British marketing giant WPP overtook long-time rival Omnicom for the first time in 2008 to become the world's biggest marketing group, as well as the most profitable. It has retained that position ever since, with record revenues of $19.4bn in 2016. Very much the personal creation of its founder Sir Martin Sorrell, WPP now owns four of the world's largest advertising agencies in J Walter Thompson, Ogilvy & Mather, Young & Rubicam and Grey. These are partnered by the four global media networks Mindshare, MEC, Mediacom and Maxus, under the overall banner of GroupM. WPP also controls a substantial portfolio of market research, PR, direct marketing, design and consultancy subsidiaries. Whereas some rivals, like Omnicom and Interpublic, have avoided large acquisitions in recent years, WPP has continued steadily to expand its portfolio, reinforcing Sorrell's reputation as arguably the industry's most skilled dealmaker. Among the more significant recent additions to the collection were digital advertising network 24/7 Real Media in 2007; global research group TNS, acquired during 2008 after a long and sometimes bitter siege; and top German marketing group Commarco, snapped up in 2011. The group's last $500m-plus acquisition was AKQA in 2012, but it continues to hoover up smaller businesses around the globe at an average rate of one a week during 2015, a year which also marked WPP's 30th anniversary.
Who are the competitors of WPP? See ranking of Leading Global Marketing Groups
Who are the clients of WPP? See individual agency profiles below for more
Subscribers only: Adbrands profile
|Soho Square||High Co.|
|Johannes Leonardo||LG Ad|
|Group M||KR Media|
|24/7 Real Media||Kinetic|
|Chime Communications||The Wexler Group|
|Ogilvy PR||Buchanan Communications|
|Cohn & Wolfe||RLM Finsbury|
Design & Branding
|The Brand Union||Scott Stern|
|Coley Porter Bell||Warwicks|
Direct & Relationship Marketing
|OgilvyOne||Grass Roots Group|
|Clockwork Capital||Global Sportnet|
|Metro Group||Spafax Airline Network|
|Prism||The Food Group|
Recent stories from Adbrands Weekly Update:
Adbrands Weekly Update 9th Mar 2017: Investors reacted badly to an unexpectedly gloomy economic forecast from WPP CEO Sir Martin Sorrell, with the group's US share price falling by around 10% following the results presentation last Friday. (That's not too serious. It's now trading at Dec 2016 levels, after reaching a record high on March 1st.) Figures for 2016 were pretty solid, in fact, despite currency headwinds. Best of all was a 21% jump in net profits to £1.5bn, far above any rival. Gross revenues of £14.4bn were up 3.0% on a like for like basis (WPP's version of other groups' organic metric), while net sales of £12.4bn, excluding the benefits of programmatic trading and research disbursements, were up 3.1% LFL for the year. However, both figures were at the lower end of the sector as a whole, with only Publicis performing less well among the major groups. Indeed, WPP acknowledged a sharp slowdown in the second half of the year, and this was especially marked in gross revenues, where LFL growth for 4Q alone was an anaemic 0.5%, reflecting the impact of a 1.6% decline in the group's Kantar research division. Net sales for 4Q were more robust at 2.1% overall growth, but that's nonetheless WPP's weakest uptick since 2012.
The real worry, as far as markets were concerned, is the current year and beyond. WPP reported LFL net sales growth of just 1.2% for January, and Sorrell's forecast for the year as a whole was "around 2%" because of expectations of a "hard and slow" Brexit. He also made special reference to fierce competition between rival marketing groups. "As image in trade magazines, in particular, is crucial to many, account wins at any cost are paramount. There have been several examples recently of major groups being prepared to offer clients up-front discounts as an inducement to renew contracts, heavily reduced creative and media fees, extended payment terms, unlimited indirect liability for intellectual property liability and cash or pricing guarantees for media purchasing commitments". Who can he possibly mean, do you think? "As some say, you are only as strong as your weakest competitor. These practices cannot last and will only result eventually in poor financial performance and further consolidation."
