Good morning, all, everybody. Well, early morning, actually, from New York, and, I'm joined with Mary and Scott, who are in London. This is our Q3 for 2023. We're gonna cover a trading update from Mary, market momentum and client analysis from Scott, and then I'll come back with a brief summary, and then we'll do Q&A. There's an appendix also available in the presentation for other matters, too. So over to you, Mary.
Thank you, Martin. Good morning, and thank you for joining us today. Trading in the third quarter was difficult, with increasing macro uncertainty, client caution, and extended sales cycles. Reported revenue was down 18%, at GBP 246 million, with some impact from foreign exchange rates, especially the dollar to pound. On a like-for-like basis, revenue was down 13%. Reported net revenue was down 15% to GBP 212 million, or 10% like-for-like in these challenging market conditions. Caution was especially evident in regional and local clients, as well as some from the technology sector, and we continued to see longer sales cycles, which impacted growth from newer and project-based clients. Our net revenue for the first nine months was GBP 657 million, broadly stable on a like-for-like basis.
We have continued to take action on costs and have made a significant reduction in headcount across the company. The number of Monks is now about 8,200, down 9% from our peak mid last year, and 4% from the end of June. Our expectation for full year net revenue is now below the prior year, given market conditions, though profitability will still be weighted to the fourth quarter, driven by anticipated client activity and our work on costs and efficiency. Our operational EBITDA margin target is now expected to be in the range of 10%-11%. Net debt at the end of September was GBP 185 million, with leverage at 1.7 x.
After the remaining payments on prior year combinations, we expect to be around the top of our guided range of GBP 180 million-GBP 220 million at year-end. Moving to the next slide, my comments here are all on a like-for-like basis. Challenging trading conditions have intensified since the first half, and net revenue in both Content and Data and Digital Media decreased in the quarter. Content grew across some scaled and mid-tier clients, but demand from smaller, more local clients and some from the technology sector was lower. Overall, the practice's net revenue was down 16% in the quarter, with two- and three-year stacks at 13% and 54%.
Our work on costs has been especially focused on the Content practice, where we have also brought in new leadership, including a new co-CEO, Bruno Lambertini, and new heads of key markets such as APAC, with a focus on accelerating growth. Data and Digital Media was down 8%, again, highlighting tougher market conditions, especially in the activation and performance business lines. two- and three-year stacks are at 7% and 51%. Technology Services grew 15%, as expected. This is a moderation after strong growth in the first half due to the timing of projects from major clients. Technology Services' two-year stack is 89%. From a regional perspective, net revenue decreased across the globe, with the Americas down 8%, EMEA down 19%, driven by the Netherlands and France, and APAC down 9% due to weaker trading in Australia.
For the nine months to September, total net revenue was stable at GBP 657 million, with two- and three-year stacks at 28% and 75%. Within this, Content was down 7%, Data and Digital Media was down 1%, and Technology Services was up 39%, reflecting rapid growth in the first half and continued progress in Q3. We have again included information on outstanding contingent consideration in the appendix, and we are happy to take any questions on this at your convenience. After 2023, we expect no further material cash contingent payments. In summary, market conditions remain challenging, and our expectations for the full year are that net revenue will now be below last year on a like-for-like basis, with margin pressure as a result.
We remain focused on managing cost and driving efficiency, and we continue to take significant action in the fourth quarter to protect margin. With that, I will pass to Scott.
Great. Thank you very much, Mary, and good morning, everybody. Thank you for joining us. If you look at the markets that we operate in, the major digital platforms have seen an uptick in their top line growth in Q3, and are on track to deliver growth of above 10% in 2023. This is obviously in fairly stark contrast to our own revenue patterns this year, so I wanted to spend some time on that, explaining why we think there is that divergence. The year-to-date two-year revenue growth stacks are 20% for us and 20% for the platforms. However, the patterns do differ. Our growth last year was very consistent at around 25% top line, and no significant difference between the quarters.
The tech platforms, on the other hand, saw very strong growth in H1, around 17%, but a major drop-off in H2, around 4%, with Meta actually going negative. And this obviously makes for easier comps for them in H2 this year. We believe this was driven by client mix, with small and medium-sized businesses, which represent a large portion of their platform revenue, pulling back spend quickly in H2 last year. Whereas enterprise clients, the type we service, who operate on January to December budgets, largely, they continued their spending, and their pullback started in January 2023, as evidenced in our slowdown and the wider industry. Client mix is also at work amongst that enterprise client sector. Strong growth from FMCGs, who've been sluggish for the past few years.
