It looked like a stunning strategy. After Publicis – one of the world’s largest media and communications companies – had acquired both Razorfish and Sapient Nitro over the past decade it appeared as though the global giant had secured both Mayfair and Park Lane on the digital agency monopoly board.
However the company appears to have bitten off more than it can chew and late last year it merged the two companies into a single unit. The restructure lead to a big impairment charge which along with a poor performance in the US operations in 2015 and 2016 has caused a drag on the company’s results. It reported a loss of more than half a billion euros this quarter.
The problems with Razorfish come at a critical time. Media and advertising groups like Publicis are increasingly encroaching on the territory of traditional consulting and systems integration businesses like Deloitte and Accenture. The challenge between these two contrasting approaches to digital transformation – one marketing lead and more traditionally IT focused promises to be one of the great business clashes of the next decade.
In its latest quarterly results, traditional media fell in the US, but so did digital advertising which in a surprisingly bad result retreated by 0.4 per cent although that was offset by big gains in Europe, APAC and the Middle east and Africa. And its problems in the US might be about to get worse as it is one of several companies being investigated for as part of a price fixing investigation.
According to Maurice Lévy, Chairman and CEO of Publicis Groupe said serious issues at Razorfish led the company to merge Razorfish and SapientNitro. He said the merger would create the world’s first entity dedicated to consumer experience.
Levy said that were 2016 was devoted to the implementation of the Group’s new organisation and transformation from an advertising holding company to a connecting company, 2017 would mark the start of a new era, as much for society as for the Groupe. “Society is evolving spectacularly as the exponential development of digital and other technologies obliges companies to undergo very deep transformation.”
“Our Groupe is ready for this new world thanks to its high-potential digital assets and capacities to help our clients embrace this new order, including help with their own transformation. And we have a new generation at the helm.”