CANNES, France—This year’s Cannes Lions advertising festival, Madison Avenue’s annual jaunt to the French Riviera, showed all the signs of an industry undergoing wrenching change.
Creative-ad agencies sent fewer people. The consulting firms, who are trying to edge onto their turf, stepped up their presence, as did other players like China’s Alibaba Group Holding Ltd. and Amazon.com Inc.
Fewer yachts for ad-tech companies reflected the turbulence and consolidation in the sector. And reports surfaced of a new player on the horizon: AT&T Inc., which is in talks for a $1.6 billion takeover of digital-ad specialist AppNexus.
The world’s largest ad company, WPP PLC, talked about possibly shedding some pieces of its empire, suggesting that being a conglomerate of varied assets doesn’t enjoy the advantages it once did.
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The event in recent years has become an annual pilgrimage for people in advertising, media and tech, who sip plentiful rosé, chew over the issues plaguing the industry and hit parties with musical acts that can range from Bon Jovi to Common.
“Cannes is still a work-hard then play-hard environment,” said Carter Murray, chief executive officer of Interpublic Group’s FCB Global.
Ad giants WPP and Publicis Groupe SA are searching for and testing big ideas to deal with an array of challenges. Their customers, big marketers, are cutting back on agency payments, doing more work in-house and demanding more transparency about the media they buy.
The playbook thus far—reorganizing in hopes of being more nimble, and buying into companies that appear to be tech-savvy—is still very much a work in progress.
“Our business is going through structural change, not structural decline, and we have to adapt,” Mark Read, the recently appointed co-chief operating officer of WPP, said in an interview.
Former WPP CEO Martin Sorrell, who recently left the company, said on the main stage Friday that it was “inevitable” ad holding companies would need to consolidate their alphabet soups of agencies internally. Still, he called it a “significant mistake” for WPP to sell its stake in digital-marketing software and consulting company Globant, a move the company said Wednesday it was making.
Ad companies are in belt-tightening mode. WPP, whose financial performance has been its worst since the financial crisis, cut back on the number of executives attending the weeklong confab by more than 20%, according to a person familiar with the matter. Publicis also trimmed its presence, choosing to direct resources to its artificial-intelligence platform Marcel, which is intended to foster greater collaboration within the company.
Management consulting companies are angling in. Deloitte had roughly 70 executives attend the event, up 40% from last year. PwC and Accenture enlisted private yachts to meet with clients and throw lavish parties.
“I’m watching with amusement as all the consultants are storming Cannes,” Quentin George, co-founder of consultancy Unbound, said at a party thrown by McKinsey & Co. with ad-tech company MediaMath.
HP Inc. Chief Marketing Officer Antonio Lucio said at a panel that his company has been bringing in-house, and away from agencies, such marketing functions as media planning and management of the company’s customer data used in automated ad buying.
“That has profoundly changed the way we do marketing…and it also profoundly changes the relationship with the Facebooks and Amazons of this world and the relationship you have with your agencies,” Mr. Lucio said.
The once-highflying ad-tech sector has come back to earth, as companies fret about Europe’s new privacy law and fight to compete with Alphabet Inc.’s Google and Facebook Inc.’s online ad dominance.
Telecom giant AT&T is betting it can put a dent in that “duopoly.” The company, which recently acquired Time Warner Inc., would become a substantial digital ad player through the AppNexus deal. The prospect of the AT&T deal was welcomed by advertisers.
Alibaba touted its ability to help marketers optimize their marketing through consumer data the company has on roughly 600 million consumers. Meanwhile, Amazon joined forces with ad agency Huge and nonprofit Global Citizen to conduct a two-day hackathon to develop services to tackle issues such as poverty, clean water and gender equality.
Google and Facebook struck more of a conciliatory tone than in previous years, after controversies such as the improper accessing of Facebook user data and the continuing fallout over ads appearing next to inappropriate content on Google’s YouTube.
“They know it’s been a bad year for them,” said Laura Desmond, former chief executive officer of Publicis Groupe’s Starcom Mediavest. “I haven’t seen this level of humility and partnership from them before.”
“We have recognized our responsibility in a way that is profound,” said Carolyn Everson, Facebook’s vice president of global marketing solutions. “There has been a huge cultural shift at the company.”
—Alexandra Bruell and Nick Kostov contributed to this article.
Write to Suzanne Vranica at suzanne.vranica@wsj.com and Lara O’Reilly at lara.o'reilly@wsj.com