Many of them have seen organic growth in their business of 20%+, driven by pricing and inflation, and similar increases in their ad budgets, which are usually a percentage of their revenue, and are already among the largest in the industry. Conversely, we've seen tech as a sector pull back as they focus on their years of efficiency, and most notably, Meta, where we saw their revenue up 24% in Q3 this year, and their marketing spend down the same amount in that quarter. We believe this is cyclical. Growth will moderate at the FMCGs as inflation declines and pricing power evaporates, and tech will return to spending.
Over the past decade to 2022, growth in ad spend from the four major players, Alphabet, Apple, Meta, and Amazon, was over 1,300%, versus 160% for the world's top 100 brands. As they continue to focus on innovation, new products, artificial intelligence, and diversification, they will refocus their growth efforts, and that will be supported by marketing. And while we remain committed and bullish on the tech sector, we are increasingly diversifying into categories such as finance and FMCG through a conscious sales effort. The tech services industry has consistent double-digit growth for over a decade, but has also slowed dramatically in 2023, with several competitors turning negative and others significantly reducing guidance several times over the course of this year.
Our business has bucked the trend so far, coming into 2023 with a strong backlog and wins, but as flagged previously, we are now seeing that growth moderate slightly in the second half as the industry trends catch up. That said, analysts are cautiously optimistic for growth returning to this sector in FY 2024, geared towards the second half. As you can see, we still have that significant exposure to the technology sector from a client standpoint. It's 44% of our year-to-date reported revenue. And while there has been that concern around the sector this year, and many of those large companies are going through their years of efficiency, and we have not been immune to those pressures, we are, we do remain bullish on that sector.
Revenues from the tech sector for us are down 5% year to date on a reported basis, but within that, we do still have several large tech companies growing their spend with us this year. Our long-term confidence in this sector remains very strong. We believe it will provide growth opportunities ahead of the overall market. The main growth category for us this year has been financial services, and that's down to the full year impact of a portfolio of finance clients in our tech services practice at Formula.Monks, and some good wins and land and expand cases from Decoded. Whilst growth overall has been hard to come by, our long-term strategy of building broad-scale relationships with the world's leading enterprise clients does continue to deliver.
We now have 12 clients with revenues above GBP 10 million year to date versus 11 last year, and a further 12 in the GBP 5 million-GBP 10 million category versus 10 last year. As we pointed out in the RNS, like-for-like revenue growth from our top 20 clients is 3%, and top 50 clients, 4.6%, which is ahead of the overall group. For clients in the GBP 1 million-GBP 5 million category, we have 65 versus 68 last year, and that's, that reveals that our Whopper strategy does continue to pay dividends. The challenge has been further down the client list, with longer sales cycles and a tougher trading environment, meaning growth from new clients and project-based clients has been more difficult this year, particularly in the technology sector. This is more marked at the local level when dealing with smaller, more localized client relationships.
This has certainly been driven by macro conditions, especially in the tech sector, but we have several initiatives in place to counter it, both for the end of this year and for 2024. We have refocused our sales and growth efforts to drive more pipeline, and in particular, have hired several new local, regional, and capability leaders, who have direct responsibility and ownership for growth targets. On the Whopper front, we had 10 last year, and 1 of those was Mondelez, which will not be at that level in 2023. It's hard to predict exactly where we'll end up this year, but we have clear line of sight on 8, and as our largest clients do continue to get larger, we have 2 that are projected to be close to the $20 million cutoff point. With that, I'll now pass back to Martin for the summary.
Thanks, Scott. Thanks, Mary. So just to summarize, Q3, it was a tough quarter and disappointing. And our year-to-date performance was better, but still be below our expectations. And that reflects the challenges that we see macroeconomically with inflation and interest rates, and client fears of recession driven by the conflicts that we see on two continents currently. Q3 net revenue declined by 10% on a like-for-like basis, but year to date, net revenue was broadly flat. There's been solid growth year to date across our scaled client base, our Whopper clients, as we call them. The top 20 clients, like for like year to date revenue being up 3%, and that's the top 20, and the top 50 being up 5%.
