GroupM, which has recently come up against business headwinds, is about to undergo some serious restructuring globally, or as parent WPP puts it, simplifying the offer.
To get an idea at the motivation, look at WPP’s already announced merger of Wunderman Thompson and VMLY&R to create the world’s largest creative group, VML.
The move will bring cost savings as well as the promise of more revenue from clients.
WPP wants around GBP 100 million of savings, via the changes on the creative agency side plus the streamlining and "the continued evolution" at GroupM.
The global advertising group says the aim is to "strengthen our competitive offer, simplify our business and benefit from scaled technology platforms".
In August, GroupM's Finecast, Xasis and Sightline brands were retired.
Now client-facing agencies will be supported by common products and a single technology platform, streamlining operations and back-office functions.
September quarter results just announced by WPP show the global advertising group's media business in a bit of a lull.
GroupM grew just 1.6% in the quarter. The issue is the US with "low-single digit growth" the result of lower spend from technology clients and the impact of client losses in retail and consumer packaged goods.
“We had a tough few months,” CEO Mark Read told analysts in a briefing about September quarter results which showed disappointing top line revenue growth, with "more impact from this felt in GroupM".
The US has been hit by a slight headwind.
“But there is a strong pipeline and a lot of opportunities,” he says.
“And we have had success. We lead the new business table in media in Asia. We’re in a very good position in the new business table in media in Europe.
“I will point out that all these new business tables primarily are really just applied to media, which is only about 37% of our business.
“From a GroupM perspective, I'd say the changes are underway. We start to address those issues in North America.”
Read has promised a “full meat and potatoes” presentation in January, explaining what's happening at GroupM.
Thomas Singlehurst, head of European media equity research at Citigroup, asked Read about whether or not the changes would mean better revenue prospects, given that clients were being brought under one roof at VML.
“I think that the world is changing rapidly and I think that scale matters in marketing more than it did one year ago or five years ago,” says Read. “So I think further action was needed.”
Read says the two creative companies are complementary.
“The reaction from clients has been very interesting,” says Read.
“They're keen to see what new capabilities they can have access to because … they're similar but somewhat different in terms of their strengths.
“And I think that it will enable us to get our hands around those clients, bring them new capabilities and have different conversations, a chance for clients to reevaluate the work that they do in an environment where clients are looking to simplify their own relationships.
“I think it puts us in a stronger position.”
Read didn’t want to talk about the revenue benefits.
“But I would say that it is intended to bring revenue benefits … we'll see improved new business performance,” he says.
“I would stress that we're doing this to make the offer more competitive, support stronger revenue growth.
“But there are cost savings … at least 100 million pounds will come back … those are net savings, rather than gross savings.”
A slide from WPP's presentation on September quarter results to market analysts:
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