By Rachel Kesseler and Rachel Mihulka
WPP Group (or Wire and Plastic Products) was founded in 1986 in London and is now the world’s largest agency holding company. Its successful growth over the last 30 years is due in part to its strong leader–Sir Martin Sorrell, one of the most well-known CEOs in the world, although his background is more focused on business, rather than communications.
Sir Martin has helped grow WPP into the company it is today, employing more than 200,000 employees across 3,000+ offices in 112 countries. Its many companies, including Addison Group, Burson-Marsteller, GCI Group, Hill+Knowlton Strategies, Ogilvy & Mather, and many more, are well-known leaders in the communications field. These many companies specialize in a number of areas, including:
- Media Investment Management
- Data Investment Management
- Public Relations & Public Affairs
- Branding & Identity
- Healthcare Communications
- Digital, eCommerce & Shopper Marketing
- Specialist Communications
WPP’s financial performance has been an important conversation in recent months, as its individual performance sets a precedent for the rest of the industry. As of late fall 2017, WPP’s stock value (NASDAQ: WPPGY) has dropped more than 18 percent over the past year (Yahoo Finance, 2017). WPP also recently announced lower revenue forecasts for the third time in 2017, meaning its like-for-like sales were expected to come in flat (Kostov, 2017). This understandably made both investors and experts question the health of the entire industry.
As a well-respected expert, Sir Martin provided some reasons why holding companies are seeing a trend of struggling revenues. He thematically attributed 1) activist investors, 2) the rise of consultancies, and 3) zero-based budgeting tactics as some of the biggest threats to financial success (Handley, 2017; Sorrell, 2016). Zero-based budgeting has specifically been a challenge for WPP, as this budgeting tactic is used by many consumer-packaged goods (CPG) clients. Since CPG clients provide 30 percent of WPP’s revenue, when two of its biggest clients – Unilever and Procter & Gamble – drastically cut budgets, WPP’s business took a huge hit (Wentz, 2017).
However, while the industry seems to be struggling, the future is looking relatively positive for WPP. Marketing firm R3 recently announced a global comparison of new business wins across holding companies thus far in 2017. WPP was shown to have more than 1,300 wins and $579 million in new business revenue, which is almost double to the second-place group, IPG (R3 Worldwide, 2017). This means that while large CPG clients may be cutting budgets, WPP is bringing in new clients at a much faster rate than any of its competitor holding companies.
As the industry continues to evolve, WPP has paid particular attention to change and taken a pragmatic approach to new business. With lower budgets, new client decision makers and a changing industry landscape, the holding company’s knowledge and experience will set it apart from its competition. While recent news may trouble investors and experts, WPP’s strong, experienced leadership has a plan that will continue to allow its agencies and its work to come out on top.