There are longer sales cycles, particularly evident in Content, and especially with tech, and local and new clients. So the smaller client relationships, both by nature of the clients themselves and the relationships, have been tougher for us. The number of Monks in the company is now about 8,200. That's about 9% down on the June 2022 figure, and about 4% down on the June 2023 figure. There will be continued headcount reduction in Q4, but that will help improve margins and establish a right-sized organization for 2024 and going into Q1. Our net debt was £185 million at the end of Q3, and that has increased due to the payment of contingent considerations.
The year-end guidance is the top end of the GBP 180 million-GBP 220 million range, but we have considerable comfort in terms of covenant clearage. We make continued progress on ESG, and there's focus on three areas: Zero Impact Workspaces, Sustainable Work, and Diversity, Equity and Inclusion. The traction from AI conversations and initiatives is significant and encouraging, and we remain at the forefront of leading in these change areas. There are about five areas of our business where AI is having or will have a significant impact. The full year net revenue is expected to be below prior year, like-for-like, with operational EBITDA margins targeted now at 10%-11%.
We remain confident in our talents and our business model, and the strategy and focus on scaled and portfolio client relationships that position us well for above-industry average growth in the longer term, with an emphasis, obviously on improving efficiency and margins, along with a long-term focus on share buybacks and dividends, particularly given the lack of further merger payments after 2023, along with debt reduction. So with that, as a, as summary, we now can open up for Q&A. So operator, over to you.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally, as you'll be advised when to ask your question. The first question, it comes from the line of Laura Metayer from Morgan Stanley. Please go ahead.
Good morning. Three questions for me, please. The first one is: What has led you to downgrade your 2023 operational EBITDA guide? Is it mostly due to lower sales expectations for H2? The second one is: Could you elaborate on what needs to happen in Q4 for you to meet your 2023 operational EBITDA margin guide? Is it more dependent on sales or cost action? And then lastly, could you talk about the investments that you're making in AI and why you think you are differentiated? Thank you.
Yeah. Do you want, do you want to deal with the first two, Mary? Then Scott and I can talk about AI.
Yes, of course. Hi, Laura. So firstly, what has led us to make this change to guidance? So we have seen in the last couple of weeks of September, and also during October, lower trading than we'd expected, and our expectations for Q4, from a revenue perspective, are now lower than they were, and that's what's driving the key change in the guidance. In terms of what we need to deliver to hit our revised guidance, so obviously, we need to hit the top line. We need to complete the work that we are doing on managing the cost base, which is well underway. So overall, we're very focused on delivering both. and getting to the end of the year in both a good place versus guidance for 2023, but also with a good exit rate on the cost base as we go into 2024.
Okay, Scott, do you want to lead off on AI, and I can come in on it?
Yeah, sure. So AI has been a huge focus for us. It's been something we've covered regularly on these calls. It's probably the main conversation that we're having with clients right now. From our perspective, we have Wes, who's driving that, across S4. And we're seeing a lot of conversations, a lot of new business opportunities with clients, but we are starting to see those convert. I think initially, a lot of the work is around audits, workshops, examining the opportunity with AI, because it is a significant change, not just for us and our people, and the technologies that they use in their daily work, but also for our clients, how they approach their marketing, how they structure it, and how they build the relationships and even the remuneration models with their agencies.
There's a lot of training going on, a lot of initiatives internally, where our people are testing products and working on tests with clients. And I think as we go into 2024, it will continue to be the main theme in the industry, but also something where you will start seeing significant revenue traction, and we are starting to convert good pitch opportunities there and to see new ones appear.
So I'll just add to that. You know, there are five areas that we see traction, and that traction is building. The first area is copywriting and visualization. We're seeing significant impact, even in the short run, on productivity. So what took us three days or three weeks or whatever, could be done literally in hours. And that's a mixed blessing in a way, because clients will obviously want... We sell hours. We should sell outcomes, but we sell hours. The clients will want to participate in those benefits, too. So that's one area. A second area, which is definitely a plus, is what we call hyper personalization.
So where we used to personalize, or we have been in the habit of personalizing at scale for, say, let's say 1-1.5 million different creative assets, we can now do multiples of that given AI technology, and that means that we'll be producing more, we'll be producing more content, which is a very significant plus. The third area is media planning and buying. If you look at Meta's results, for example, for the third quarter, it's clear from those results that the small and medium-sized businesses are beginning to use AI for media planning and buying, and that's having a very significant impact.
