Mark Penn: Stagwell is gaining momentum, “taking shares” in holding companies | Advertisement
Stagwell Global has started its second year well after the merger with MDC Partners, which led it to raise its growth forecast for the year 2022 between 10% and 12%.
Revenue increased 254.7% year over year to $642.9 million, with organic net revenue up 23.6% in the quarter.
On an investor call Friday, May 6, Stagwell CEO Mark Penn said growth was being driven by digital transformation services, which grew 9% year-over-year, as well as by consumer insights and strategy, up 56% year-over-year.
Penn also pointed to media growth, as Stagwell now has the scale to tackle global accounts that spend “hundreds of millions of dollars on media buys.” Stagwell merged Assembly and ForwardPMX in September, creating a full-service media offering with $5 billion in trading leverage. The agency won Lenovo’s multimillion-dollar media account in April.
“A lot of media is in the running these days,” Penn told investors. “People say, ‘I used to do mostly conventional media, now I’ve changed. I have to reconsider the team. We’re already 75% in online placement, which positions us extremely well for clients looking change their media placements.”
Stagwell is also investing in new areas as it expands its global footprint. The company acquired Polish e-commerce agency Brand New Galaxy in April after buying Canadian multicultural company Dyversity Communications earlier that month, bolstering its capabilities in two important areas.
Stagwell’s creative and communications agencies grew 9% year-over-year, driven by double-digit PR growth and the strength of Anomaly, which landed Dunkin’s creative AOR account in November.
Penn caught up with Campaign US after the results call.
Campaign US: You seem to see a lot of potential in the media sector, where there have been a lot of big global accounts vying. Do you see this as a major growth driver for Stagwell in the future?
Mark Penn: One of the biggest changes is the complete mix of our offering. We merged Forward PMX with Assembly, so it’s now Assembly, a multi-thousand, global, online and offline marketing and media company. Gale has also grown as a creative media consultant and there are a few other small businesses within influencers and B2B.
This allows us to come out with a full suite of scale media deals and opened up a whole different level of contract. There’s a big healthcare company [win] it was not announced. You’ve seen the H&R Block [win] at Gale. these [Q1] the numbers do not reflect Lenovo’s victory, which is worth several hundred million dollars in the media.
Gale seems to have a lot of momentum. What does it do that stands out to customers?
It has evolved very strongly over the last two years, going from a primarily CRM-focused agency to one that now offers great creative offerings combined with the ability to [help] customers with first-party data and create a marketing flywheel. It’s not about the “media” — it’s the whole campaign, including the media.
We are seeing a recombination of creation and media after years of sourcing separated them. In digital, it makes no sense. You need to deliver the right ad to the right person at the right time, which requires some level of synchronization.
Where do you see the strength of creative agencies? To what extent is growth there fueled by digital services?
We have ensured that every creative agency can partner with a digital business. We’re in the process of making sure that each network has a full tech stack of media offerings, so they can combine creativity with more direct media placement, especially digital, so they can duplicate that formula of the very close link between creativity, data and media.
Stagwell talks a lot about gaining shares of legacy holding companies. Is this your main competitive set or do you see yourself facing more modern companies?
[Our] digital transformation companies will typically be competing with engineering-focused companies that might not have the customer experience. But for some of the biggest media and other accounts, we absolutely compete with traditional companies and offer an alternative. We positioned ourselves as the challenger company, but we are now reaching the scale where we are able to take shares of them and have an outsized growth rate.
Customers are spending on advertising and marketing despite high inflation and global uncertainty. What’s behind all this?
It’s a new marketing environment. They were busy figuring out what to do during the pandemic. Now they’re looking to recalibrate marketing for new products like electric vehicles and returning travel. Then they say, whatever way we did it before the pandemic, we have to do it on a digital basis now.
I also wouldn’t discount the growth we’re seeing in research. As people emerge from the pandemic, [marketers] need to know how consumers think, act and change. We received a lot of requests there.
How has the talent shortage impacted Stagwell?
We’ve added about 1,000 people in the last eight months. It’s a competitive market, there’s no doubt about it. We are a growing and growing company.
We’ve structured the brands so that if you really understand research, you’re not in a generalist agency. You are in a specialized company where people can develop their expertise.
But there is no doubt that it is a competitive market. We have combined the ability to hold our shares as well as the compensation into what we hope will be an attractive offer.
Do you see strong salary pressure?
Medium. It’s more about competition for talent and adjusting to the work environments people are looking for than just salary pressure.