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With a drop in global marketing spend impacting WPP in the first half of the year, CEO Mark Read is being cautiously optimistic about the rest of 2023 and beyond.
WPP, the world’s largest agency network, has lowered its growth projection for the year from 3%-5% to 1.5%-3%, partially due to a the “disappointing” addition of new business during the first half of 2023.
WPP reported organic revenue growth of 2%, with revenue at $7.38 billion (£5.81 billion) and operating profit growth of 2.7% to $846 million (£666 million).
“We’re in an interesting point in the innovation cycle where they have a lot of products ready to market, but the business models are not necessarily entirely clear for them,” Read explained on WPP’s earnings call Friday morning. “I think as they become clearer, we’ll see a greater volume of marketing around many of these new products.”
A new business lag
The business was impacted by lower spending from big tech clients and some of the world’s largest advertisers, which has impacted U.S. business. WPP agencies AKQA, VMLY&R and Wunderman Thompson were hit particularly hard.
For the first half of the year, WPP’s Tech and Digital Services revenue declined -4.9%, making up 18% of the business’ overall client sector mix.
I would never count out Elon Musk. He’s a very smart operator.
Mark Read, WPP CEO
“If you’re in CPG, Travel and Leisure or Financial Services and you want to drive top-line growth, then you have to invest in marketing, but if you are in technology or telco, you’re probably looking to rebuild margins and be focused on cost-cutting by delaying projects. I think we’re seeing a little bit of that sector-by-sector,” Read told Adweek. He added that he sees “a strong pipeline” of business, ahead of last year.
The company reported $2 billion in new billings in the first half of 2023.
Alongside the reduction of some tech spend was the loss of Pfizer’s business in May. However, creative agency network Ogilvy grew with client wins, including H&R Block, Mondelēz, Samsung, SC Johnson and Verizon and production company Hogarth recorded mid-single-digit growth.
Media business GroupM also grew 6.1% in both quarters, with growth across Europe, U.K. and the U.S. Digital revenue now makes up almost half (49%) of the company’s media billings.
Other client sectors to decline during the six-month period include Telecom, Media and Entertainment (-1.4%), Automotive (-0.2%) and Retail (-7.9%). Growth was recorded in CPG (+15.1%), Financial Services (+10%), Healthcare and Pharma (+4.2%), Travel and Leisure (8.9%) and Government, Public Sector and Non-Profit (+3.6%).