Yannick Bolloré, the global chief executive of Havas, has said the recovery in advertising stock prices in recent months is proof that parent company Vivendi is “investing in the right direction” and “Havas is stronger now than we were before the start of the crisis”.
The profit multiples of the big agency groups declined after Vivendi bought Havas at a €3.9bn (£3.3bn) valuation exactly four years ago in May 2017, Bolloré conceded, but share prices have bounced back “big time” as the sector held up better than expected during the pandemic.
“You would have been wise to invest in advertising” at the start of 2021, he said. “Look at the six largest holding companies – people were surprised by the level of EBIT [earnings before interest and tax] and the cashflow coming from operations” during 2020 – the “worst of the worst” in terms of business conditions.
Investors have “finally” come to “understand that this is a great business to invest in”, he said, referring to the big global agency groups.
Bolloré said Havas’ decision to simplify and integrate its creative, media and healthcare operations under one roof in Havas Villages around the world from 2014 had paid off as the agency group topped the global creative new business rankings, compiled by R3 Worldwide, last year – the first time since Bolloré became global CEO in 2013.
Wins included Douwe Egberts owner JDE Peets, Fortnite creator Epic Games and Tetra Pak. The BBC was also a notable retention.
“In the last eight years, we have never been so successful in new business [as in 2020] and it is continuing,” the 41-year-old Frenchman said in a nod to recent wins, including Asda’s creative account and Volkswagen’s customer experience business in the UK.
Bolloré, who is also chairman of the supervisory board of Vivendi, added that Havas has benefitted from being part of a larger group because it was able to avoid making temporary salary cuts during the pandemic and it now collaborates with other parts of the French media conglomerate on “80% to 90% of new business pitches”.
Vivendi owns music giant Universal Music Group (UMG), TV and film business Canal+, mobile gaming arm Gameloft and book publisher Editis, as well as Havas. Bolloré said its scale and €35.5bn (£31bn) stock market value – twice the size of the biggest agency holding companies, he noted – means Havas is in a stronger position in its dealings with the tech giants.
Bolloré maintained it was too soon to say what Vivendi might do with its cash windfall from the planned stock market flotation of UMG later this year or whether it might make a major acquisition in the agency space. “What is sure is that we have great ambitions for Havas,” he said. “We believe in advertising."
His father, Vincent Bolloré, is the top shareholder in Vivendi and controls about 30% of the voting shares via Bolloré Group, the family business.
The younger Bolloré has given relatively few interviews since Havas became part of Vivendi because he "didn’t feel the need to over-communicate”. But he spoke to Campaign by video call from his office in Paris because he can “see light at the end of the tunnel”, especially in the UK and US, as the pandemic eases.
Havas reported an 0.8% decline in organic revenues in Q1 2021, its best quarterly performance since Q3 2019, and is set to return to growth in Q2 2021.
Reorganising Havas before the pandemic
Bolloré was 33 when he was appointed global chief executive and he maintains that Havas, the smallest of the big six agency holding companies, was ahead of its time when it “decided to change its business model and creative strategy around integration and the Villages – what we call the Together strategy”.
That led to the company dropping many of its subsidiary brands such as Euro RSCG and MPG in favour of the Havas name.
“We have been quite pioneering in the industry because now the other groups are going through integration,” he said. “We did well because we finished that move before the pandemic and it’s a great asset to be integrated and to have people collaborating under one roof. It’s more than a spirit. I think we have created a Havas culture.”
Before 2014, “no-one knew a lot about Havas”. Now it has “become an integrated group” and “many great leaders have joined us”, he said, citing Chris Hirst, global CEO of Havas Creative, Peter Mears, global chief executive of Havas Media, and Donna Murphy, global CEO of Havas Health and You, as well as local leaders such as Xavier Rees and Vicki Maguire, respectively the chief executive and chief creative officer of Havas London.
