IN BUILDING the world’s largest advertising company over the past 30 years, Sir Martin Sorrell, chief executive of WPP, has weathered two recessions and survived a global financial crisis. His firm nearly went bankrupt in the early 1990s. Now he must make his hardest advertising pitch yet, to convince the corporate world that image-making agencies like his are not dinosaurs on the brink of extinction.
The world’s advertising giants are struggling to adapt to a landscape suddenly dominated by the duopoly of Google and Facebook. Some of their biggest clients, such as Procter & Gamble (P&G) and Unilever, are also being disrupted, in their case by smaller online brands and by Amazon. They are cutting spending on advertising services, and also building more capabilities in-house. Consultancies with digital expertise such as Deloitte and Accenture are competing with agencies, arguing that they know how to connect with consumers better, and more cheaply, using data, machine learning and app design.
The resulting picture is an industry under siege. WPP just had its worst year since the financial crisis, with declining revenues from like-for-like operations (ie, stripping out revenue from acquired businesses) and a slightly reduced profit margin. This year the company projects that organic growth will be flat, compared with 5% or so in better times. Its big rivals, including America’s Interpublic Group and Omnicom Group and France’s Publicis Groupe, have registered anaemic growth. Publicis posted 0.8% growth in its like-for-like operations in 2017. Investors are losing faith—none more so than WPP’s, who have driven the company’s shares down by 23% since mid-February (see chart).
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