US market and creative agencies weigh on WPP
WPP has confirmed its disappointing organic growth numbers in 2023 of 0.9% for the year and just 0.3% in Q4. Media did best with Group[M growing 4.9% for the year (Q4 5.7%) with creative and other agencies going into retreat (-1.6% for the year, -3.4% in Q4.)
It’s now pretty clear why CEO Mark Read (above) decided to merge most of his creative agencies into VML at the end of last year with just Ogilvy and AKQA staying outside.
The US is the biggest area of concern with Q4 organic revenue down 4.5% (up 3.1% outside the US.) Read blamed this on tech clients, who had accounted for a big proportion of WPP’s revenue, cutting back.
Read says: “At our recent Capital Markets Day we detailed our strategy to capture the opportunities of AI, data and technology, while harnessing the full power of our offer to clients, building world-class agency brands, and driving strong financial returns through efficient execution.
“AI will be fundamental for our business and we are embracing the opportunities that it presents, putting it at the heart of our operations and our work for clients. Our AI-powered platform, WPP Open, is now being used by more than 30,000 people across WPP with growing adoption by our clients.
“While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year with 0.9% like-for-like growth and a 0.2 point improvement in our headline operating margin at constant currency. This was driven by disciplined cost control, while continuing to invest in AI, data and technology.”
WPP is forecasting another year of 0.9% growth so recovery is still some away. This seems a modest excpectation and Read will be hoping for rather better. Main rivals Publicis and Ommicom are forecasting about 5%.
More changes are obviously necessary, for example :
1. Move headquarters to US — leadership is too UK centric while WPP’s fortunes are driven by the US. Key competitors are very US focused .. Omnicom , obviously and Publicis through its Epsilon, Sapient and Digitas acquisitions.
2. Delist from the LSE and list in NY
3. Recognize that “creative” isn’t what it used to be .. data is “God” .. talk and act that way .. the legacy of creative glory days is still too prevalent in managements mindset . Guys, it’s over .. look at the composition of Publicis’s business and revenue .. growth !
4. More North American representation on the board and in management would help. The reality is that the US market issues must be solved or WPP goes nowhere . Unfortunately, It can’t be done from London, with largely UK leadership.