WPP Briefs Investors On Its Plans For The 'AI Age'

 

 WPP said today that its organic net revenue growth for full-year 2023 was about 0.9%, in line with earlier guidance, with an operating profit margin of 14.8%.  

The figures—a sneak peak at fuller 2023 results to be released Feb. 22—were revealed during an investor conference the company held today in London to provide an update on company activities and future plans as the industry transitions from the digital age to the “AI Age” as CEO Mark Read described the shift.   

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Another headline number—the firm has earmarked 250 million GBP for 2024 for additional investments in data and technology to support the company’s ongoing AI strategy. 

Like the other major holding companies, WPP has already invested hundreds of millions to scale AI throughout its organization. And it's working with all the key industry AI players like Nvidia, OpenAI, Microsoft and others. 

Publicis Groupe last week said it was investing 300 million euros over three years on efforts to create a “CoreAI” layer that would support all activities at the company. 

WPP has its own branded Al platform--WPP Open--which has been developed over the past two years, an effort led by Satalia, a UK AI company that WPP bought two years ago.  

Like Publicis’ CoreAI, WPP Open is being developed as a central part of the holding company’s offering that agencies throughout the company will be connected to. And it is being designed to serve the needs of every major client at WPP. Currently a handful of clients are utilizing it including The Coca-Cola Company, Ford and L’Oreal. It’s credited as being the decisive factor in winning the Nestle media account last year. Some 28,000 users are currently utilizing the Open platform within the holding company.  

Apart from AI, WPP has targeted efficiencies from ongoing streamlining programs that will produce structural and efficiency savings of around 300 million GBP over the next couple of years and accelerate the company’s organic growth. But that won’t happen overnight. The firm says that growth for 2024 will be in the range of flat to 1%. But in the next three to five years, Read said the firm is targeting 3%+ growth.  

The company, Read asserted, is far less complex than it was in 2019. Since then, WPP has retired 300 brands, 1,400 legal entities and 840 office locations, consolidating much of the staff into new campuses around the world.  

Now, 90% of the company’s business is generated by 6 brands including VML, GroupM, AKQA, Ogilvy, production network Hogarth, and PR giant Burson. “These brands are critical,” said Read. “We don’t need 500.” 

After months of integration planning, the merger of VMLY&R and Wunderman Thompson took effect on January 1. In a joint presentation at the investor conference CEO Jon Cook and President Mel Edwards told attendees the combination would generate 50 million GPB in savings.  

The main strategy behind the merger was to create a single brand with three core and integrated practices including brand experience, customer experience and commerce.  

Christian Juhl, CEO of GroupM told attendees that half of the $900 billion in annual global media spending is digital and most of that is programmatic. He likened GroupM’s task in that regard to high-frequency trading in the financial markets. Google and Meta, he added, control about 47% of the digital pie. “We have to be masters in those universes,” he said.  

Juhl touched on simplification efforts at GroupM, noting that from an investment and activation standpoint GroupM acts as “one company, one culture and one operating system...We go to market the same way for all of our clients,” utilizing the same platforms. 

The different brands, he added, drive growth by managing clients and conflicts. 

Juhl added that GroupM is focused on improving U.S. growth performance. He noted “refreshed” leadership with the recent appointment of Sharb Farjami as North America CEO. 

U.S. growth in 2023 was 3%, Juhl disclosed, noting that the region suffered some account losses. “It’s not a capability gap,” he said. Rather, the firm failed to communicate its story as effectively as it could have.  

During the Q&A portion of the event, Read was asked how clients would share in the efficiencies brought by AI. He responded by noting with scaled AI-driven production the company could produce “a thousand more assets at a thousandth of the cost” for a client. Some of that value would be shared with clients while “we keep some for ourselves.”  

He was also pressed to elaborate on the firm’s goal of “3%+” growth in the years ahead. The short answer, he replied, is that the company is committing to a minimum of 3% growth in the medium term. “We see a good opportunity ahead of us,” he added. “Maybe its 5%. Or more.” 


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