Becoming part of Vivendi made sense because of a growing crossover between entertainment, content and communications, he said, noting “people are watching less and less linear TV and some people are exposed less to paid media”.
Brands want “to be part of the entertainment, to be part of the content” to engage consumers, he suggested – a trend that Vivendi has called “advertainment”.
What’s more, Vivendi has offered financial protection to Havas. While other big agency groups introduced temporary salary reductions for higher-earning executives at the start of the pandemic when adspend plunged, Bolloré and Arnaud de Puyfontaine, the chief executive of Vivendi, decided Havas would not pay a dividend to its parent, rather than ask staff to sacrifice pay.
Havas also did not make “any lay-offs during the initial lockdown”, he said. “If we had been on our own on the stock market, maybe the story would have been different.”
Havas still cut jobs later in the year. Headcount fell by more than 1,100 from 19,939 in 2019 to 18,802 in 2020, the annual report showed.
Just over 50% of staff are in Europe, 20% in North America and 17% in Asia Pacific, with most of the remainder in South America.
The resilience of advertising during Covid and speeding up change
Havas’ organic revenues declined 9.9% last year, “which can seem big but this is the industry trend”, Bolloré said. “Being honest with you, this was my optimistic scenario back in May .”
The decline was worse than at Interpublic (down 4.8%), Publicis Groupe (down 6.3%) and WPP (down 8.2%) but better than at Omnicom and Dentsu (both down 11.1%). All of them lagged newer digital disruptors such as You & Mr Jones, run by David Jones, the former global chief executive of Havas, and S4 Capital, founded by Sir Martin Sorrell, which grew at double-digit rates last year – in line with the tech giants.
The upside was that the second wave of Covid had less impact on adspend than the first wave as advertisers understood “the absolute need to continue to communicate”, as Bolloré put it.
Havas has sought to use the crisis as “an opportunity” to “accelerate all the changes that we wanted to implement”, he said, noting that in the past “sometimes we have been slow in making some changes”.
Recent moves have included the launch of Havas CX, a customer experience agency network, and Havas Market, an ecommerce practice, at the end of 2020.
He also highlighted the decision long before the pandemic to expand its health division, which is now a “world leader in health” but was “not the case eight years ago”.
Health is now 23% of group revenues, media 32% and creative 45%. Half of Havas’ top 100 clients use a combination of all three services, according to Vivendi’s annual report.
“We have completely changed the group in eight years” and it is “working really well” in partnership with Vivendi, Bolloré said, giving examples such as Havas Market working with Editis on ecommerce in France and Havas Events collaborating with Canal+ on virtual events.
That is why he has been telling his team: “Havas is stronger now than we were before the start of the crisis.”
He emphasised that it has still been “a terrible year for health reasons and everything that goes with it” and cautioned “the crisis is not completely over”.
Bullish about the opportunity for agencies
The pushback about Havas’ performance since the sale to Vivendi is that growth across much of the agency sector has been lacklustre. Havas’ organic revenues fell 0.8% in 2017, rose 0.1% in 2018 and fell 1.0% in 2019.
With hindsight, 2017 looked like a good time to sell because the valuations of some of Havas’ rivals have tumbled. WPP’s stock price has halved since 2017.
However, Bolloré dismissed suggestions that Vivendi shareholders might have over-paid in the deal that was orchestrated by his father.
“If I put myself in a Vivendi capacity, it was a great acquisition for Vivendi,” he said, noting that Havas generates €225m in EBIT before exceptional items “in a normal year”.
Havas has “brought many great things to Vivendi”, including “great knowledge of consumers”, “great data capabilities” and “great understanding” of “new creative platforms”.
Havas grew 5.1% in both 2014 and 2015 and 3.1% in 2016 and increased headcount from 15,000 to nearly 20,000 since 2013, he pointed out.
“I think we did great, great things – it’s not me, it’s the teams all around the world. I’m quite satisfied with the progression of the group [over the longer term].”
