WPP Group advertising & marketing profile

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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 remained the biggest ever since, with gross revenues reaching a record high, in USD at least, of $20.8bn in 2018, helped by the weak pound. However, a sharp downturn in profitability in 2017 was followed in early 2018 by an allegation that WPP's creator and CEO Sir Martin Sorrell had misused corporate assets, a charge he strenuously denied. With WPP's share price already in freefall, Sorrell stunned the global advertising community by resigning from the group he had assembled almost single-handedly over the space of 33 years to launch a new venture, S4 Capital. His successor Mark Read has been struggling since then to turn around the group's weakening performance. His most radical move was to merge the ailing J Walter Thompson and Y&R networks with stronger sister agencies. WPP still owns four of the world's largest advertising networks; now Wunderman Thompsonand VMLY&R as well as Ogilvy and Grey. They are partnered in turn by three global media networks Mindshare, Mediacom and Wavemaker, 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 largely avoided large acquisitions in the 21st century, WPP continued steadily to expand its portfolio in the 2000s, 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 has continued to hoover up smaller businesses around the globe.

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Adbrands Daily Update 16th Mar 2020: WPP issued an all-staff memo on Saturday asking more than 100,000 employees to work from home "wherever possible". Although all offices will remain nominally open, unless otherwise ordered by each country's government, WPP said it "will take action to greatly reduce the density of people in our buildings and the amount of travel to and from work." Omnicom followed suit, moving to an official work-from-home policy from this week. In a memo to all employees, CEO John Wren said "We are asking for the support of our agency leaders to make certain our people work remotely and only essential staff go into the office. If you have not done so already, please ensure in the next day or so that you collect what you need to work from home."

Adbrands Daily Update 2nd Mar 2020: WPP has launched a new strategic marketing agency under the name WPP Black Ops. The unit is loosely aligned with Grey and Mediacom, but operates separately as a "fluid operation situated in key global hubs". Founding client is P&G's high-end skincare brand SK-II, but talks are ongoing with additional clients in several markets. According to unit leader Nihar Das, also managing partner of Mediacom APAC, "What started out as an experimental working model for one client escalated into a new proposition with wide relevance and appeal that's all about flexibility – drawing in the right people and structuring on a bespoke, project-by-project basis." Grey London strategy consultant Danni Mohammed is also part of the senior team and creative duties are overseen by Grey London ECD Leo Savage.

Adbrands Daily Update 28th Feb 2020: With all results now in, Omnicom led the pack for 4Q with organic growth of 3.5%, followed by Interpublic at 2.9%. Everyone else was in negative territory: Dentsu -1.1%, MDC Partners at -1.5%, WPP on -1.6%, Havas -2.0% and Publicis on a grim -4.5%.

Adbrands Daily Update 27th Feb 2020: WPP's 4Q and full year results weren't great, but they were better than many feared, especially after disappointing numbers from WPP AUNZ earlier in the week. The group recorded another organic decline in the final quarter after modest growth in Q3, but -1.6% (including Kantar) put WPP in the middle of the pack compared to its peers, better than Publicis and Havas but worse that Omnicom and Interpublic and Dentsu. WPP's full year organic decline was -1.2%. The key markets of the US and China remain a serious problem. WPP didn't declare market-by-market organic performance for 4Q, but both - and especially China - appear to have performed much worse in Q4 than Q3. For the year as a whole, revenues less pass-through costs came in at £10.8bn. Net profit plunged by 37% to £718m. "Our clients and our people tell us that WPP has a clear new sense of purpose and is successfully instilling a culture of creativity, collaboration and openness," said CEO Mark Read. "I am optimistic about the future of our industry and WPP's position within it, although there is still much more work to do."

Adbrands Daily Update 25th Oct 2019: WPP was back in the black for organic growth in Q3, further isolating Publicis as the industry's "weakest link", at least for this quarter. (Figures are still awaited from Dentsu and MDC). Revenues less pass-through costs scraped a 0.5% like-for-like gain for Q3, or 0.7% including Kantar (which is being part-divested). The final figure was £2.7bn. This quarter's gain reduces the YTD LFL decline to 1.5% (ex Kantar). It's a welcome improvement, though problems remain in the US and China, down 3.8% and 0.8% respectively. Those declines were offset by solid growth in the UK (3.1%), India (15.5%), Brazil (8.9%) and Russia (14.7%). "Wunderman Thompson, VMLY&R and Grey show[ed] significant improvement compared with the first half. Following the merger, VMLY&R grew in the third quarter both globally and in the United States," said the group.

Adbrands Daily Update 9th Aug 2019: WPP rounded out the reporting season with another weak set of numbers, but they were at least better than Q1. The like-for-like decline in net revenues was -1.4% to £3.2bn. That was the worst of any of the big six marketing services groups, but an improvement at least on WPP's Q1. Once again, the weakest region was North America at -5.3% LFL. The UK was back into growth at 1.3% and Western Continental Europe was unchanged at 0.0%, because a -5.0% slump in Germany offset better performance elsewhere. Asia too was dragged down -1.6% because of -8.7% fall in China. There was stronger performance from C&E Europe (up 6.3%) and Latin America (up 9.3%). For the first half, net profits slumped 50% against the year ago period to £349m. With all results now in, IPG leads the Q2 ranking once again at 3.0% growth, followed by Omnicom (2.8%), Havas (0.4%), Publicis (0.1%), Dentsu (-1.3%), WPP (-1.4%) and MDC (-2.4%).

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Background

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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