September 30, 2023

Digital Marketing Education

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Stagwell lowers 2023 guidance | Ad Age

The [organic revenue] guidance now is between 0-2% for the year. That’s a difference from 7.5% at the low end of the past quarter. Can you explain specifically when it comes to the guidance, how you went from one end of the spectrum to the other? 

It really came down to existing client cutbacks. Clients we didn’t lose slowed down or postponed their work or held off on additional projects. We saw that particularly in the tech area, there was some disruption in the financial area where First Republic was a major client [the holding company lost digital transformation work with the bank]. We saw that in the retail area [revenue from retail clients was 29% lower this quarter compared to last year]. We saw that in the entertainment area with the writers’ strike and generally there was an atmosphere of economic cautiousness and it was also the bottom of our political cycle. All these factors kind of stacked up and even with those factors from first quarter, we have revenue growth, we have EBITDA growth, we are continuing to move forward and just deal with the curve balls that I think have been thrown at us and the rest of the industry. And we really think those curve balls are bottoming out now. The worst has been thrown. 

How is your creative agency and your media agency business?

Really the biggest declines were in digital transformation. Creative actually, while I think there were enough factors here that we saw it across all the capabilities, creative actually is holding up nicely winning new business. Media, we really just won six or seven new clients related to it, but during the quarter … the easiest thing for people to cancel is a media buy. And so [we] definitely lost commissions and canceled media during the quarter.

Would you say those two sides of the business saw positive growth for the quarter?

No capability had positive growth, but the strongest area of positive growth that we did see was international. Over in Asia Pacific, EMEA, those areas which are smaller but are a growing part of our business. [International business grew by 9% compared to last year, with Asia Pacific up 17%]. Just bear in mind, the previous Q2 was a 16% grower. So even with some setbacks this quarter, we’re still well on our long-term targets. It still is a substantially bigger business than it was two years ago. 

Do you feel like Stagwell in particular is more affected by the writers’ strike than maybe your competitors? 

We have the largest property devoted to entertainment research and so that one property would [feel] temporary but direct effects from the writer’s strike since they test all the content … they’ve had writer strikes before. It will end and then people will double down on building and making content. But in the interim, it basically puts a hold on a lot of their work.

Are there specific examples that you’re predicting you’ll see generative AI play a big part in your business?

In terms of our digital transformation division, every company out there has to say, well, how should we interact with our consumers now on the basis of AI? We changed how we interact with websites, we changed how we interact with mobile apps now this third level of change, generative AI interactions, person-to-bot interactions on a much more human-like scale, will just provide an incredible amount of work as everyone has to catch up with everybody else to interact with consumers in new ways. So I think that the power of that is being overlooked … We outlined though that we’re putting it in our tech products, particularly in the communications and the research fields where the understanding of words and numbers and what they mean can at least be pre-analyzed by AI in very effective ways, saving tremendous amounts of time. We’ve already developed products that [work on] focus group analysis, and open-ended analysis. We’re working on tabular analysis. We’re working on being able to query large databases of polling data to construct trend charts. 

There was a mention of a reduction in staff costs. I know last quarter you reported that 300 staffers were cut. How many were cut this quarter? 

We’ve reduced our overall workforce by 4%. We’ve saved approximately $48 million. We’re not on a hiring freeze because we’re shifting resources from some areas to areas like the cloud or internationally where we’ll be hiring. 


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