That will start to spread into other areas of the business over time, and the need for significant media networks is thereby reduced with the intensive people, because the digital media planning and buying process can be reduced to algorithms. That's the third area. Fourth area is general agency efficiency, and we're seeing that both on the client side and the agency side. For example, our exclusive relationship with NVIDIA, with AWS and Adobe is an example of that in outside broadcasting, where we're the integration partner, and we can reduce outside broadcasting, the cost of that, by about 90%.
So instead of buying a truck for an outside broadcasting truck for $7 million, $8 million, or $9 million, amortized over, say, five years, you can do it with an AI cloud computing execution for 100, over 100,000 or so. And then the fifth area is what I call democratization of knowledge. We have, for example, 700 people working on Google, and if we can enfranchise those people with significant knowledge, it makes life much easier for them. So those are the five areas. They're having varying impact. I think the first two are having more and more significant impact in the short to medium term. The other three will be more important over time.
Very helpful. Thank you.
The next question, that comes from the line of Tom Singlehurst from Citi. Please go ahead.
Good morning. Thank you for taking the question. It's Tom here from Citi. The first question is really on the planning for next year, because, I mean, sort of the most unique challenge for you as an organization, it feels from the outside, is this sort of longer tail of local, regional clients where I assume that the sort of decision to spend or not is perhaps a little bit more binary than for a really big advertiser or a big client. You know, they're much more likely just to either spend nothing or spend something, which must be difficult to plan for. So I'd love to get your sense of how you approach budgeting in that context. That was the first question.
And then the second question is, with Tech Five, I think there's a consensus, consensus of opinion that they, you know, that there's still a very vibrant long-term opportunity in tech. There's no real sense that they had overinvested in the past. So it feels like, it's a question of when rather than if spending comes back. I suppose the question is, when is it going to come back? Do you think it, you know, starts again from January the first, or do you think we have to wait for the comp profile to, like, do it? It's more of a QH 2024 effect. Those are the two questions. Thank you.
So the two questions are first on the long tail for a minute. And the second is on tech. Mary, do you want to deal with the first?
Yes. Thank you, Martin. Hi, Tom. So in terms of planning and budgeting, we're midway, roughly, through our planning cycle for 2024. And we are approaching it differently, so we're also making changes to our forecast process. But for budgeting specifically, it's about being more granular, more data-driven, and using our systems, so we use Salesforce more specifically than has been done in the past for the longer tail. We also, as we mentioned in the release, have new leadership in several of the key markets in Content. The changes that Bruno and Wes have put through, in terms of the structure and how they're running the business, will help drive ownership and accountability at a local and regional level.
That will support the budgeting process, working very closely with finance, obviously, to get the budget for 2024.
Yeah, just on the tech question. I think in Q3, Scott, Meta's advertising and revenue, marketing budgets were down about 24%-25%.
Correct.
Their net revenue was up 24%-25%. So it's an AI efficiency, for example, for Meta. That's probably the most commented on example of tech clients bringing back advertising and marketing. I mean, interestingly, Meta's net revenues, ad revenues, have grown from, I think in Q1, it was 3% on a like-for-like basis, 12% in Q2, and 24%-25% in Q3. So very strong growth at a time when their advertising and marketing budgets being cut. It's difficult to assess at the current moment, but I would say, you know, if you... We're in the midst of doing our planning, but if you pin me against the wall and said, "What do I think?" I think clients will continue to be cautious as we go into 2024.
The economic environment and political environment is so uncertain, and so, concerning and depressing, that I think while CEOs do in conferences and in the media, exudes some degree of confidence, internally inside companies, people are quite cautious. So I think the situation will be similar, the market situation will be similar in 2024 to 2023. I don't see reasons for a significant change until after the U.S. presidential election and all the other elections. There's a large number of elections taking place next year around the world, and the tail end of this year. So I doubt whether it'll change. But having said that, the pressures inside the tech companies have come off because they have made cost reductions, their margins and profitability have improved.
