Stagwell Inc. (STGW) Earnings Call Transcript & Summary

Hello, and welcome to the first and a new series called Stagwell Curated. In this series, leaders from Stagwell and our agencies will discuss key trends, key topics that have shaped and will shape our business moving forward. We're kicking off with the next 5 years in marketing, which is going to be a deep dive into the future of the industry. Just introducing with me today, we have Mark Penn, who's Chairman and CEO of Stagwell. He's built and led companies for 4 decades from Penn Schoen to Burson-Marsteller and Microsoft. We also have David Sable, Vice Chair of Stagwell and a 40-year industry veteran. He served as Global Chairman of Y&R. And we have Julia Hammond who will be joining us shortly, I believe, who is the President of Global Solutions at Stagwell and a tested creative leader with experience at both Deloitte and WPA. Just a reminder, if you have any questions, feel free to ask them, feel free to do so through the chat function in your teams or browser window.

So Mark, why don't we kick it off here and jump right in. Based on your years of experience in the industry within marketing and advertising, perhaps you could just walk us through some of the key evolutions that have occurred within the industry, outline where we are today, and then discuss some of the key trends that you think are going to shape the future of the advertising and marketing industry?

Thanks, Ben and I'm happy to give you all some insights in terms of some of the trends that I think are shaping marketing and advertising today. Of course, as Ben has pointed out, I was around when the facts was innovation. But today, I'm pleased to say that we've got a lot more exciting things coming our way during this period. So I think probably most importantly, global ad spend is up by 2025. We expected to reach $1 trillion. I joked that and then that basically, we're going to have nothing but no products at the end of the day. We're just going to have marketing and bots. By the time AI comes along here because marketing is certainly growing as much as I find try to warn people up to the marketing industry. As a growth industry, it should be up around 9%, led primarily, of course, by digital spending, which will probably increase around 12% in our over the year-over-year. And when you think about digital marketing and digital media has just overtaken the conventional media advertising almost in an avalanche. When I started this business 8 years ago, we were grasping for the time when digital advertising would exceed conventional advertising. And now we expect it to be about 70% of overall media ad spend worldwide and may be as high as 75% of the overall media spend in the United States. And this momentum appears to be prudent. Right? I think through 2028, you can expect to continue to see strong almost double digit growth and we believe that it will go up to either connected or addressable media will be about 80% of the total spend. What's growing? I think you said, why is this growing? Well, I think 3 areas are growing and we'll cover those in a little bit more detail. Our retail, what we call retail markets, social and CTV, right? Even though search remains the single biggest block at about $90 billion in 2024. You see a lot of growth in these new ways to reach marketers because they're different, more immersive ways. I think that they're either in the retail case, closer to point of purchase or in the CTV and social better than those comfy ads that appear every time we're trying to read an article. Retail and media, we expect to increase 26% in 2024 and that this category spending here will increase between 2023 and '28, basically triple because you basically have Walmart, Target, Kroger, Instacart, all realizing after Amazon really made a bit put here that they have customers that are near point of sale and they could do that. That's why we are actually doing QR code business. We're picking up QR codes for restaurants and other places and then trying to push a point-of-sale, point-of-sale for, say, alcohol or a screen those things that are more voluntary in nature. So a second social network spending increased 16% and obviously, there are a lot of domestic players that would like to get rid of TikTok because TikTok growth is expected to be almost 40% in 2024 and Instagram 20%. So advertising in this kind of video picture platforms is really what's happening in terms of social. I think you also saw why we then also acquired movers and shakers because we believe they are the best TikTok video makers on the planet. But it's all about social video and interestingly, and we are so used to ADD, longer forms and I joke longer forms considered 90 seconds. All longer form videos that then can have multiple ads are growing in interest and success and they're easier to monetize. And then, of course, our trend to CTV. It's just under 1/10th of the amount of U.S. advertisers spend on linear TV. So it's really just kind of the younger sibling here. If you look at that, we expect CTV to grow and to perhaps equal it in 2028. And I think that -- I think it's almost a subset of that is ad-supported streaming nearly a 1/3 of Americans, $105 million used free ad-supported streaming service at least once per month. So 2023 compared to $110 million in 2018. Now ad prices almost those platforms are lower. People are still experimenting with it. They haven't really switched their budgets. They're trying to figure out what the right formats are? You can pick up better CPMs there $10 to $15 compared to $25 to $47 for subscription services like Hulu or Netflix. So you really trying to say, okay, digital advertising and marketing is growing. It's growing more on these 3 platforms of their point of sale, which will point of sale is a counter Google because Google is really here -- was really the original point-of-sale market. Amazon came in here and you're seeing the major marketing chains. And I think you'll see the pharmacies, do the same thing. And then you see the combination of social videos and connected TV are really the 3 legs of growth here. And of course, the wild part is what happens to TikTok and how that might benefit Facebook and exited and how it might hurt Facebook if, in fact, they don't exit and continue to grow at these rates. Of course, you don't have to be a genius to say that AI is a trend, 67% of enterprise organizations anticipate increased AI investments in there for years. I would assume that should be more like 95%. And I think that a lot of marketing professionals see data analysis, market research, copyrighting. We internally see already AI principally used and turning text to video and creating images and pictures that otherwise generally would have got a cat in the mountains, we would have to go out and do a shoot capital balance sheets. And now those kinds of things are done effortlessly and then you could have thousands of different cats and then AI research could figure out which cat have a greater persona. Started a research to judge how the cats, which cat is most like, which cat lovers by creating an artificial persona for the cat lovers is spinning out kind of examples here, but every one of our firms is looking for those applications that really can speed up and a more efficient the marketing process on our clients. Our clients thoroughly expect that. And of course, for us, the biggest thing in AI will be I would say we're a tech -- tech company's tech company. Right now, we have people embedded on AI type projects and virtually every one of the major tech companies, helping principally on the design side, how new design, new pillar faces between people into tutors in an AI world. And then I think you can look for more immersive experiences. Immersive experiences are a combination of augmented reality, extending reality and gaming. It's sort of the -- it's not the better for us, but it's almost the universe plus a combination of reality, Esports and gaming really come up to about $4 billion. I think you're going to see AR and VR. [indiscernible] I'm not sure Apple Provision is a great product. I'm not sure it really has killer applications at the moment. But nevertheless, I think you'll see some increased uses but it does create this immersive experience where you're transported like the [indiscernible] into another world and these systems are getting better and better at creating those. And last but not least, political ad spend by brand. We expect that to grow 29% from 2020, past $12 billion. TV is the preferred medium but obviously, digital political advertising is growing faster, grew 156% in the past 4 years to $3.5 billion of about $12 billion. So you're still -- I think that political will still give a major boost to TV networks. It was always tried to advertise on news or as close to news or possible news viewers were the most likely to be voters. And so I think you see the continued trend of political viewers. I always thought that this would be the biggest election in history. I realized now that 2028 will be the biggest election in history because neither of the cabinets who are running will be running in 2028, between that we have 2 primaries and 2 primaries leading to new candidates on each side with no incumbent in select. So I think you're going to see continued political growth. So that's kind of my overview of trends in media and marketing. Part of what we've done now is design our model in terms of interfacing with enterprises and how we differentiate our model between WPP and Omnicom, and [indiscernible]. So we're going to turn this back to Ben to turn it over to Julia to give you a first camp look after what our model is for and large global accounts compared to the others.