He is bullish about the opportunity for agencies despite many doubts, including past scrutiny over media-buying transparency, clients bringing marketing services in-house and buying direct from Google and Facebook and new entrants including the consulting giants.
On transparency, “the industry has shifted to full transparency to meet clients’ expectations” since a landmark report by the US Association of National Advertisers in 2016, yet “the cashflow from advertising agencies didn’t go down”, which showed the media business remained in good health, Bolloré said.
He declined to comment on a legal disclosure in Vivendi’s accounts that said the US Federal Bureau of Investigation issued “a subpoena for documents” relating to Havas Media Alliance WWSL, a Spanish subsidiary, in 2018. “At this stage, Havas is not a party to any proceedings and is not being interviewed,” Vivendi’s 2020 accounts said, repeating the same line that it has given since 2018.
Bolloré also played down the threat of in-housing. Clients realise the advertising market is “very complex” and “the world is changing too fast and they want to make sure they have great experts”.
It is “very hard” to in-source marketing expertise because “it’s not your core business” and creative talent likes to “work for multiple clients”.
Brands that have been insourcing “are trying to outsource now” and “this is going to be the next trend”, he predicted.
Three or four years ago, there was also a lot of talk about “consultants going down the chain [from strategy consulting] to advertising and it hasn’t been a success”, he claimed, without naming any of these new entrants such as Accenture and Deloitte. “Traditional consultants that have invested in advertising are not winning that many pitches.”
R3 Worldwide’s creative rankings show Havas with $112m in revenue from 222 wins last year and Accenture Interactive’s Droga5 not far behind in second place with $96m in revenue, despite having only 15 wins.
Bolloré said: “What we realise is it’s easier to go up the chain from advertising to strategy consulting than it is for a strategic consultant to go down the chain. Why? Because what people haven’t realised is people don’t know how advertising works.
“People [outside adland] believe people working in advertising are just creative people, doing some crazy drawings at their computer,” he said; but agencies have “huge capabilities” in other areas, such as planning, strategic resources and analysis of the competitive landscape.
“In fact, we are consultants ourselves but we didn’t know that. We believed we were just creative people – nice people – but we are not just creative. We are also strategic people.
“We have huge opportunities to go up the value chain. The margins are higher [in consulting], we charge twice the price per hour and the synergies are great,” he said, noting Havas bought a 70-strong UK consulting firm, Gate One, in 2019 to expand its capabilities.
And, as he looks forward, Bolloré is optimistic as the economy rebounds. No clients have “told me that they will reduce their spend” in 2021, he said.
The scale question
Havas is the smallest of the big six agency groups but Bolloré insisted its relative lack of scale is not an issue and being part of Vivendi means “in some ways” it is the biggest.
When he took over in 2013, Omnicom and Publicis Groupe had just announced their merger plans (which were aborted in 2014) and investors told him that Havas had two options: “sell to a bigger group” or “you’re going to die and lose all of your talent”.
Havas responded by creating its Villages and bringing creative and media closer. “People said: ‘Are you crazy? You’re going back to the organisation of the 1980 or 1990s.'”
However, Bolloré believed it was the right move “because this is what clients are expecting from us”.
It would be “very easy” to “partner with someone else” and merge Havas, he said. “But I don’t feel the need to go for more scale – just for the sake of scale. Don’t forget that we are [nearly] 20,000 people around the world, so we have all the power to serve a global client.”
Havas lacks the media-buying scale of rivals but he suggested that he was not interested if that meant using financial resources to accept long payment terms from clients.
“I don’t believe media agencies or advertising agencies should behave like banks.” In one case, two years ago, Havas made it to the final round of a pitch but pulled out because the client asked for “one-year payment terms”.
When it comes to pricing, he added it’s often not agencies that command the best prices with media owners – it’s the clients themselves, depending on the size of their spend.