And at the same time, driven mainly by FMCGs, who've been pricing up and fixed their ad budgets on the basis of net revenues, those FMCGs have been plowing the money into the platforms. You can see, it was up—Amazon was up, what? 22, 21, I think 25% in three quarters. Google was 36, and I think 12 in Q3. So you are seeing the platforms benefit from particularly FMCG spending. As inflation comes down, that will become more muted, and as clients get more and more concerned about volumes, and we saw in Q2 some packages, clients encounter volume issues, and when Q3, and a broader number of FMCG companies face that.
So I think the answer to your question is, tech companies, as we go into next year, the pressure will be much less on them, and they will be more expansive, particularly given the, the, the strong performance. We reckon the tech platforms will probably grow this year by 8, 9, 10%, whereas linear media probably will be down, or somewhere in the low single digits, and somewhere in the high single to digits, even double digits. Does that cover what you wanted, Tom?
Yeah, that's great. I mean, one follow-up question, maybe for Mary, on that kind of long tail. Would, you know, does the structure of your client base mean that it just makes more sense for you to retain a higher exposure to sort of freelance or temporary sort of workforce capability, so that you can adjust, you know, more sort of real time to those sort of changes within the small client base, or does that impact margins, or is that... Is it something that you think you can genuinely sort of model out and sort of-
Your line is a bit fuzzy. Are you saying in relation to the long tail, as I call it? Are you saying we should have a more flexible cost structure for that, or what?
Yeah. Yeah, sorry. Apologies. Yeah, exactly that. Do you-- Does S4 C need a higher level of temporary or freelance workforce because of the nature of its customers?
I think, I think we have to react faster to the changes that we see in the forecasting. And obviously, the forecasting needs to be improved, too. It is improving, but needs to be improved. But, Mary, do you want to comment on it?
Yeah. So, I mean, obviously, we've talked about the changes to headcount we've made over the last 12 months, and part of that is about ensuring that in our local and regional markets, that we're right-sized. There are discussions about flexibility of cost base and how we manage it, so it's very much a focus for us to make sure that we're driving those clients as efficiently as possible.
Very clear. Thank you.
The next question comes from the line of Steve Liechti from Numis. Please go ahead.
Yeah, morning, everybody. Can I have three, please? One, can you just give us a little bit more detail about the management changes in Content? Bruno going co-CEO, exactly what he's gonna be doing and adding, maybe a bit of his history would be useful as well. And equally, you talked about the structure changes in that business, maybe some color there. That's the first question. Second question, just asking the question really, you know, the shift to the unified structure within the business, do you think that's helped you or hindered you, you know, given the current market conditions? You know, are there any issues that have come out? Has it actually worked, is the question there.
And then the third question: Mary, are you actually able to give us a kind of annualized cost savings that you're going for in the current year? Because obviously, you've given us some percentage changes in headcounts from different periods, but what would be helpful is to get a kind of number that we can run into 2024 in terms of your, your structural cost base, which, which would be lower. Anything you can give us there would be great. Thanks.
Okay. Mary, do you want to deal with the first one, and then I'll come back to the second two?
Uh, sure.
Yeah, you want the annualized cost?
Yeah, of course. The last one. Hi, Steve. So in terms of the cost savings we've made, we've obviously reduced the headcount by about 9% since June last year, and in total, 4% of that has come since June this year. We're very focused on the exit rate, and there will be more changes made in Q4. It's probably not appropriate for me to comment publicly on specifics and exact numbers, but we will expect to see a noticeable benefit on our cost base as we go into 2024. When we get to the guidance for 2024, we will be very clear about our expectations in terms of margin delivery. I'm afraid not complete specifics at the moment, but more to come on that.
I think you-- You know, in your thinking about it, Steve, you can-- If you look at the headcount reduction, it's down by about 10% from... It peaked at about, I think, 9,200. It's now about 8,200. It peaked in the middle of 2022. Since June of 2023, it's down about another 4%. It's down by 4% within that 9%. So you can, you know, you can think about the impact on our cost base, that obviously the impact is less in a partial year than in a full year. The other thing that's related to Tom's question before is our business is seasonal, more seasonal than other competitors. It's very geared to Q4.
Q1 is the weakest quarter in terms of growth. Q2 is the second strongest, Q3 is the second weakest, and Q4 is the strongest. So you go from Q4, which is the strongest, into Q1, which is the weakest. And obviously, if your cost base is not aligned, that's what Mary was getting at in terms of talking about the exit rate. So that's one thing. On Bruno and becoming co-CEO, he's really focused on the issues that we're talking about. Wes is more focused now on AI, totally focused on that, really, and on the impact that that will have on our business. And Bruno really is trying to improve two things. One is our forecasting in Content, and secondly, our cost base, aligning our cost base to client demand.