Thanks Mark. There's great insights. It's great to get your perspective on how things have been shifting. Let's bring Julia in here. Julia, you've been super involved in reimagining how Stagwell delivers services to our clients. But based on what Mark just highlighted, can you just maybe run us through the module the future to deliver kind of exceptional outcomes for the clients and the customer? Got you, Julia.

I think Julia is [indiscernible].

I think she froze.

Mark, as we're getting Julia back online. Perhaps you could run us through what the vision of Stagwell and how it may be shifted over the course of the last couple of years, obviously, 8 years Stagwell has been a company, but it would be great to get your perspective on how things have shifted how maybe your strategy as the CEO has shifted over that time?

Well, look, I think, again, obviously, we know that marketing has shifted from a conventional from an interesting ad that is a 30-second film and then that's placed on television along with companion ads and newspapers and outdoor. And then I think what we've seen is the big companies had to moderate cost, right? And so they had to shift to something that was more data oriented and more digital. But fundamentally, they have huge levels of assets so that they still have a person in every single country and every single city. So they're not really able to take full advantage of the technological revolution in working with global clients. I think the model that we've built then enables us to come in fresh and say, okay, in the global world, how do we transformed marketing work, how do we service global clients and do so efficiently and effectively? And how do we at Stagwell coming up in the $3 billion emerging up to $2.5 billion to $3 billion, how do we as Stagwell designed something that meets the needs of these clients, pushes back on the other model of the competitors and Julia is back, hold on still a little broadband challenged but...

