By DAVID EBNER
Thursday, September 13, 2018
Mark Read started at WPP in 1989 as Martin Sorrell was building the small company into what became the world's largest advertising firm.
Three decades later, Mr. Read has taken the helm of WPP after Mr. Sorrell, who had become the ad world's biggest name, departed in the spring during a personal-misconduct scandal. The London-born Mr. Read inherits a sprawling and struggling empire and faces the challenge of paring down the company, in part undoing what Mr. Sorrell built, as old-school conglomerates such as WPP and rivals Omnicom Group Inc. and Publicis Groupe fend off incursions from competitors.
The new players, Google and Facebook Inc., and now Amazon.com Inc., have massive scale and are trying to cut out the long-standing intermediaries such as WPP, with its advertising agencies, media buyers and array of services. Meanwhile, major advertisers such as Procter & Gamble Inc. have questioned the value they're getting from the likes of WPP and are looking at new ways of doing things. It's a two-front attack that WPP is losing.
Mr. Read has made "structural change, not structural decline" a refrain for his strategy to rally WPP - but he is warning investors of the pressure WPP is under.
"Amazon, Facebook, Google and Tencent, and Alibaba are competing for talent, competing for attention from clients - seeking more direct relationships - and disrupting our market," Mr. Read said last week on his second day as CEO, as WPP issued another weak quarter of earnings. The WPP stock took another blow and the shares are now down about 40 per cent from an all-time high in early 2017.
Google and Facebook controlled an estimated one-quarter of all global ad spending in 2017, up from one-10th in 2012. While the tech giants compete directly for ad dollars, a lot of money that goes to Google and Facebook comes from clients that still run their business through WPP. Mr. Sorrell a decade ago first called Google a "frenemy" of the established advertising world.
The WPP story, until recently, was one of consistent growth, alongside constant deal-making.
Mr. Sorrell in the late 1970s and early 1980s was chief financial officer of London ad agency Saatchi & Saatchi and led expansion of the firm through takeovers.
In the mid-1980s, he struck out on his own with WPP, a maker of wire baskets. Mr. Sorrell soon forged his name in two bigmoney hostile takeovers on New York's Madison Avenue, J. Walter Thompson and Ogilvy. The New York Times billed it as a London invasion of the American ad business and called Mr. Sorrell "a financial wizard who has never written a headline, drawn a storyboard or devised a media plan."
The WPP advertising, marketing and public relations conglomerate has more than 400 companies, employing 130,000 people, in 112 countries. But cracks emerged several years ago, as the move to digital ads from venues such as television and print intensified, and 2017 marked the first year that WPP's benchmark measure of sales fell outside of a recession. This year, WPP sales are up less than 1 per cent, and in North America, they are down 3 per cent.
"A lot of people have jumped to the conclusion that something is structurally awry," said analyst Tom Singlehurst of Citi in London.
Mr. Read's key problems are where Mr. Sorrell set the pillars of WPP, in the United States, and it remains the heart of WPP's business. American economic growth is strong, but WPP's operations are stuck in decline.
A worry for WPP is Ford Motor Co., which in the spring put its decades of doing business with WPP under review. A final decision has not yet been made, but Ford has already taken a step elsewhere, for a campaign this fall. Ford hired Wieden & Kennedy, an independent agency in Portland, Ore., best known for its work for Nike, including recent ads featuring former NFL quarterback Colin Kaepernick.
It's an example of brands rethinking how they have always done their marketing.
Another trend, said David Soberman, a marketing professor at the University of Toronto, is brands leaning toward smaller specialist firms with a digital focus and cheaper services, rather than an expensive conglomerate such as WPP.
"That's happening quite a lot, to the detriment of the big agencies," Prof. Soberman said. "The big agencies specialize in traditional media."
Mr. Read, 51, is not a Don Draper from the past century.
While he has been at WPP most of his career, his work has been defined by digital, from founding an online startup in 1999 when he was away from WPP, to his long tenure overseeing WPP's digital moves. In 2015, he took the helm of WPP's Wunderman, a digital agency, and retooled and revived the firm. Part of it included folding in other parts of WPP.
WPP has also made moves that reflect Mr. Read's strategy of paring back the sprawl. WPP in Toronto - which includes Taxi in advertising - comprises 19 locations downtown and employs more than 2,000. In July, WPP said it plans to bring it all together as the main tenant at the new Waterfront Innovation Centre that Menkes Development Ltd. is building.
"It will make it easier for our people to work together and give clients what they want," Mr.
Read said in July.
WPP directs about US$75-billion of ad money each year.
Among its clients are three-quarters of the Fortune Global 500 and all of the Dow Jones 30.
Those clients want it to be simpler, and cheaper, to work with WPP. It's another hurdle, said Alan Middleton, a marketing professor at York University who worked for WPP in its early days.
WPP is not a monolith but many silos, cousins who don't see themselves as family.
"Ogilvy people think of themselves as Ogilvy," Prof. Middleton said. "They don't think of themselves as WPP."
Tom Doctoroff, chief cultural insights officer at the brand and marketing consultancy Prophet, spent a quarter-century at WPP and was a long-time executive in Asia at J. Walter Thompson until 2016. He said Mr. Read has to win back the confidence of investors.
Mr. Doctoroff believes the conglomerate model will live on, because major brands need an array of services that deliver a unified voice.
"I don't see how you can do it," Mr. Doctoroff said, "with a million independent shops."
JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: WPP