With all the groups' results now in, here's the final ranking for organic growth for 4Q and full year 2016. The other groups don't differentiate between revenues and net sales, so we've included both for WPP. The full year ranking is led by Dentsu (5.1%), followed by Interpublic (5.0%), Omnicom (3.5%), Havas (3.1%), WPP (net sales 3.1%, revenues 3.0%), MDC Partners (2.3%) and Publicis (negative 0.7%). The table for 4Q alone is topped by Interpublic (5.1%), ahead of Havas (4.2%), Dentsu (3.9%), MDC Partners (3.8%), Omnicom (3.6%), WPP (net sales 2.1% revenues 0.5%) and Publicis (negative 2.5%).
Adbrands Weekly Update 9th February 2017: The proposed rebundling of the Ogilvy marketing group and elimination of sub-brands announced last week is to go ahead without healthcare arm Ogilvy Commonhealth. That unit is instead to join a new umbrella entity within parent WPP, to be named WPP Health & Wellness. Ogilvy Commonhealth will retain its name, but will be partnered in the new grouping by GHG (formerly a satellite of Grey) and Sudler & Hennessey (from Y&R Brands), as well as specialist media shop CMI. At the same time, Ogilvy Commonhealth CEO Matt Giegerich is set to retire, with his duties divided among other divisional leaders. Mike Hudnall was named as CEO of WPP Health & Wellness, moving across from WPP's Team Pfizer vertical agency.
Separately, in keeping with a philosophy of "If You Can't Beat 'Em, Buy 'Em", WPP has acquired US-based multicultural agency Zubi Advertising Services, longtime home of Ford's Hispanic marketing account. WPP already handles virtually all other Ford marketing duties via its Global Team Blue unit, but has never been able to persuade the client to assign the Hispanic business too. Zubi has handled the account for more than 20 years, and Ford is its biggest single client.
Adbrands Weekly Update 2nd Feb 2017: In account assignments, WPP snatched the biggest creative account win of the year to-date with the capture of consolidated marketing services and media for Walgreens Boots Alliance in both the US and UK as well as other global markets. Combined billings are estimated at around $600m annually. WPP will assemble a new dedicated unit to handle the business under the banner Team WBA. It has yet to offer more details of which agencies will be involved, but the new entity is expected to handle all services from creative and digital to media, PR and promotions. The main losers are Omnicom's OMD and GSD&M, and independent Mother, but Publicis Groupe agencies also held a share of digital and promotional duties. WPP, on the other hand, was largely unrepresented on Walgreens' previous roster, so the appointment marks a fresh start for the pharmacy giant.
Adbrands Weekly Update 8th Dec 2016: Ad industry ethics came under the regulatory spotlight yet again this week following confirmation of an investigation by the US Justice Department into allegations that the major groups "rigged" new business pitches to favour their own inhouse production networks. According to evidence seen by the WSJ, selected unnamed agencies sought written cost estimates from independent production companies for work in order "to create a paper trail that justified to the advertiser its decision to award the project to an in-house facility, which provided a rival bid at a lower price". All the major groups now have their own inhouse global production networks, including WPP's Hogarth and Townhouse, Omnicom's eg+ and Publicis Groupe's Prodigious, as do many larger standalone agencies. Interpublic, Omnicom, WPP and Publicis all subsequently confirmed that certain unnamed subsidiary agencies had received subpoenas in connection with the investigation.
Adbrands Weekly Update 24th Nov 2016: The addressable TV deal flagged up by Sir Martin Sorrell at WPP's 3Q results conference has finally materialised. The British marketing group has teamed up with AT&T's DirecTV and rival satellite broadcaster Dish to acquire Invidi Technologies, the developer of a system that allows advertisers to target different ads to different audiences during the same commercial break, based on demographic data or customer habits. AT&T will have a controlling interest but the business will operate independently under the three companies' collective ownership.
