WPP is used to being the darling of the City. Although Sir Martin Sorrell's ridiculously high pay packet prompts an annual shareholder revolt that typically goes nowhere, the holding company is about as reliable a performer you could ever hope for in adland.
Until today. Its share price slumped 11% as London opened this morning after it admitted growth would languish between zero and 1%, significantly below expectations. The main reason was pretty fundamental. Clients are spending less money, they're thinking more short-term, and zero-based budgeting is becoming more common. That was the message on the morning call with analysts and reporters this morning.
It differed from Sir Martin Sorrell subsequently telling Sky that the "cancer" and "killer" that is Brexit was a major factor because the uncertainty it creates is hard to deal with. The WPP announcements earlier also did not reference a deterioration in the relationship between Trump and big business, which Sorrell also referred to with Sky as part of the poor business background against which these figures should be presented. He even mentioned Charlottesville on Sky News, which seemed a reach for a Chairman trying to account for poor figures up to and including the end of the second quarter.
However, it should be pointed out that Sorrell is a big thinker and whenever I've seen him speak, he does not dodge direct questions but will always bring in thoughts from a global perspective. So this isn't so much diversion, I think, but rather how he talks and thinks. A point is made and references to other situations and observations are quickly assimilated in to that view.
The truth is that all of these factors are playing a part, and it's a natural tactic for the iconic head of any company to praise their people and strategy when things are going well and attribute poor figures to an economic and political background they can do nothing about.
However, the writing has been on the wall for quite some time for agencies and the massive holding companies that collect them. It's not the end -- of course it isn't. Revenue is only marginally down, and an 11% drop in share price will soon be corrected. No, this is a reflection that the adland scene has changed.
Brands want to do more with less. That's the clear takeaway from the mega spenders such as Unilever, P&G and Mondelez. They are all committed to slashing rosters, pushing through double-digit budget savings and sweating assets by making the same content do more and run for longer.
Zero budgeting is also catching on. Marketers are increasingly being asked to come up with plans for what they need to do and budget for it, in the hope that funds are forthcoming. The day of automatically getting budgets renewed with a bit extra for inflation each year are now seriously challenged.
At the same time, nearly half of the huge spenders surveyed recently by the WFA are investing in upping their game internally and 70% have switched media agencies to gain more control and transparency.
Brands are taking the front foot. They want more control, they want marketing to think like finance and justify budgets and they want to achieve a lot more with less.
All these factors have been in the post for a while, but it appears that they are now beginning to land on the holding companies' doormats. It's unlikely that WPP is the only giant that will be affected. In fact, it dropped a massive hint that it believes rivals have been buying business by reducing rates to ensure contracts and retainers are renewed. This, it claimed to reporters, will come home to roost for rivals.
To be fair, WPP has a point. This isn't personal. This is the way the market is going. More for less with accountable, justified spending plans. So it will be interesting to see if, and when, other holding companies report any effects.
The days of massive retainers set to auto renew are coming to an end, and it's hard to imagine these latest figures from WPP are an isolated one off.