing in the CEO leadership playbook in a time of war."

This article has been updated to reflect Omnicom's announcement it is also pulling out of Russia.