Digital Takes Bigger Slice Of Shrinking WPP Pie, Now Accounts For 25%

Digital and direct marketing related services now account for 25% of WPP Group, the owner of GroupM, Outrider, 24/7 Real Media, and media shops such as Mindshare, Mediaedge:cia and MediaCom, the company reported in a first half earnings statement released early this morning.

With $1.7 billion in first half digital and direct related revenues, WPP said it projects an "annual run rate" of nearly $3.5 billion in digital/direct revenues. Digital media and advertising services, however, appear to be taking a greater slice of a shrinking WPP pie. Impacted by the continuing effects of the global economic recession, WPP's first half revenues declined 2.9% to $6.4 billion during the first half of 2009 on a "reported" basis. On a like-for-like basis, total revenues have declined 8.3% vs. the first half of 2008.

While WPP doesn't break out the proportion of digital revenues within its discrete operating units, it did say that its traditional advertising and "media investment management" businesses were among the hardest hit of the entire group due to the effects of the recession.

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"On a constant currency basis, advertising and media investment management revenues fell by 7.5%, with like-for-like revenues down 7.8%," the company said, citing the impact of the "worsening economic situation, with significant severances in the first half, particularly in Western Continental Europe, reducing operating margins by over 2.0 margin points."

Among all of its communications services, WPP said its "branding & identity," healthcare and specialist communications (including direct, Internet and interactive) were least affected.

"The pressure continued on the group's advertising, media investment management businesses, with clients, given the current economic climate, seeking greater and greater value and economies. Media investment management came under greater pressure in quarter two. Public relations and public affairs also saw some deterioration compared with the first quarter. Consumer insight, as in the first quarter, was most affected by the recession at the revenue level, although not at gross margin," the company disclosed.

Looking ahead, the company said that as the recession begins to abate, it plans to focus it strategy on growing its digital communications services, as well as consumer insights, and on the fastest growing geographic markets.

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