Dive Brief:
- WPP’s CEO Martin Sorrell said weak client performance and an ultra-competitive marketplace led to a 3% Q1 drop in like-for-like North American revenue per Ad Age.
- In other news, WPP's annual report, released today, reveals that the maximum pay Sorrell will receive this year will be no more than 19 milion pounds ($24.6 million), significantly lower than the 48 million pounds he earned last year, as reported by Reuters in the Daily Mail. The move comes in response to a backlash by investors who were unhappy with the high pay out.
- Sorrell told a group of analysts that the performance of its U.S. clients wasn’t as good as international performance, adding he was surprised at the result as the new Trump administration has a more positive attitude toward business than the previous Obama administration.
Dive Insight:
The fact that WPP's revenue dropped during the first quarter even as U.S. business has been feeling positive under the Trump administration suggests other factors may be impacting the agency conglomerate's results. Last year, WPP lost the AT&T and Volkeswagen accounts while Sorrell previously pointed to Amazon's growing influence as a development that causes him worry.
The news about WPP’s North American revenue comes amid a backdrop where traditional agencies have been facing challenges over the last couple of years on issues ranging from the media marketplace to big brands demanding more transparency and new deals in agency relationships. Sorrell himself pointed out that one issue impacting U.S. revenue was extreme competition in media buying although he added that pressure may have peaked.
The trend around big brands consolidating marketing and advertising efforts to a smaller number of agency partners should also help WPP according to Sorrell. He said the six main holding companies have advantages because of the benefits of scale that go beyond just media buying.
At the same time traditional agencies are facing more direct competition, both from brands taking marketing functions in-house as well as management consultancies building out business units that are moving directly into territory once reserved for agencies.
