UPDATE: Sept. 26, 2018: WPP confirmed Wednesday morning that it is merging Young & Rubicam with VML to form a new agency called VMLY&R. "VMLY&R will be a powerful brand experience offering and a core agency brand for WPP," CEO Mark Read said in a statement. "VML and Y&R have distinct and complementary strengths spanning creative, technology and data services that make them a perfect match. This is an important step as we build a new, simpler WPP that provides clients with a fully integrated offering and easy access to our wealth of talent and resources."   

Dive Brief:

• WPP is reportedly planning to consolidate some of its major agencies, with the company's new CEO Mark Read saying he will unveil a strategy by the end of the year, The Wall Street Journal reports.
• Read has also said that merging creative and digital agencies may make the most sense. One possibility reportedly under consideration is the merger of Young & Rubicam and WPP's digital ad firm VML, sources familiar with the situation told the Journal. The move would put VML CEO Jon Cook at the head of the combined business, which could be called VMLY&R. WPP acquired Young & Rubicam in 2000 as part of a $4.7 billion deal. The shop has accounts including Office Depot and the U.S. Navy.
• WPP has not yet confirmed the Journal's report. However, sources close to the matter have said the VML and Young & Rubicam merger will likely be official soon, according to Adweek.

Dive Insight:

The possibility of a merger between Young & Rubicam and VML comes as traditional ad agencies have struggled with digital transformation, transparency and increased competition from smaller shops. However, it also marks a reversal by WPP's new CEO Mark Read, who previously said he would focus on better equipping creative agencies with digital capabilities, rather than merging the two types of agencies.

"I'm keener to build stronger creative agencies with digital capabilities than I am to think about merging creative agencies in a cost consolidation play," Read said earlier this month.

WPP's like-for-like net sales have declined for six consecutive quarters, according to the Journal. Young & Rubicam and other longstanding ad agencies have been growing more slowly than WPP's digital and media-buying groups, so the potential merger could help the company keep apace with the marketing industry's digital evolution. WPP has also reportedly discussed having its tech-savvy Wunderman work with creative agencies to craft relevant ads based on data.

This report comes as more companies are bringing marketing functions in-house or turning to smaller agencies to better compete in a digital ad market dominated by Facebook and Google. The number of advertisers with in-house agencies has jumped from 42% to 64% over the past decade, according to new Forrester and In-house Agency Forum research. Advertisers said knowledge of the brand and business, along with cost-effectiveness and speed, were the main advantages for internalizing their marketing operations.

Along with declining growth, WPP has struggled to hang onto several major accounts. Automaker Ford put part of its ad business up for review in April, after decades with WPP. In May, American Express put its global media business up for review after 20 years of working with WPP's Mindshare agency, and HSBC said it was moving its estimated $400 million global media business from Mindshare to Omnicom's PHD. But in August, Mondelez brought WPP's GroupM into its group of agencies it works with, and confectionary giant Mars also tapped GroupM for consolidated media planning and buying functions.