The only time that “I felt the need to be bigger” was in discussions with Google, Facebook and now Amazon, “because they are so big that we needed to be stronger”, he said.
“Thanks to Vivendi, because there are so many interests between Google, Facebook and Vivendi and the rest of Vivendi, I believe we have more than a seat at the table. They treat us as one of their biggest partners.”
Still, Ian Whittaker, an independent analyst and former head of media at investment bank Liberum Capital, said: “There is a question mark as to the future evolution of Havas and where it stands in the agency space.
“If you look at where the greater focus is on now, it's investment in technology and if you’re Havas, you’ve got a shareholder in Vivendi that doesn’t seem as though it is willing to spend the big bucks in order to make the acquisitions that you need to compete.
“You look when Vivendi talks about Havas, it’s generally the least important unit. It’s certainly far less important to them than UMG or Canal+. Now that may change if UMG gets spun off, but even then you look at where Vivendi seems to be focusing and it is spending a lot on publishing assets such as Editis.”
The question that comes up most often in conversations with Havas insiders is what will Vivendi do after selling 60% of UMG in its IPO?
Bolloré said Vivendi has a “sequential approach” and “once everything is completed, before the end of the year, we will start thinking more about the next steps”.
Vivendi will “continue to invest” in “everything related to media, communications and entertainment” and “there are a lot of synergies between the advertising and content industries”, he noted.
Selling a majority stake in UMG means Vivendi could generate upwards of €20bn.
On-off speculation that Vincent Bolloré wants to buy Publicis Groupe and merge it with Havas bubbled up again in March when BFMTV, a French business news service, reported he made an approach earlier this year.
Shares in Publicis Groupe, which is valued at €14bn, rose on the news. “We have no comment on this unfounded rumour,” a Vivendi spokesperson told Campaign at the time.
Vincent Bolloré has previously been a shrewd advertising deal-maker, acquiring a stake in Britain’s Aegis Group before selling in 2012 when Japan’s Dentsu bought it.
He would likely find it easier to do a deal with Publicis Groupe than WPP, Omnicom or Interpublic because it is harder to get a seat on the board as a minority shareholder in the UK or US, as he discovered at Aegis Group, Whittaker pointed out.
The UMG sell-off raises another intriguing possibility that Vivendi could sell Havas one day – two decades after Vivendi, under different ownership, briefly acquired Havas and then sold it off.
“It’s not at all in our plans today [to sell Havas],” the younger Bolloré said. “We still believe advertising will continue to grow for the reasons I’ve explained. Together with Arnaud and the management teams at Vivendi, we are working really, really hard to develop Havas and our investment in communication.”
Still, he doesn’t entirely rule out the idea of a sale: “It’s a question of timing. We need to remain open.”
When he joined Vivendi’s board six years ago, it was receiving offers for UMG of about €10bn for the world’s biggest music company. Last year, it was valued at €30bn when China’s Tencent bought a stake, and it has likely risen further.
“Vivendi created a lot of value. The valuation did not come by accident or chance,” he said, referring to how UMG worked with Spotify and Apple Music to develop the ecosystem for music streaming.
So, if the timing is good, can it sometimes make sense to sell? “If you offer me €100bn for Havas, I will open a discussion,” he said with a smile.
The Bolloré Group – a family business
Vincent Bolloré, who is 69 and has been described by The Economist as a contender to be “France’s greatest capitalist”, remains the key decision-maker in Bolloré Group and Vivendi.
Another of his sons, Cyrille Bolloré, who is 35, is a growing force after he took over from Vincent as chief executive and chairman of Bolloré Group in 2019 and he sits on the supervisory board of Vivendi.
Vincent is “still very young” and “pretty active as the main shareholder of Vivendi”, Yannick said. “He is a genius and he is my father, so I love him as a son loves his father.”
Bolloré Group was founded in 1822 and Havas was founded in 1835. Their shared French roots matter, according to one person who knows the Bolloré family.