I just want to emphasize again that in the major client relationships, which I think the top 13 account for about 55% of our net revenues, the growth continues to be robust and strong, and the margins continue to be robust and strong generally. So, coming to your other question, but just really on Bruno's history, he was a principal at Circus, one of the agencies that we consolidated into Monks, in 2021, 2022. He started... Argentinian by birth. Started in Buenos Aires, then moved to Mexico, and then L.A., now based in Madrid, and would have been on this call, but for a client commitment, actually in Argentina.
But he will be focused, or he is focused on the areas that we've talked about, with Wes focusing on AI. On the unified—I think the unified structure is the right structure. I think one P&L is, we continuously find with clients that they welcome that, they like working with that, they prefer that than a multi-brand structure where there are inefficiencies. So I would still say that the, you know, the basic fundamentals, digital only, data-driven, faster, better, more efficient, however you want to put it, and more given the AI and the unified structure, the four pillars of the strategy remain in place and remain strong.
And when you look at building major client relationships, which is what we're committed to doing, and there are, there are really good examples of what we're doing with major packaged goods companies, increasingly, interestingly, in the last few months, I think that, that really indicate that the unified structure is the way to go, and that a multi-branded structure is. It's more difficult, probably, with unified to, to locate the, the revenue forecasting issues and the cost buckets or the cost - the points of cost control. It's probably more difficult to do in the unified structure, but from a client point of view, I think it works much more effectively than the multi-brand strategy. Steve, did that cover everything you wanted?
Yeah, no, cool. Thank you. Thanks.
Before we go to the next question, as a reminder, you can press star one if you would like to ask a question. The next question comes from the line of Julien Roch from Barclays. Please go ahead.
Yes. Good morning, everybody. Three questions, if I may. The first one is: you started by growing about 25% when your underlying market was growing about 10%. You're now declining about 10%, when your underlying market is arguably better than that. I know it's somewhat debatable, you gave the Meta example, but why did you go from outperforming to underperforming or, or at best, growing in line with the underlying market? And what are you doing to outperform again? That's my first question. Second question on AI. Martin, very clear on the five impacts, with two being more important, i.e., firstly, you sell hours, you'll spend less hours, your clients will pay less for the same service, and secondly, more content. When you put the two together, what's the impact on revenue, do you think?
And then the last question is: how unified is your unified structure, really? I mean, having one P&L is one thing, but if you still have different brands, if you have different ERPs, and the number of people are not greatly coordinated, it's, it's not really unified. So how unified is your unified structure, to put it that way? And, and what do you need to make it really, really unified? Thank you.
Well, ERP is, we've started on that process in DDM, and Mary can go into that in a bit more detail, if you wish. That will take a year or two beyond and to go beyond DDM. So that's one area. I mean, you're right in saying that is an issue in terms of back office, not in terms of front office. The branding system that we have, the Media.Monks system, gives a lot of flexibility in that unified process. You know, for example, our tech services business is branded Formula.Monks, and enables them to present, well, what they want to present from a technology services point of view to clients who wish to go through digital transformation. So, the unified structure, I think, works.
I mean, to your question about, you know, how unified is unified, it depends, frankly, on individual attitudes and preferences. Ego, power bases, spheres of influence, historical relationships, all play a part as they do in your own company, Julian, or your own companies in investment banks or brokers or whatever it happens to be. It's the same sort of issues. But when you do have the unified approach, or that is where you're going, I think it's much better in terms of securing integration and securing people working together. So I think with the different... Do you wanna add anything on the back office, Mary, from what you're doing in DDM and beyond?
Yeah, sure. We have been reviewing our ERP landscape, and one large project is now well underway, where we are consolidating all the DDM entities onto one instance of a new ERP. You know, as everyone will be well aware, these things don't happen overnight, so the timeframe for that is about a year and a half. We've started. Progress is good. We're also currently looking at a next step in terms of the ERP setup for technology solutions. Following that, we will then move to, to Content. Roadmap well underway in terms of harmonizing the ERP across the company.