Yes. I apologize, my hotel WiFi keeps going on and off so I'm dialed in from my phone right now, which is less than ideal, but I will do my best to present as long as the Internet if God allow me to do so.

Well, Julia, while we have you, why don't we hopefully, we can keep on correct. It would be great to get your take on sort of -- and you've been part of reimagining how Stagwell delivers services to clients. Perhaps you could talk about the model, right? Like what is the model that Stagwell is doing that we think is the model of the future hold code?

It's a good question. So I think, first of all, we don't want to call it a model, right? Because we talked about Stagwell as a platform. That's what really makes it different. I think a lot of our legacy holding companies that we compete against. They're built on the back of the talent arms race. So they've got these massive organizations all around the world. And when scale was the only thing that mattered. That's how they win. They have great talent, and they would be available all around the world. What we've built here because we've had the good fortune of being able to build for the future and build for the needs of the modern marketer, we're able to put together our talent much differently. So I will think to the slides. Great. We can go through these. We don't [indiscernible] but yes, really, it's about getting to a place where we can operate differently. If you want to go to the next slide, we can talk a bit more about what this means for us. So we have talent all around the world, absolutely. Telenor around the world is great. But if they're not connected by data, by systems and by those low-value tools that humans used to do, but now we use a lot of technology to do. It's really doing the clients a disservice, right? So we have to build a platform. We call it -- it's kind of one thing that, I think, actually, Mark pointed in the middle of a pitch. We talked about it in terms of regulation Renegade. You need a bit -- you need the regulation of systems that stitch our company together and not just stitch to our company together but actually stitch us together with our clients. So we build portals where our clients can interact with us where they can look after work in progress, where they can collaborate alongside of us, and we can really form one team, but it's an integrated system that everybody works off of together. And we've got these Renegade talent groups all over the world that because we're all operating from the same system on behalf of a specific client, we can deliver in a more unified and efficient way. So can you go to the next slide because I know this is something that a lot of different companies talk about, like everybody's got their specific tech solution. But we're -- we want to go through to 5 things that really makes this different. And I'm not going to drain this in detail. But really, the thing that makes Stagwell unique. We're one of the few companies out there that has research on demand and talking to 2 million people a day around the world regularly. Every single day, we're able to keep a pulse on really what's going on. And that research on demand is available to our clients and stitch together with those local market insights that we're gathering constantly. We are able to actually bring together data upstream to inform and then downstream to measure impact and optimize. And that's a very unique proposition. Not a lot of our competition actually is doing the research and pulling that we have just in a role inside of our company. The next thing we have that's really different. We don't focus all of our energy around building that M3, right, that media mix modeling. It's really about understanding the CX. And this is taking from things that we've learned from other tech partners like, call it, a Candy Crush or Mr. Beast, who is able to build a complete connected ecosystem around what they deliver and Mr. Beast talk about a lot as a business model, who's securing a Super balls worth of eyeballs on his content every week. How can we learn from surrounding consumers with different kinds of ways of connecting versus just pushing straight media them over and over again. The fourth thing we talk about is a centralized production engine. We've taken all of our high-value and high-volume content creation capabilities, blended those all together, replaced a lot of those sort of low-value, high-volume capabilities with technology and AI capabilities, which leads us to our fifth thing is technology as an accelerator. That's a real differentiator for us. I know Mark talks a lot about the Stagwell Marketing Cloud and how we're leveraging technology to build something really truly differentiated inside of our ecosystem and that shows that inside of our operation. If you want to go on the next slide, just a real quick visual of how this works together. Like I talked about, that upstream insights, that data driven, that gets us into a place where we're really understanding a central idea or a campaign or perhaps it's a road map to develop a new way of work to the client, whatever it is all the way down to a more tech-enabled governance, operational and delivery model that has funnels throughout our entire ecosystem. This is unique to -- depending on which client we're working with. It's slightly modified here and there and it adapts to the specific need of our client, but this is generally how we operate as a complete organization and how -- and what we mean by building this platform. That bottom part of the funnel is really it's technology and systems. So can you go to the next please. Because if you think about the complete supply chain, that content supply chain that we -- every single client we talk to is desperate to deliver against. We have to use technology to accelerate our ability to deliver. So we're pulling in AI at every single part of this process, whether it's research to preproduction to sourcing imagery to delivery and optimization. We have the technology that's helping our people deliver more impactful solutions to our clients ongoing. And then finally, just a quick snapshot on AI because everybody likes to talk about AI. There are 3 ways that we're using AI right now. To innovate with clients and deliver something slightly different than our competition. So one big one, self-correcting metadata. So we're collecting so much of data every single day, that's no secret or surprise but what happens is we don't have a lot of companies don't have a unified way of ensuring that, that data is absolutely correct that we're able to have that data connect with the assets that we're creating that the data travels in the appropriate ways and we're able to monitor and measure that data ongoing, connected to a specific asset or a specific action that we're having a consumer take on behalf of our client investment. So we're using AI to ensure that data cleansing is a part of the ecosystem and we're able to deliver that value to our clients ongoing. Second thing that we're doing, we are building AI personas that are out in the world and we're able to use as research. So we're doing that in a couple of different ways. One, we're building actual AI panels. So we're able to essentially pretest creative on behalf of our clients before it actually gets into market. So a quick example of how one of our agencies has done that on behalf of a betting company in Ohio. Betting -- can you go to the next slide, please. So a betting company comes into the marketplace. They want to figure out how to connect with local consumers who are interested in sports betting. And anyone from Ohio is going to know that a cabs fan is going to operate very, very differently in betting scam. So how do you ensure that you've -- you're serving the right messages to the right consumer that's going to get them like into that hook and get them to start participating with this platform. Well, we're able to build AI personas that one is a stereotypical cab spam and we understand their media behaviors and the things that they're interested in the things that they're looking at and the followers that they had were able to essentially design that artificial human to evaluate our creative and see whether or not it's going to make a difference in the impact. So we're able to go confidently in front of the client with an asset or a collection of assets via a campaign and we are confident that if you spend the media towers behind this content, it will make a bigger impact on your business and they'll deliver the results that you want. So it's a very different way of thinking about research and it's something that's just a part of how we're continuing to evolve an organization. Because we are a platform, we're constantly looking for new ways to think differently about delivering value to our clients and innovate within the tool sets that we currently have and dream up the next wave of leveraging them definitely.

