• by Joe Mandese  @mp_joemandese, February 25, 2005

WPP Group, the world's second largest advertising holding company, Friday reported strong 2004 results and indicated a relatively positive outlook for the near- and long-term advertising marketplace, thanks largely to contributions from new forms of media and marketing services. The company also indicated plans to continue to diversify into non-traditional advertising services, especially marketing research, announcing a bid to acquire NOP World, a marketing and media research company that United Business Media recently put on the block.

While WPP is known for operating ad agencies like J. Walter Thompson and Young & Rubicam, and media shops like MindShare and Mediaedge:cia, it has become a significant player in the research business, which has been among the fastest growing segments and most stable areas of WPP's operations during the past few years. WPP's bid for NOP World, which measures TV, radio and magazine audiences, was not disclosed, but analysts have estimated United Business Media could fetch more than $600 million for the unit.

Last year, WPP formed a joint venture with VNU, the parent of Nielsen Media Research, which has also been on the prowl to acquire new research businesses. The venture, which combined WPP's AGB Group with Nielsen's non-U.S. TV ratings operations, is known as AGB Nielsen Media Research, and provides TV ratings in 30 countries. Research accounted for only 16 percent of WPP's revenues in 2004, but was among its fastest growing sectors, and the company indicated it plans to continue to diversify beyond its core advertising and "media investment management" businesses, which accounted for 47 percent of WPP's revenues.

"Network television price inflation and declining audiences, fragmentation of traditional media and rapid development of new technologies continued to drive experimentation by our clients in new media and non-traditional alternatives," the company said in its 2004 earnings report, noting that non-traditional marketing services now account for 54 percent of its revenues. An especially fast-growing, though still relatively small sector has been online media, which accounted for $400 million, or more than 5 percent of WPP's revenues.

"This is in line with over 5% for on-line media's share of total advertising spend in the United States and approximately 4% share worldwide. The new media continue to build their share of client spending," the company said.

The company said it emerged from "some 36 months of unrelenting economic battering" in 2004, a year in which total reportable revenues rose nearly 5 percent to $8.2 billion.

Advertising and media buying demonstrated a significant turnaround within that, with revenues rising 10.8 percent, including WPP's acquisition of Cordiant. On a pro forma basis, revenues for the sector rose more than 3 percent thanks largely to new billings growth. During 2004, MindShare and Mediaedge:cia generated more than $5 billion in new media billings.

"Our media investment management businesses started to improve in October 2002, and then significantly from April 2003. This growth continued for the remainder of 2003 and escalated during 2004, primarily driven by the strong new business wins, in turn driven by client consolidation," the company reported, adding that advertising has followed a similar trend, but "less strongly."