WPP: 'Armageddon' Averted as Ad Company Hits Optimistic Notes

Reports Third-Quarter Revenue Down 8.7%; Sorrell Bullish on Branding and Identity, Health Care, Specialist Communications for 2010

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NEW YORK (AdAge.com) -- Noting that consumer and corporate confidence has "somewhat" recovered from the "panic levels" they hit at the end of 2008 and the beginning of this year, WPP, the world's biggest advertising company said its third-quarter revenue dropped 8.7%, to $3.3 billion, compared to the year-ago period.

On a constant currency basis, the group actually posted a growth in revenue of 7% for the quarter and 8% for the first nine months of the year due mainly to the acquisition of Taylor Nelson Sofres. Describing overall conditions as "less worse" and that it appeared an "Armageddon" had been averted, the message was definitely a more positive one than back in August, when WPP reported a 47% drop in profit for the second quarter. But it did remain cautious and said in its earnings statement that while the "hearts of CEOs and CMOs are stronger and their minds clearer, increased confidence is still not transferring to their check-writing hands" and that brand investment was still in check, especially in the West.

The U.K. company's agency roster includes creative shops Ogilvy & Mather and JWT; media agencies Mindshare and Mediaedge:cia; direct shop Wunderman; and PR agencies Burson-Marsteller and Hill & Knowlton. WPP's results fall in line with its competitors: Paris-based Publicis Groupe also saw single-digit declines in organic growth; Interpublic Group of Cos. reported a net loss of $35.8 million for the first nine months; and Omnicom Group saw a third-quarter drop in net income of about 22%.

In terms of U.S. dollars, WPP's advertising and media-investment-management services sector took the biggest hit the quarter with a revenue drop 15.2%; PR and public affairs declined 10.8%; and branding and identity, health-care and specialist communications, which include direct marketing, internet and interactive, dropped 9.6%. Its consumer-insights division, however, saw growth of 86%. For the year, revenue from direct, digital and internet represents 26%, or $2.6 billion, of WPP's revenue.

On an earnings call with analysts and media this morning, WPP Chief Executive Martin Sorrell noted that branding and identity, health-care and specialist communications functions were positioned to have a bigger impact in 2010 than advertising, media investment management and public relations and public affairs, as digital and interactive components drive those specialties. He was also bullish on consumer insights, saying that "in the long term consumer insight is fundamentally important to our clients." Overall, Mr. Sorrell noted that those nontraditional areas "will tend to do relatively better as we go into 2010."

On a regional basis, revenue growth was negative across the board, including North America down 6.3%, U.K. down 9.0%, western Continental Europe down 12.5%; and Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe down 8.3%.

Since the beginning of the year WPP has let go more than 11,000 people, bringing its total number of employees to 101,333 compared to the 112,565 it had at the start of the year.

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