WPP posts 19% growth as clients continue 'fundamental shift' toward digital

Dive Brief:

WPP reported like-for-like net revenue increased 19% in the second quarter in an earnings statement. Net revenue in the year's first half was up 9.8% compared to the year-ago period, with growth recorded across categories and most major markets. In North America, GroupM and Ogilvy led the recovery for Q2.
The ad holding group said that a recovery has taken shape faster than expected, with much of the returning demand centered around digital media. GroupM, its media-buying arm, raised forecasts to state the global advertising economy will grow by 19% this year when stripping out U.S. political ad spending.
E-commerce became a larger aspect of WPP's business in H1, with GroupM seeing commerce-related billings climb 61% year-on-year. The positive results align with how other large agencies are feeling fresh tailwinds as brands try to adjust to consumer habits shaped by the coronavirus pandemic and changing needs around data.

Dive Insight:

WPP joined its "Big Four" peers Interpublic, Omnicom and Publicis in seeing healthy organic revenue growth in Q2 versus the year-ago period, when the agency category was decimated by mass client pullbacks spurred by COVID-19. The company raised its guidance for the year, estimating it will see between 9% to 10% like-for-like net revenue growth in 2021.

In H1, WPP notched $2.9 billion in net new business, another sign that advertiser demand is rebounding despite continued pandemic-related uncertainty, with fresh investments targeted largely at digital media. Executives expect brand mandates accelerated by the health crisis, particularly those related to commerce, connected TV, digital media and data, to be long-lasting and transformative for the sector.

"If you look at where clients start now, they increasingly start with digital and not with analog," WPP CEO Mark Read told analysts on a call discussing the results. "I think things have changed fundamentally, and we expect that to continue to shift."

Recent months have seen WPP launch new initiatives to keep pace with fast-moving client needs. In May, it merged the specialist data units of GroupM and Wunderman Thompson to form a consultancy called Choreograph that is focused on first-party data services. The group, partially a response to the eventual death of third-party cookies, is linked closely with GroupM as WPP tries to provide clients a more holistic view of their data.

Read sees opportunities in helping brands build out direct-to-consumer platforms, driving demand to those channels and then tracking and enriching assets like purchase data to inform future marketing. He said that clients value WPP's strategic advice on data more than the first-party data sets themselves, which he added are not the "be-all and end-all."

Looking forward to the second half, the executive noted there are "good-sized opportunities" for mergers and acquisitions, and that WPP is most closely eyeing e-commerce, marketing technology and data and analytics on the dealmaking front. His comments echoed those of Omnicom chief John Wren, who last month said the group would pursue more "accretive acquisitions" in areas including precision marketing, digital transformation, commerce and media.