Awesome Julia. Thank you so much. I think we're going to need to dig into some of these individual elements. But I want to bring David a little bit first of all. And David, I think you're coming up in about 6 months here at Stagwell. Would be great to get your perspective on like -- what's different for you, right? You've had this amazing career in the industry, what sort of set Stagwell a part for you over the course of the last 6 months or so?

So let me build on what Mark and Julia said. Some obviously, the people, which I'll get to at the very end, but I want to talk about the differences. I want to talk about why we really are different. I think that, that, to me, is really the critical issue. When Julia says that we don't have a model, that's not just semantics. We've been in a number of business presentations together, Julia and I were. We said to the client, what was the last agency that was in here, they probably talked to you about their new model. And they want you to adapt yourself to their new model and it's amazing. Every time we do this, you see the people go like this, their eyes roll and we are a platform. Why would a client want to adapt themselves to an agency's model. The uncertainty of it is beyond. But that's the old model because they were so big and they had so much enterprise that they had no choice but to say here, we've got a model, we need you to fit into it. I think the Stagwell platform is organic. We come to a client we work on their tech platforms, we can adapt ourselves to any tech platform that our clients have and we have, and we do that. And it's critical to us for the clients to understand that, that is truly an incredible difference. So the notion of Stagwell being a platform and not being some top-down management business is huge. And we expect that everyone is going to hear over the course of the next few months, why in fact, and we hear from clients why that makes such a difference and why that's different. I'd say that -- we also are very much about people first. See, when you have a platform like ours a tech platform, you still can never lose sight of people. You can't lose sight of your people because clients still want to have the best people to be able to consult with. They want to have the senior people at their fingertips to help them with their issues. And what you try to do with the AI and with the -- all of your automation is to take the things that are sort of at the lowest sort of the things that are really commodity and just take the cost out and make it easier and make it more efficient, but you never want to lose that human loop. In fact, I recommend that everybody read the story about Sam Altman's library. It was in the times on -- over the weekend about Sam Altman's library that he built in their AI, their magnificent offices in San Franciso. And what he talks about is he wants real books there because he wants his people to understand that the human loop is incredibly important. And so when you look at our personas and you look at what we did, for example, in Ohio, what's fascinating is that there is human loop in there as well. So we create these personas. We use AI to create the persona, but the team goes back into the marketplace and talks to real people because the advertising is going to real people. The offers are going to real people. And what you don't want to do is create a loop that's just created by AI delivering more AI. You want to always make sure that you're validating yourself in that loop with the human piece and we think that, that's incredible too. So I think when you put it all together, we are -- I said to the last thing as well, I'll just say is that we value our brands. We value our brands incredibly. And so when we go to market to a client, we don't create some homogenized team and say, "yes, yes, it's no problem. We'll take 10 people from here and 10 people from there and 6 from here and we'll call it something whatever you want to call them, if you don't like them, we'll replace it with them. Our brands are unique. They're all best-in-class. They all have incredible cultures. They all have incredible expertise. They all have incredible people. What's critical for us is to make sure that our clients understand it. There's a reason that we bring those companies to the table. And our job at a Stagwell level is to enable and help those companies come together using the technology and using the Stagwell platform in the best way possible to create the best possible outcomes for our client. And we think that, that's unique as well.

