Dive Brief:
- WPP, the global ad agency holding company, released its Q3 earnings report with revenue up 0.8% in dollars for a total of $4.78 billion, per a company press release. Performance across global currencies was mixed with its nine months constant currency revenue up 1.1% while like-for-like revenue was down 0.9%.
- In an earnings call with analysts, WPP cut its growth expectations for 2017 to zero, as reported by Ad Age. It began the year anticipating up to 2% growth and lowered that forecast to 1% in August before now dropping it to zero. WPP also expects flat margins in 2017.
- An earnings statement specifically addressed the challenge digital services divisions from management and financial consultancies such as Accenture and Deloitte present to the big five agency holding companies, stating agencies are holding their own on a win/loss basis when competing with consultancies, per The Drum.
Dive Insight:
WPP's results mirror similar bad news from other agency holding groups Publicis and Interpublic. Only Omnicom beat expectations for Q3, although that growth was still modest. The news that these traditional lions of advertising continue to experience revenue issues stands in stark contrast to tech giants like Google, which beat expectations last week. Facebook reports its quarterly earnings later today is expected to put in a stellar performance as well.
WPP called out the increased influence on its business of ad tech and search platforms such as Google, Facebook and Amazon in its statement, noting that Google and Facebook have become friendlier partners for WPP. Working more closely with Google and Facebook could be good news for big brands looking for both creative input and digital scale.
The statement also noted that client consolidation from CPG giant clients Unilever and P&G is impacting business. That trend is likely to continue for the near future as both companies are intently focused on eliminating what they see as inefficient investments or ones not providing the level of brand safety and transparency they want.
The claim that consultancies aren't a major threat to holding companies comes less than a month after Jerome Bodin, a Nexis analyst, released a research report stating tough economic conditions put WPP and its holding company peers in jeopardy as independent businesses, while specifically citing Accenture or Capgemini as two companies in position to acquire one or more of the big five.
In the earnings call, CEO Martin Sorrell turned up the heat on a simmering issue around advertising awards programs. Sorrell called out the Cannes Lions festival host company, Ascential, for "unacceptable practice" in demanding a WPP agency had to enter a separate awards program — the Eurobest awards also run by Ascential — to become a Cannes judge, while praising its holding company competitor Publicis for withdrawing from next year's awards programs.
