WPP, whose latest profit results continue to feel the drag of a contraction in advertising spend by technology clients, sees an improving trend.
Spend by technology clients was down 9% in the March quarter compared to the same three months last year.
“As we talk to those clients, I'd say we do see stability in their spend,” CEO Mark Read told a briefing of analysts. “I think we expect that to turn positive over the course of the year.”
WPP reported like-for-like revenue less pass-through costs down 1.6% to £2.687 billion in the March quarter.
Read wouldn’t commit to saying which quarter technology spend would lift but was confident of improvement this year.
“Our first quarter performance, while not as strong as we would like, was very much in line with our expectations,” he said.
The result should be seen against a tough comparison to last year and driven by continued pressure from technology clients and the impact of client losses in 2023 and going back to 2022, he said.
“That said, we do see momentum improving,” he said.
“Over the rest of the year, we expect technology clients to turn from a negative in Q1 (March quarter) to a positive over the course of the year.”
The impact of budget cuts will tail off and WPP has a strong new business pipeline.
Read said client sentiment was relatively similar to how it was three or six months ago.
However, he sees more desire to invest in brand rather than tactical marketing.
He said clients feel they're invested too much in performance and product marketing, but not enough in brand.
“I’m detecting in quite a number of clients a desire to refocus some of their marketing on brand,” Read said.
“It's harder, because a lot of those channels don't exist in a straightforward way, as it was.
“But I think there is that desire.”
Read said the impact of AI is being seen in conversations and discussions in meetings with clients.
WPP has committed to invest around £250 million a year in AI.
“And that's largely been delivered through WPP Open and as the platform gets more intelligently developed, more AI components into it, that will naturally get embedded into the workflow,” Read said.
He sees revenue growth opportunities from expanding services, increasing the scope of work.
“I think that clients, particularly large clients, are going to look to simplify their rosters to deploy AI across them,” he said.
“There will be ways where we can use AI to improve our efficiency and some of that will return to the bottom line and some of it will be to be invested back into the operation.
“I think the short term impact is largely going to be on how we use it to make us more competitive .. business pitches and in our work for clients.”
With clients the conversation about AI has been broad.
“We're having them at a CMO and increasingly a CEO level as they think about how it can impact their business,” Read said.
“I would say that clients are looking for AI to solve some challenges they have. How do they produce content at scale across all the channels they need to produce?
“But they're also looking at opportunities to reach consumers with more relevant messages and use data in a more integrated fashion. How do they speed up the way that they work? How do they reduce the cost of approvals?”
Read also said WPP’s new structure is making the group more agile and competitive
On restructuring, WPP reported “really good progress, and strong execution” by creative unit VML, public relations at Burson and media at GroupM.
WPP is seeking annualised net cost savings of £125 million (AUD240 million) in 2025, with 40% to 50% of that expected to be achieved in 2024.
Burson -- the combination of communications agencies Hill & Knowlton and BCW -- will largely be completed by mid year.
GroupM, with its so-called accelerated evolution” was a “more complicated initiative, according to CFO Joanne Wilson.
“That will go into the second half,” she said.
However, she said the program was on track.
“Of course, you don't enter into initiatives like this without some disruption,” she said.
“But I have been incredibly impressed at how quickly the team has executed and the CEOs of those agencies and their leadership teams are spending as much time, if not more, with clients as they ever would. And so the disruption really on the client business side is minimal.”
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