I think we need to sort of separate this into the human and the tech for a second. So I get a lot of questions from investors pretty consistently. And so may be the first one, I just want to jump into is around data, right like [indiscernible] if the breaking down of the data ecosystem for some brands, right? So that's cookie deprecation that disintermediation of consumer data across an ever-expanding range of touch points. How are we accounting for this customer sort of imperative when what we think about the future here? Maybe Mark, that might be one for you, so our data spying and talking about that?

Well, once again, the cookies does not disappear. So this has been put off. But I think that the oculus future is generally predicated on what we're building, which is to have an ID/knowledgegram of essentially of a person. And that's built on top of like a TransUnion or other credit card and then adding to that there is marketing interactions and then also build on customers' first-party data. So if you look at the general principle of digital marketing and advertising compared to offline advertising, the whole concept is that the marketing will be improved because we will be able to find your customers and your likely customers on an efficient basis. We've been able to create a top, middle and bottom funnel all of which are driven on a more personalized, customized and targeted basis. And of course, the goal is to get the cost of that system down so it doesn't put people out of business, right? And so the promise of the Internet and digital advertising, and I think we're seeing the market open up with more competition. As I described, there's social, there's streaming, there's retail marketplaces. So that soon, as you can see, there aren't just 2 places to go. There's a multitude of places and techniques that marketers can use the digital ecosystem to find it. But what we are doing and also we expect in the next year or so, be able to extend out to have the DSP and SSP. So we can offer clients, full service all the way through the actual placement and I think that we're going to develop going down the value chain. So our 2 main things, just to review create the ID graph. Add to that ID graph, both third party, first party and our own first-party data that we gather through surveys and other sources to make that a unique data set that's maximum useful for marketers. And also stand down the value chain so that we can, again, also offer our customers to lower cost, more effective media [indiscernible].

Well, can I add to that for one second. What Mark said is the core of everything that we're going to be doing. And the piece it that he added at the end was our own unique data set, which is where the insight comes in. And I think that is what distinguishes us here. And so if you think about the model that Julia showed you before, insight was at the top of the construct because the notion data is critical, because data helps us find these people. The better our data is and we think that our Dgraph is going to be the best. We'll be able to find you those people quicker, cheaper, better but it's our ability to provide insight into who these people really are, what really turns them on, where is the human serendipity here and then take that and use it on the creative side as well. I think that, that's the piece where the magic comes in. The magic that gets attached to the technology is really, in my view, the piece distinguishes us in the market.

It's about David just to give you a somewhat less relevant, but core example, it's Newton could have study, gotten all the data on all the apples falling on the entire planet. But it would have meant nothing without the insight that there is force of gravity bringing the apple down and was that insight that can be tested against the hypothesis, that is really what makes for success and data alone helpful, points into that. But ultimately, it is an insight like that, that then drives successful marketing campaign.

Exactly.

Let's real for fact because I think it's an interesting point. We're moving towards more tech-driven tech-enabled future rate. But the history of advertising has been about the big ideas, transformational creative effectively human beings creating ideas, right? It would be great to get your sense some kind of where do humans step into this new model? Or are they going to become obsolete. It would be great to get your perspective on that.

Talk to my bar. The -- No. Look, I think seriously, we know that marketing and marketing materials come in different levels, right? And at the highest level, it will take even greater creative inspiration to build marketing platforms that will be successful. And we know that downstream from that creating thousands of pieces of content that meet the standards of the original idea, right? If the original idea is to have a baby on a tire. It will be possible for AI to generate lots of baby on a tire pictures, but it would never really be possible for AI to come up with a concept that we're going to show the tires are so safe that you can trust your own family and your own children as represented by that inventory. AI could never, at least as present for them and hopefully not for another 50 years, make that lead. But it can, once that lead is established at that insight, a dozen good job of creating related content and making blowing out the campaign and are more effective. That's why I think you're going to see the biggest utilization of AI in the content by the pound business. And I think you're going to see the continued what we tend to do here is while we offer that as a service, it's a much smaller part, a much larger part of our enterprise is the top-level creative and strategic thinking. But I think in this world becomes even more valuable to differentiate in a world where everybody has access to the same ChatGPT models, spelling out the same answers that kind of human creativity will actually have an even greater value in that world. And the easy things that I always point out, our start of the survey business that used to have key punctures of interviewers. So content creation, I think will be greatly simplified through what AI can produce based on command.