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Free for all users | see full profile for current activities: British-born Martin Sorrell began his marketing career working for sports rights guru Mark McCormack at IMG, shortly after leaving Harvard Business School. He joined Saatchi & Saatchi in 1976, eventually rising to the role of finance director. In the early 1980s it was Sorrell who arranged the funding that allowed the Saatchi brothers to embark on their big acquisition spree, initially in the UK and then in the US. As a result he gradually replaced Tim Bell, who had previously been the Saatchis' right hand man, as the effective "third brother". However while the Saatchis were putting together their biggest deal of all, the takeover of Ted Bates, Sorrell was setting up his own business on the side.
In 1986, Sorrell acquired a large stake in Wire & Plastic Products, a small publicly quoted manufacturer of shopfittings and supermarket baskets, and resigned from Saatchis to begin assembling his own group. Wary of this potential rival, the Saatchi brothers attempted to keep a controlling hand on the new enterprise by offering to provide 20% of its capital. Sorrell declined, but did agree to sell the brothers a reduced 10% shareholding. He then set out to use WPP as his vehicle for growth, picking up a handful of small marketing services businesses. By 1987, Saatchi's was facing serious repercussions from its Bates takeover as clients deserted the US agency. Meanwhile Sorrell was secretly buying shares in another US agency, J Walter Thompson. In June 1987, Sorrell made an unprecedented hostile bid for JWT. Though rebuffed by the US giant, Sorrell refused to take no for an answer, eventually raising his offer to £352m. At this level, JWT's board was forced to concede defeat. It was a staggeringly audacious deal. JWT's sales at the time were over £400m, while WPP's were a paltry £24m. But the business community was amazed by Sorrell's skill and nerve, agreeing to support the highly leveraged purchase. WPP's share price soared. The Saatchi brothers quickly took the opportunity to sell their 10% stake, convinced that Sorrell's huge ambition would come crashing down to earth.
In fact the crunch came sooner than anyone had expected. Only three months later, the world's financial markets were devastated by the stockmarket crash which became known as "Black Monday". Share prices for all companies fell dramatically, but WPP was particularly hard hit, virtually halving. Nevertheless the company continued spending, funding payments on its increasing borrowings out of the cash flow of other newly acquired companies. Conquest was set up in 1988 to service international clients, and this was followed by the purchase of Ogilvy & Mather in 1989 for a cool $862m in cash. The capture of O&M made WPP the world's biggest marketing group (overtaking Saatchi & Saatchi) but it left a huge £650m debt. A year later the Gulf war crisis sparked off another near-recession. This time WPP's financial position was far worse than it had been four years earlier. For much of 1991, the group was very close indeed to collapse. The only thing that persuaded WPP's bankers to hold their nerve was the fact that Sorrell himself agreed to invest £2m of his own money as a gesture of his absolute confidence in the company's credit-worthiness. Meanwhile, as WPP struggled to keep its head above water, it was overtaken by the growth of Omnicom and IPG, who pushed the British group into 3rd position.
In return for his personal investment, Sorrell put in place an instalment incentive package designed to reward him and his management team handsomely if WPP returned to full financial strength. He set about this with great energy, acquiring or investing in a huge number of additional companies, mostly in the marketing services sector. WPP was an early investor in digital media, building up a strong portfolio of new media content and consultancy businesses. By mid-1999, Sorrell's efforts had lifted WPP into the FTSE ranking of the UK's top 100 companies. At the same time, his personal incentive package matured, netting him almost £38m in WPP shares and cash.
Later the same year Sorrell unveiled a new incentive package for WPP's senior management. In return for reinvesting $20m in bonuses and cash back into WPP, the new scheme promised to pay out another $100m in bonuses to senior managers, including $30m to Sorrell, if WPP's total shareholder return by 2004 was among the top two in a ranking of 15 similar marketing services companies. Capping a great year, Sorrell was knighted for his services to the marketing industry. According to Prime Minister Tony Blair, Sorrell was one of several figures (among them Richard Branson) honoured because they had "left a mark on the century and will be beacons for the next century".
