April 8, 2008 / 9:02 PM / 11 years ago

Publicis says advertising business model outdated

WASHINGTON (Reuters) - Publicis Groupe Chief Executive Maurice Levy said on Tuesday the advertising industry faced “tremendous pressure” to change, but could still withstand competition from Google Inc and Microsoft Corp.

“The very model of our industry is being called into question,” Levy said at an advertising industry conference sponsored by trade group IAA. “The model today is no longer valid, no longer relevant.”

Levy, who runs the world’s No. 4 advertising and marketing group, which includes agencies like Leo Burnett and Saatchi, said the industry’s role was to concentrate on finding consumers and getting them to care about brands.

He added, “The agency does what others don’t — it creates the message.”

Still, he said advertising agencies needed to develop a deeper understanding of technology, as audiences spend more time with video games, cell phones and other new media.

The CEO noted rising competition from Google, Microsoft and Yahoo Inc, which have expanded their advertising businesses. Since the beginning of 2007, Microsoft has bought aQuantive for $6 billion and Google has acquired DoubleClick for $3.1 billion.

Microsoft also wants to buy Yahoo, but the Web pioneer has rebuffed its $42 billion takeover bid as undervalued.

While Levy said he had “huge respect” for these companies, he added that he was unconcerned about them taking over from traditional advertising agencies.

“Our role will remain strong, firm, indispensable,” he said. “All we must do is adapt.”

Publicis itself helped kick off last year’s frenzy of buying new media advertising agencies, snapping up U.S.-based communications company Digitas Inc for $1.3 billion.

Reporting by Paul Thomasch; Editing by Tim Dobbyn

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