Yes, Ben, I think if you think of big ideas as platforms and so if you take Mark's tire and baby example, that's sort of a platform idea that came from some insights that somebody had. But now using the AI, not only can you create lots and lots of that, but think about it in America, in the United States, we have bigger cars with bigger tires. In some other country, they're not driving cars. They've all got tuk-tuk or bicycles or mopeds or whatever and so those -- and maybe it's not a baby, maybe it's something else. But the ability and you saw this in what Julia showed, the ability to take that local insight apply it to the big idea on the platform and then create the relevant piece of content from the core idea is what makes us different. This puts the notion of match luggage, which has been -- which still surprises me how many clients and agencies still do that where everything they think is success is everything looking the same all over the world. When it's really not the case because it's just about the platform. If the platform idea is big, it shouldn't look the same every place. It should be adapted locally by local insight and so the ability to create that content is critical. I think the other thing to think about and Mark is 100% right about the bigger content, right, the big word provoking content. If you think about what's happened in production. And the stuff that we watch, whether we watch it stream viewers it doesn't make a difference movies, it's all the same. Never in the history of humanity since we started making film has production been better. Has production been so we're literally at a gold nature. And so if you go back 10 years, everybody said, "no, no, everything is going to be CGI" and it's really going to be cheap to do production because nobody is ever going to go out again on say everything is going to be unsense. It's going to be CGI. Nobody is going on into the field. Nobody is going to go out of the location. It's exactly the opposite. And so when you watch Game of Thrones, CGI is unless that dragon is real. I'm not sure, maybe somebody can tell me. But everybody that's all on a location, it's unbelievable. The detail is magnificent. Shogun, the -- which is just on Hulu. If you read about that, the detail, the attention to every little stitch in the costumes was amazing. So people -- the humanity here, the human piece of it to create the best possible content whether it's film, whether it's going to be written, the next Harry Potter with all the respect to ChatGPT is not coming out of that, is not coming out of a computer program. And I don't think it ever will. Yes, there'll be books and people read. But remember, it's not that long ago that people said, well, we're going to -- the next new novel is going to only have 180 characters because it's going to be limited to whatever social media think it's going to be on but it's just not true.

Also brands still push to the lowest common denominator. If you think about like we're right now on a project where we're doing 6, 15-minute videos is an interesting project that will be unveiled in a couple of months and it involves someone speaking and then surround it by really interesting graphics that illustrate the 15-minute talks that they're doing. And the -- to get the kind of graphics utilizing state-of-the-art technology requires top professionals to use the tools to make an incredible video so that it is not -- we push a button and AI figures out all of the relevant graphics. AI would do a very, very poor job of that. And in fact, it requires teams of highly trained producers using those tools to drive a product that is truly differentiated. And so while there will be a lot of primary product out there, there will be easy content by the pound. The differentiating stuff the big brands need are still going to be driven strongly by creatives who need to have more skills than ever before.

That's great. Before we throw out a couple of questions, I want to invite Julia in, again, you'll kind of take on the role of the human as well, scale production, all those kind of things would be great to get your thoughts on some of these topics?

Yes. I mean, I think David and Mark really covered off on most of the point. I think the way that our organization has deliberately taken production to a centralized anything means that -- we're trying to just keep more of that work in-house, right? I mean, there's a ton of talent inside of the network. And the way that we're able to systematize the way we operate the different production capabilities around the world now versus how we were able to do a couple of years ago. It means we're just keeping a lot more of that money filling the coffers of our agencies rather than sending it out to outsource, simply by connecting dots and opening doors to each other. So it's a very deliberate part of our model. And I think it's leading to a lot better results for our clients because all of the PP and parts are now completely interconnected.

Let's get to a couple of questions from the audience here. I think some of these are really interesting. First of all, sort of riffing on sort of AI and creations and things like that. One of the questions I get quite a lot is about deflationary pressures, right? Like what's going to happen -- what's going to happen is Generative AI is looped into the creative into the creative ecosystem and becomes more engaged in it. What is going to do to revenue? And how is sort of Stagwell positioning on that one? I don't know which would you like to have a run at that, but I think.

