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The advertising and communications industry is very competitive and is expected to remain so.
The Group’s competitors are of all sizes and types, and range from large multinational companies, including Internet giants capturing an ever-increasing share of the advertising market, to smaller agencies that operate in local or regional markets. New players such as systems integrators, database design and management specialists, telemarketing and web-based companies now have access to technical solutions that respond to clients’ specific marketing and communications needs. Such players have the potential to up-end the competitive landscape in the advertising and communications industry more sharply and quickly than in many other industries. The Group must compete with these companies and agencies in order to maintain existing client relationships and to win new clients and accounts. Increased competition could have a negative impact on the Group’s revenue and earnings.
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The advertising and communications industry is particularly sensitive to changes in advertiser businesses and a scaling back of their advertising investments. Economic downturns can have a more severe impact on the advertising and communications industry than on other sectors, in part because many companies respond to a slowdown in economic activity by reducing their communications budgets in order to meet their earnings goals, which could have an adverse effect on the Group.
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Operating in the advertising and communications industry means that the Group has to process a significant volume of personal data. Regulations governing personal data protection are complex and evolving, differ from country to country and generate important and increasing compliance costs. Some of the regulations applicable to the Group have come into force recently. In particular, the European Union’s General Data Protection Regulation (EU) 2016/679 of April 27, 2016 (GDPR), which came into force on May 25, 2018, heightens the obligations and responsibilities of companies processing personal data, creates new operational requirements (in particular in the event of a breach in the confidentiality of personal data) and increases their security and confidentiality obligations. GDPR also strengthens the rights of individuals by giving them more control over their personal data. GDPR provides for administrative sanctions of up to euro 20 million or 4% of global annual revenue for the most serious breaches.
Moreover, in June 2018, the State of California promulgated the “California Consumer Privacy Act” (CCPA), which came into force on January 1, 2020. In the absence of comprehensive federal data protection regulations, the CCPA is the most important law in this area in the United States. The CCPA provides for a right to opt-out, allowing users to suspend the collection and the sale of their personal data. Although this law only applies to Californian residents, one of the main challenges will be distinguishing between users in order to apply the appropriate procedures and put in compliance the entire ecosystem by identifying precisely the responsibility of each actor.
Any unauthorized loss or disclosure of personal data may give rise to substantial damages for the persons concerned, who may sue the Group. The Group, which deals with more and more personal data, could be subject to increased scrutiny by supervisory authorities. Any breach of applicable regulations may, on top of any liability suits and sanctions handed down against the Group, create a loss of customer confidence and have an adverse impact on the Group’s reputation and activities.
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The advertising and communications industry is known for high mobility among its management and talent. In addition, the Group’s new competitors, particularly technology and Internet companies, may also attract profiles that the Group would like to recruit or retain. The loss of some of them could hurt the Group. The Group’s success very largely depends on the talent and expertise of its teams as well as on the strength of its relationships with customers.
In an environment in which digital expertise is central to organization transformation, the Group’s businesses are seeing significant staff turnover, something that may represent a risk if not sufficiently anticipated. If the Group were no longer able to actively attract and retain valuable managers or employees, or if it were no longer able to retain and motivate its key talent, its prospects, business, financial position and results could be very adversely affected.
