WPP CEO Mark Read on ‘Disappointing’ New Business Growth, Utilizing AI and Elon Musk’s X

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%).

Read theorized that there was a “drag” in the new business pipeline, perhaps due to increased time being taken in the decision-making process.

The AI Opportunity

Read pointed to the work WPP is producing involving Generative AI which is driving conversations with clients as well as tghe partnership with NVIDIA in which the companies will work together to build a generative AI-enabled content engine for the ad business.

He cited creative campaigns developed for clients, including ING, Mondelēz, Nike and Virgin Voyages featuring Jennifer Lopez, as examples of how AI is being used by major brands.

“It’s starting to impact our client relationships and where they’re investing,” Read told Adweek. “For WPP, production is one of the fastest parts of our business and the application of AI to the production process is another area of growth this year. And increasingly, we’re seeing, like the consolidation of the Mondelēz production business earlier this year, the ability for us to grow our capabilities in that area as well.”

There are efficiencies, too. The technology sits on the same internal platform to ensure different WPP businesses are not duplicating their efforts when producing and deploying the created assets.

With the decline in tech spending, Read disagrees that it shows a sign of companies slowing down on their business transformation efforts. Instead, he believes those plans are “on pause” while CEOs and companies are taking stock of the AI revolution.

“What is interesting at the moment is companies starting to lay the foundations for what that will be and where they will invest. And then we will see an explosion of new product launch innovations and all of that will drive marketing spend,” he said.

Platform Developments

Social media platforms have been at the forefront of the news in recent months, especially focused on Elon Musk’s ownership of X—formerly known as Twitter—and the launch of Meta’s Twitter-like platform, Threads.

He has a wait-and-see view about X and believes advertisers are taking a similar stance.

“For now, it’s just a rebrand. We have yet to see how it will affect product innovation and how it will impact the nature of the platform and the nature of the discourse, and I would never count out Elon Musk. He’s a very smart operator.”

With Threads, he questioned whether it was the next Clubhouse or the next Twitter.

“We need to see what the purpose of Threads is and what it will serve in the marketplace,” Read added.

WPP has also announced a global partnership with Spotify that will allow the business to offer clients access to the platform’s ad products as well as gain access to its data in order to reach its audience worldwide.

That will see Spotify integrated directly into WPP’s own products and solutions, including data insights business Choreograph, while also developing thought leadership and training programs to produce digital audio creative for the streaming service.

“Audio is one of the most important connection points in marketing, which will give our client early access to products on their platform, and it also gives us and our clients insight into what’s going on at a time when we are all looking to build deeper, more personalized relationships. How we leverage and activate music will be very powerful,” Read said.