Yes. I mean I think as I said that the corporate meeting to our agencies, I believe we're a cost decline in industry and every agency has to look for how it declines at cost every year through its processes. Now cost declining doesn't mean that you're revenue losing because what happens is as the -- as a huge corporations can afford becomes more affordable, typically volume grows. And again, I have the most experienced same survey business, where as I was illustrated, we went from 60 people doing a survey to 2 or 3 people, usually never got tools to do a survey. And you have we do about $250 million of surveys and our margin was perfectly good. I don't think we're going to see that level of compensation here in terms of production of content and media. But I do see every year, we should be able to simplify and reduce costs but I think on the other hand, what clients demand that goes to a higher level that would have passed for ad in the 1950s. If you take a look at it, wouldn't make it for 2 seconds in this decade. The people expect higher and higher degrees of profession [indiscernible] of interesting visuals. And so if you look at like how are we going to market right in EV? Well, you're not going to market in EV with like a plain video that could be shot on an iPhone. It's going to have to be really something that is so attractive to people prove that creative content and then utilizes all of the tools that are at disposal that becomes closer and closer to basically making a black box to using the tools that you see and blockbuster movies that were previously about only to that. So I think that's the progress, simplification of lot of processes but at the same time moving up for the standards of productivity and production and some democratization of the ability for more companies to spend more on marketing successfully.

Yes. I'd only add to that and link it to what I said before. I think if you imagine that in general, the quality of production has gone up. So the quality of what we associate are adds to has gone up. So who wants their brand with some crappy advertising linked to some brilliant beautiful piece of content that's been created that people are watching because they love it. So there's notion of that everything has to be fast and cheaper is the wrong notion. It needs to be better and it needs to be market priced based as Mark said, on what happens when we get the -- for the type of content that we're able to take cost out of, but the end product has to be spectacular.

I don't think people understand that when marketing becomes cheaper, it doesn't make sense for a company to cut back on their marketing. When marketing CPMs drop, it makes more sense for customers to expand their marketing because they can now bring in a greater volume and profit than they could at the old cost curve, right? And so that's why marketing doesn't shrink in the same way because what happens is less expensive marketing opens up more frontiers for greater volumes for the company to start.

So Ben, your question about generative AI specifically in the creative process? And how is that going to impact us? I think like one thing I want to make clear is we are already using GenAI inside of our creative development process. So there's -- like I can break it down a couple of different ways we're using it. Number one, we're using it for finding the right assets inside of stock or inside of existing footage or content that we can acquire and license. One way we're using AI to help us find and generate more ideas. A lot of times, we use AI to generate more and more concepts or more and more idea statements that we can then put into testing to see what's going to resonate with the consumer. We're also using AI to pre-lit preproduction. And when you use to spend days figuring out lighting and angles and how exactly are we going to position the camera and then where we are going to film. We now can do that virtually by using AI rather than using the man hours of days. So we're taking that money out of the pass-through cost that goes back to a client for that production expense. And then finally, we are using AI to -- I mean, we already talked about earlier, like to generate lot of versions and content by the pound. So generative AI is already very much inside of that contents of supply chain that we talked about earlier. It's not coming, it's already here.

A couple of questions that I've got teed up, which I wanted to ask and get some people's perspective on first a question from Barton Crockett, Rosenblatt. He's asking about the outlook for search. And you're saying given share gains by Retail Media Networks and the change in the search experience from AI, what's kind of your thinking on search?

A couple of questions that I've got teed up, which I wanted to ask and get some people's perspective on first a question from Barton Crockett Rosen Black. He's asking about the outlook for search. And you're saying given share gains by Retail Media Networks and the change in the search experience from AI, what's kind of your thinking on search?

I think that Google is going to fight for its market share here. We think it's going to be pushed to do more innovation in terms of how to interact with consumers. So I think a little bit said that we moved from the year of tech pullback to the year of tech competition. And if there's retail media, CTV, online, national events, just to go back by the way to the earlier question, the days we can just make a TV spot and put it on. Today, you have to make 10 different kinds of content that suit each and every media as it goes hot. But I do think that there's -- if you think of Facebook and Google, as you were all kind of sitting here a few years ago and probably saying, look, it's all going to be Facebook and Google and of course, and of course, the long come TikTok and retail market. Did you know this? The thing is it's a growing marketplace, right? If you have double-digit growth can -- is there still room for Google growth? Yes. But they still have the most unique data set on the planet. Yes. Will they invent new products that are competitive in nature. Yes. So will they grow in proportions in the marketplace. That will really depend upon the steps that they make and how they apply AI. I don't think the Dice is rolled on that.

