WPP, the largest advertising agency globally, has indicated that initial signs of market recovery are emerging, despite ongoing challenges from China’s extended economic downturn.
In the latest quarter, WPP experienced a return to growth, reporting revenues that surpassed expectations, largely due to new media partnerships with major brands such as Starbucks, Amazon, and Unilever.
The FTSE 100 company, which operates renowned agencies like Ogilvy and Finsbury, recorded revenues of £2.9 billion for the third quarter, reflecting a 0.5 percent increase on a like-for-like basis. This marks a recovery from the 1 percent decline seen in the first half of the year.
Mark Read, the chief executive, remarked, “It’s encouraging to see the first signs of recovery. We must maintain this momentum into the next year, with several new business opportunities on the horizon.”
The like-for-like revenue growth was notable in North America, up 1.7 percent, and in Western Continental Europe, which saw a 2.2 percent increase. However, the UK market remained flat after experiencing a 5.3 percent drop in the first half of the year.
In the remaining global markets, there was a 2.2 percent overall decline, primarily due to a significant 21.3 percent decrease in China. This decline was an improvement compared to the 24 percent fall recorded earlier in the year.
China ranks as WPP’s fifth largest market, employing approximately 6,000 individuals. Read described the climate in this region as particularly challenging, affecting clients in sectors such as luxury goods, automotive, and consumer packaged products.
“Consumer spending in China has yet to achieve consistent recovery post-COVID,” he stated. “Many consumers are prioritizing savings and attempting to stabilize the housing market, which impacts economic security and has consequential effects on the sectors we serve.”
Addressing the bribery scandal that impacted WPP last year, leading to the dismissal of an executive and the suspension of collaborations, Read acknowledged that the situation had adversely affected early operations this year, though it is now more stable. “We have undergone leadership changes and introduced new management to move forward,” he added.
When asked about the possibility of WPP exiting the Chinese market, Read clarified, “We are not planning to leave China. Our clients are committed to this market, and as long as they are, we intend to develop our business there.”
Founded by Sir Martin Sorrell, who built WPP by acquiring numerous agencies, the company has undergone significant restructuring under Read’s leadership. Approximately 90 percent of WPP’s annual revenue is now derived from six principal networks: AKQA, Ogilvy, VML, Hogarth, GroupM, and Burson.
WPP’s share price has faced pressure amidst uncertainty in the advertising sector. Last year, the company noted that major clients, particularly in technology like Apple and Google, had reduced marketing expenditures in response to a volatile economic landscape.
While some budget cuts are being implemented, Read has focused on enhancing WPP’s capabilities in artificial intelligence.
“AI is crucial for our future as an organization,” he emphasized. “It streamlines the creation of innovative ideas, helps us discover market insights more rapidly, and allows for quicker project deliveries while ensuring the relevance of our media strategies.”
Nevertheless, he expressed concerns regarding the broader industry landscape, highlighting risks associated with deepfakes and AI-related fraud. “As with all new technologies, there are both opportunities and risks involved,” he noted.
Read also pointed out the significance of safeguarding intellectual property amid recent copyright lawsuits against AI entities.
WPP’s shares have surged by 16 percent over the past year, with an additional rise of 6.1 percent, or 47p, bringing the closing value to 820p on Wednesday.