Adland’s obsession with image is hurting the industry, warns WPP boss Sorrell

The boss of the world’s largest communications holding group WPP has warned that agencies are chasing new business at any cost, just to generate positive trade press headlines.

Sorrell: “Image in trade magazines is crucial to many”

The comments from WPP’s CEO Sir Martin Sorrell came as the company announced record breaking numbers in its global financial results for 2016. In the outlook section of the report, he warned:

“Competition is fierce and 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, although the latter are difficult for procurement departments to measure and monitor.

“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, the premium being on long-term profitable growth.”

WPP reported revenue growth up 17.6% at £14.389bn ($23.2bn).

This was helped by favourable currency fluctuations for the UK-based company. Stripping out the currency factor, it reported revenue growth of 7.2%.

EBITDA (earnings before interest, taxation, depreciation and amortisation) headline profits for the company were £2.42bn ($3.89bn), up 20.8%.

WPP’s Australian agency brands include GroupM, Mindshare, Maxus, MEC, Mediacom, Burson-Marsteller, Y&R Brands, Grey, J Walter Thompson, Ogilvy, Play, TNS, Millward Brown, Hill + Knowlton, Xaxis, PPR and Landor.

Globally, Grey performed the best in 2016 out of the agencies within the holding group.

However, WPP said conditions are still tough for the industry. It said: “Asia Pacific was up, but elsewhere conditions were more challenging and overall advertising remained under pressure.

“Clients face challenging top line growth opportunities and uncertainties. And although inflation may pick up in the United States because of stimulative economic policy and in the United Kingdom because of the weakness of sterling, generally inflation remains at low levels, resulting in limited pricing power.

“As a result, there remains considerable focus on the short-term and cost and the finance and procurement functions are dominant, certainly equal or more powerful than marketing, rightly or wrongly.”

Sorrell called on the global digital and media  giants to play their parts in boosting the economy, writing: “Controlled companies like the Murdochs’ Newscorp and Fox or the Roberts’ Comcast or Zuckerberg’s Facebook or Brin & Page’s Google or, now, Spiegel’s Snap may provide the confidence and stability needed to take the appropriate level of risk.”

Of Donald Trump’s new presidency, Sorrell said: “With the short to medium prospects in the United States, at least, strengthening under the Trump administration, which is much more strongly pro-business, much more business-connected than the Obama administration, outlining planned pro-growth tax, infrastructure investment, spending and regulatory reform.”


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