Just on AI, the impact of the first two of the five, it is difficult, in all honesty, to say. I mean, the impact would be on net revenue, and the impact would be on employment. And it's very difficult to say. My preference, obviously, would be for the second to outweigh the first. In other words, that the demand for more content. You know, I, in a Netflix example, we probably, on a campaign, would produce 1.5 million, at least theoretically, creative executions. And that certainly would generate significantly more opportunity than the productivity loss, if you like, in terms of sharing the benefit with clients of productivity in the visualization and copywriting. But to be frank about it, I think it's quite difficult to assess at the moment.
Those are two of the five areas. The other three, in media planning and buying, are cost reduction, generally, like the OBS example I gave you with NVIDIA, or, or indeed the, the spread of knowledge, is I think, you know, it all adds up to being positive for the industry and positive for ourselves. On the first point, I mean, obviously our, our client list is very heavily technology-geared. It's still, I think in the figures that Scott had, what was it? 44% technology, so it's almost half of the business. Coming back to the question about when do we outperform, I think we outperform, frankly, when the technology clients start to, become more confident about advertising and marketing spending. I think in Tom's question, there was some suggestion that maybe those clients had overspent historically.
I don't think that's the case. There are tech clients also, within our portfolio and elsewhere, who've maintained spending. They haven't probably increased it very significantly, but they have maintained spending. So I, I think the answer to your question really, really is heavily geared to tech. We are expanding our capabilities in the consumer goods area, and that's starting, I think, to pay a little bit of dividends too. Packaged goods have been relatively unaffected in the high inflation area. As inflation comes down, ad budgets in packaged goods obviously will not be fixed at such high increases. They've been increasing their budgets by 5, 10, or 15%, depending on the price increases that they've managed to get. So I think the answer to your question is...
The other thing is it depends on what happens with the tech marketing spending. And with AI, going back to the other question, that's going to become more and more important. The other thing to say is that as the economy has come off in terms of growth, smaller projects, either with big clients or smaller relationships, either with big clients or with the smaller projects themselves, have become more peripheral. So the froth has gone out of the market, and I think we've been affected by that, and we've seen that in the long term.
Very clear. If I could come back on AI. You know, between impact 1 and 2, you said it's difficult, in all honesty, to say.
Yeah.
So it's basically too early, despite the fact that, you know, Wes is scrambling around to make you as ready as you can be and ahead of peers. When do you think you'll have an inkling of whether two outweigh one and it's positive for everybody, or one outweigh two and revenue will be lower for everybody?
Well, that's-
You're gonna know it... You're gonna go, you know, you know that you are going to know in, say, three months, or it's gonna be 12 months, 24 months?
I don't think it's as close as that, Julian. I think the reality is there's lots of conversations about AI, but, you know, when such a fundamental change happens in an industry, you know, clients are fairly risk-averse, and they don't move as quickly as you, as you'd maybe anticipate. If you think about the waves of technology we've had in our industry, if you think about search coming in, or social, or mobile, these have had really, really significant impacts. But it's. You know, if you remember back to mobile, for example, every year was year of mobile for, you know, six or seven years, until it, that shift finally happened, so it can take longer.
And I think on your question as well, I'd just say that, you know, even if there is some impact on that first one, which, you know, I think there inevitably will be, it doesn't mean that it's the same impact for everyone. So from our perspective, with our sort of size, scale, agility, the partnerships we have with tech companies, and our history of partnering with tech companies to provide services, you know, we still see it as an opportunity. So even if it does have that negative impact on addressable market, we think that'll hit some of our larger competitors harder than us.
I think the traction that we're getting at the moment, Julian, is. It's a very good conversation opener, and we get workshops out of it, we get audits out of it. Example, last Friday, with a major packaged goods company of that. So I think it is happening, but it is longer term. To isolate those two things, when the other three things, and other things that we haven't touched on or are aware of, because there'll be new areas that get opened up. I mean, for example, healthcare. We're seeing very significant traction in AI in healthcare and healthcare references, and we'll see how that impacts us and others over time. But when we have to wait and see how that develops.
Thank you.
We have no further questions in the queue, so I will now turn the call back over to your host for closing remarks.
All right. Well, thank you, everybody, for joining us. We'll come back to you as we in 2024. And by then, in the meantime, we'll update you on our planning and budgets for the year as well. So thank you very much for joining us.
Thank you.