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.|
|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 24th Aug 2017: WPP was the latest marketing services group to report significantly weaker performance than expected for the latest quarter. A key factor, said the group, was a sharp slowdown in advertising expenditure by consumer packaged goods companies, not least WPP's biggest client Unilever. So far, among the big groups, only Omnicom appears to have shrugged off the gloom, largely as a result of its two big account wins of P&G and AT&T media. WPP said revenues for 2Q were down 0.8%, its first quarterly decline since 2009. Net sales excluding programmatic and disbursements slipped 1.7%. The month of July was even worse with revenues down 4.1% LFL and net sales down 2.6% LFL. The twin epicentres of the damage were the two key markets of China and the US, where LFL revenues for the first half of the year slumped by 5.1% and 3.4% respectively. The UK was the shining star regionally with an LFL gain of 4.5% in revenues. Latin America and the rest of Asia Pacific (other than China) were also positive, but those gains were offset by firmly negative performance across all of Europe, Africa and the Middle East. As a result, the group cut its full-year forecast for both revenues and net sales to between zero and 1.0%. Luckily for WPP, exchange rates against the weak pound offset any organic declines, so reported revenues were up 10% to £3.8bn, while net profit for the first half of the year more than doubled to £634m against the year ago period. Yet the scale of the organic decline took investors by surprise, prompting a sharp markdown of as much as 12% in WPP's share.
In the group's commentary on the results, it also highlighted the unremittingly fierce competition between major groups for new business and re-emphasised concerns over instances where rivals had offered clients "up-front discounts as an inducement to renew contracts, heavily reduced creative and media fees, extended payment terms" and other incentives". This is a familiar refrain from WPP's recent earnings reports, but this time the group went even further than before in its rhetoric. "These practices cannot last and will only result eventually in poor financial performance and further consolidation... Our industry may be in danger of losing the plot." There was one bit of good news: consultancies such as Accenture and Deloitte have, it said, "certainly been mopping up some small, fragmented digital agencies, but there is little evidence so far of significant competitive penetration."
With all the groups' results in, final scorecard for organic/LFL growth/decline for 2Q is as follows: Omnicom +3.5%, Publicis +0.8%, Interpublic +0.4%, WPP revenues -0.8%, Havas -0.9%, WPP net sales -1.7%, Dentsu -4.8%. Much smaller MDC scored +11.7%.
Adbrands Weekly Update 20th Jul 2017: Essence, best-known until now as a specialised digital media agency, is being catapulted into the big league within WPP's GroupM with the addition of two major new clients from elsewhere in the group, as well as an expanded role in offline media. The dedicated agency Team Arrow, which manages discount retailer Target, is being absorbed into Essence, along with the team from Maxus handling NBC Universal's US TV and cable channels. Combined billings are worth around $1.5bn a year. GroupM CEO Kelly Clark called Essence "the tip of the spear in terms of innovation across the group", as it pioneers the adaptation of digital planning and buying technology for traditional media. "We're doubling down on Essence as a growth engine for GroupM and WPP. It is currently a smaller agency, and therefore in some ways is nimble, adaptive and really able to act on changes and opportunities."
Adbrands Weekly Update 13th Jul 2017: WPP added to its portfolio with the acquisition of Thjnk, one of Germany's most admired independents, named Agency of the Year this year by trade paper W&V. The negotiations were handled in strict secrecy by none other than Sir Martin Sorrell himself. No price tag has been disclosed, and Thjnk is expected to continue as a standalone unit within the group alongside its major international networks and local resource Scholz & Friends. Founding partners Michael Trautmann, Karen Heumann, Armin Jochum and Ulrich Pallas will continue to lead the business. The deal represents a significant win for WPP in Germany. The only potential problem would be the future of Leo's Thjnk Tank, a joint venture with Publicis which handles the local McDonald's account.
Adbrands Weekly Update 29th Jun 2017: WPP was one of numerous companies affected by a global cyberattack this week, only a month after the "WannaCry" ransomware assault. A new virus, dubbed "Petya", infected Windows-based computer systems and demanded payment of a ransom for unencryption. The assault appears to have started in the Ukraine, where state telecoms, postal and transport companies had their systems frozen. It then moved on at random, affecting multiple subsidiaries of WPP, as well as drug giant Merck & Co, Russia's state-owned oil giant Rosneft, Danish shipping company Maersk and others. Within WPP, the corporate network was the worst affected, but the problem also spread to numerous subsidiary networks and agencies including Y&R, Mediacom and Ogilvy. In a statement released on Wednesday, WPP said "Having taken steps to contain the attack, the priority now is to return to normal operations as soon as possible while protecting our systems. Our operations have not been uniformly affected, and issues are being addressed on a company-by-company basis. Many of our businesses are experiencing no or minimal disruption."
Adbrands Weekly Update 22nd Jun 2017: Following the decision by Publicis to suspend all participation in advertising awards schemes for a year, WPP said it too is reviewing future involvement in the Cannes Lions and other such events, though reduction is more likely than outright prohibition. Sir Martin Sorrell suggested last year that he was reconsidering WPP's commitments to the industry festival circuit because of the time and effort involved, and he reiterated those thoughts this week. Only around 500 WPP staff are in attendance this year, down from 1,000 last year, and he voiced concerns that the festival was becoming "too much of a money making exercise". He said "There is gouging that goes on and there is peak time pricing. Cannes in June is not the cheapest place in the world to be." So will WPP sit out next year's event like Publicis plans to do? "The jury is still out," he answered.
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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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