• by Steve McClellan  @mp_mcclellan, October 31, 2014

WPP reported a 3.1% gross revenue gain for the third quarter to about 5.5 billion British Pounds with organic gross revenue growth of 7.6%.

By comparison MDC Partners recently reported Q3 organic growth of 8.3%, surpassing Omnicom's 6.5% organic growth, IPG's 6.3%, and Publicis Groupe's 1%. 

Net revenue at WPP, however, was down 1.2% while organic net revenue growth was 3.0%, which both the company and analysts say provides a more realistic picture of the firm’s performance.

The holding company started breaking out both gross and net revenue figures earlier this year in an effort to “more accurately show underlying trends” given growing increases in the amount of on-line inventory the company buys on its own behalf and resells to clients as well as increasing “pass-through costs for data investment management.”  

On a call with analysts Friday, WPP CEO Martin Sorrell urged other holding companies to provide similar breakouts and not just the gross revenue and organic growth figures they currently provide.

WPP said that its audience buying operation, Xaxis, bought about $1 billion in media for resale to customers during the quarter and will record approximately $75 million in net sales for each quarter of 2014.

“The third quarter got tougher,” said Sorrell. “There was a lack of demand,” he added, which was attributable at least in part to rising geopolitical turmoil. While the U.S. and the UK have shown strong signs of recovery from the recession, “there are signs of stagnation in Europe,” Sorrell said.

Sorrell also noted that pricing pressure is intensifying on traditional media, citing data indicating that TV accounts for about 45% of media outlays while consumers spend just 38% of their total media time watching the tube. The debate rages on, he said, about the long-term impact that the market-share/time-spent gap will have on the medium.

Increasingly, Sorrell said the company is packaging both its GroupM-led media investment management offering with Kantar-led data management investment capabilities to both pitch business and service accounts.

He said that a recent investment in Rentrak was designed to help that measurement service expand globally but that WPP was not currently considering increasing its stake beyond the current 17%.

And a recent agreement with AppNexus would help the company adjust its technology platforms as new developments emerge while remaining media “agnostic.”

Year-to-date, WPP reported $5.7 billion in net new business wins, $3.9 billion of the total attributed to media assignments.

Looking ahead, Sorrell said WPP expects to achieve its stated goal of 3% organic net sales growth or better for the year. As for 2015: “It will be similar or better than what we have seen this year industry wide.”

Commenting on the results in a note to investors, Pivotal Senior Research Analyst Brian Wieser wrote that “WPP’s 3Q14 results were slightly soft on the top-line, but other factors including solid margin expansion, less negative [currency fluctuations], as well as favorable interest expense and working capital trends roughly balance out. We remain positively disposed towards WPP’s coming year given recent new business trends and best-in-class strategic positioning.”