WPP’s US Revenue Declines Continue, But Tech Clients Give It A Boost

WPP is still struggling to get back to growth in the United States, its largest market, where it hasn’t posted a positive quarter since Q1 2016.

Q2 growth declined 5.4% in North America, an improvement from Q1’s 8.8% dip. WPP’s global revenues were down 0.6% to $8.9 billion in the first half of the year.

“It remains the case that business this year was heavily impacted by client losses that took place from the beginning of last year through September,” said CEO Mark Read on the earnings call Friday.

But WPP is performing well in fast-growing markets like India, where revenue was up 13% in the first half, and Brazil, up 10% in the same period. And while FMCG and CPG clients continue to have mixed spending patterns as their businesses are disrupted, WPP is seeing upside from big tech clients.

Google is WPP’s third-largest client, Read said, and increased spending from companies like Apple, Microsoft, Dell and IBM – all on its top 20 client list – are contributing to overall growth. Ogilvy recently won the agency-of-record business for Instagram.

“WPP is actually a major beneficiary of the growth of technology,” Read said. “We really want to shift our offer into the faster-growing parts of our business.”

Because these big tech clients want to leverage fast-growing digital channels in areas like ecommerce and experience, WPP plans to double down on these offerings and take a top-down approach to data and technology across the group.

“When three to five of the world’s largest companies are tech companies, it wouldn’t surprise you that they might also be the largest advertisers,” Read said. “We are seeing a shift in economic power and spending, and we want to be on the right side of that trend.”

Still, losing legacy clients in 2018 had an outsized impact on WPP’s performance. For example, the loss of the Ford business significantly weighed on WPP in Q2, as did spending cuts by FMCGs across the board.

“A small number of our larger clients have had an impact on the revenue,” Read said.

While the new business pipeline is “slightly subdued” this year, Read said, WPP has won important pieces of business, such as L’Oréal in the United Kingdom, where it’s a top five advertiser. It also won major global reviews through an integrated holding company-led approach, including the global business of Centrica, owner of British Gas, and Vodafone Ziggo in The Netherlands, where it beat Accenture for the business.

WPP’s ability to win clients through an integrated model is “a vindication of the strategy of putting people in campuses,” Read said. So far, 29,000 of WPP’s 149,000 employees are co-located in the same city, allowing WPP to save money on back office and real estate costs.

Investors were curious about WPP’s relationship with Accenture, after Read said that the holding company would not compete in pitches led by the consulting firm. Read declined to comment on how many pitches are led by Accenture and how many WPP has chosen to sit out.

“We do have some concerns about people who are competing with us and auditing our work,” he said. “There are many other very good companies that clients can go to [for] that, and we certainly feel more comfortable doing it with people that don’t have a conflict of interest.”

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