The next few months were comparatively quiet for WPP, although it continued to add a string of small marketing shops to its portfolio. The next big move came in Spring 2000, on the back of strong financial results for the previous year. In April WPP made a friendly approach to Young & Rubicam, offering the US agency's shareholders a one-third stake in a merged group, which would once again overtake Omnicom and Interpublic to become the #1 global marketing conglomerate. However Y&R's management team was not immediately receptive, and instead put in place a secret "white knight" deal with smaller rival Publicis, before tentatively agreeing to negotiations with WPP. The implication was that Y&R would talk to WPP, but on its own terms. If WPP's takeover bid went hostile, Y&R would merge with Publicis instead. By early May it looked as if Y&R had slipped off WPP's hook, and the company finally unveiled its plan to merge with Publicis. But shareholders were very unhappy with the new development, citing the very unsuccessful previous alliance between Publicis and FCB. At the same time Ford, a key client of Y&R, refused to back a deal with the French agency because of its affiliations with rival Renault. However Ford did already work with WPP's O&M network... Y&R was forced back to WPP's negotiating table and the deal was finally completed mid-month.
Meanwhile, WPP announced plans to launch a fourth global advertising network, rolling out the hitherto low-key Conquest brand globally. Singapore's Batey Ads and US-based Cole & Weber joined Conquest's 14 existing European offices to target medium-spend advertisers looking for global representation. The network was rebranded as Red Cell in early 2001. The group continued to complete a series of smaller deals that year, adding to its portfolio of marketing services companies, but it wasn't long before Sorrell was tempted to launch another big takeover. In summer 2001, WPP intervened in Havas Advertising's agreed merger with media group Tempus, launching a hostile counterbid. (See Tempus profile for more). Despite later attempts to pull out of the bid, WPP was confirmed as the new owner of Tempus by year's end.
In 2003, WPP snapped up failing British marketing group Cordiant Communications for a rock bottom price of £10m, a far cry from the £1.5bn at which it was once valued. WPP also took on Cordiant's £256m of debts. The acquisition was confirmed in late June 2003 after a brief skirmish with rival bidder Publicis. After initially attempting to force Cordiant into administration, Publicis withdrew from the fight, possibly because of indications that BAT and Pfizer, Bates Worldwide's last major clients, might not transfer their accounts to the French company. In September 2004, WPP was named the winning bidder in a contest to acquire Grey Global Group. The final bid was worth around $1.3bn net, split between cash and shares. A year later WPP was also linked to a possible bid for media service and research group Aegis. WPP was said to be interested primarily in Aegis's market research division, Synovate. The Carat and Vizeum networks would have been sold on to private equity group Hellman & Friedman. Any such speculation proved purely academic however. WPP eventually pulled out of any deal as a result of a fine display of brinksmanship by rival Aegis investor Vincent Bolloré.
Also in Autumn 2005, WPP generated some less welcome headlines after global creative director Neil French, already renowned for his outspoken opinions, made some ill-advised and apparently sexist comments about women in advertising at a marketing conference. As part of a speech criticizing women in advertising for spending too much time on childbearing and too little on hard work, he was reported to have said "Women don't make it to the top because they don't deserve to. They're crap." After a resulting barrage of negative media comment, he offered his resignation to Martin Sorrell in October 2005. Martin Sorrell himself made headlines that year after the terms of his divorce a few years earlier became public. The £30m payout to his former wife set a new UK record for a divorce settlement.
Another set of headlines followed in January 2006 after WPP instituted an investigation into possible fraud at its Italian operating business. Local manager Marco Benatti was fired at the beginning of the year. This led to further unwelcome attention on Sorrell's private life. A series of anonymous emails were circulated to media publications and WPP clients publicising the personal relationship between Sorrell and another WPP Italy employee, Daniela Weber, and also alleging financial impropriety. The emails appeared to originate from Fullsix, a digital agency founded by Marco Benatti and in which WPP was a minority shareholder. Sorrell and Weber later issued a lawsuit against Benatti and the managing director of Fullsix for libel and invasion of privacy. The case came to court in London in March 2007. Benatti offered compensatory damages without admitting his guilt. A subsequent lawsuit over his dismissal was settled privately out of court. See full profile for current activities
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