But let's take a look as well from the port of view of advertisers, our business and our clients because I imagine a piece of the question might be rooted in this as well. Today, you type in your query, you get an answer. So we say, my God, this is the new search, it's way better. It's only a short matter of time before advertising starts showing up as we know, they've already talked about it. We know that every single platform that said they're never going to take advertising, ends up taking advertising and ends up being funded by advertising. So there's going to be a whole new system for us to learn which is going to be how advertising shows up in chat, how we adapt advertising to chat and how we work with our clients to make it really efficient for them. So my bet is that within the next year or so, we're going to start seeing that, and we're going to have to start dealing with that as well. So from my perspective, more opportunity -- more opportunity for advertising, more opportunity to create new things in advertising. And as Mark said, the other guys are not going away. There's a fierce competitors. So rising tide raises all ships, I think we're just going to see more opportunity, more things going on for everybody.

Awesome. One final question, I'm going to leave you with this. Julia, you mentioned personas, AI generative personas and those kind of things as part of the new model. One other question we've got here, Stagwell has a compelling approach going forward. Do you feel that the Stagwell approach around persona development monitoring and action to the consumer will eliminate the role of companies like Nielsen, Ipsos Kantar in the marketplace as service provider? Or do you think the data sources which are going to be drawn upon. How do you think about that? How might the team think...

Well. I'm always torn by that question because I'm rooted in the analysis of actual data. So in some ways, I often versal at the creation of personas. But let me flip it around. Personas don't drop out of the sky. We don't just say, "Oh, let's get an IR persona and replace Ben, right? In order to do that, I need a vast amount of data and information. So I need to suck in all that information from Nielsen. I need actually more data than ever before to drive persona. The thing about persona is that it can uniquely turn around and give me what it looks like in response to immediate questions, right? And then it's actually a way of interpreting Nielsen and other data sets through generative and other AI that go into the creation of the persona. So if we understand it that way, you are understanding that personas are data vacuums right? Otherwise, you get a completely back persona that could be in the movie being there, but really couldn't in fact satisfy what you're really demanding up.

Yes. I think Mark has exactly the right point. And while we build personas based on a lot of different data sources like the ones mentioned earlier, certainly would be able to do them without that kind of data. There are plenty of other ways that we can access data that are unique like one thing that we've been doing a lot lately. And ties back to actually the previous question about retail search is scraping Amazon reviews and using AI to distill down Amazon reviews and understanding the different personas of people who are volunteering their opinions in public forums. And then because they are public forums and they are tied to an actual human being, we're able to see at scale, what other kinds of things are they purchasing on Amazon? And can you create unique clusters of people based on that level of retail data that isn't necessarily even behind it walled garden because it's all out in the public. So I think like there's a steady source of data that's constantly streaming in and you need people to open your eyes to different ways of thinking about getting access to those kinds of data but then you need the technology to distill it and build something that you can actually tend to do with it. So it's -- so I think it's funny these questions like there's never a silver bullet of like what's going to take out of the business? Are we going to eliminate the need or people. No. We're finding new ways to work differently with incredible talent that we have, but we're able to maximize their impact because we're giving them tools to think and work differently.

And again, remember, to Julia's point, the key is always going to be to refresh that data with real data, not to refresh it with data that was created by the persona which I think is the trick because if you read the stories of what others are doing, they think that there's a game there about, "Oh my God, look at this, because we're now trading on data and we can feed this data back in. So what you've done is you've created this loop that you have no idea like what's real, what's not real. You constantly have to have real insight, which is why, I think, again, our platforms are so interesting and our ability to use Harris and what we get from real human beings and then feed back into this loop. The human loop becomes the critical point of differentiation and leverage.

No, I think we're at our time, and I hope people enjoy this little seminar and what's going on at Stagwell, Ben any closing words.

Yes. Just thank you all, Julia, to Mark, to David, I think a great insight. Any of us questions, we didn't get around to. We'll try and answer some of those in the investor news letter. Please do keep an eye out. We're going to be trying to do 5 or 6 more of these over the course of the next few months, focused on some of our other capabilities as well. Hopefully, you found it useful. And any questions, please don't hesitate to reach out to IR. We're always happy to answer it. But thank you very much for being here, and thank you to our speakers.

Thank you.

Thank you. Bye-bye.