• by Joe Mandese , February 24, 2006

WPP Group Friday reported better than expected fourth quarter and full-year 2005 results and a positive outlook for the year ahead largely on the strength of its media planning and buying services, especially in digital media.

"Media investment management was again the fastest growing part of our business," WPP said, reporting organic revenues of $5.9 billion, an increase of 5.5 percent over 2004, and higher than Wall Street expectations.

WPP, the parent of MediaCom, Mediaedge:cia, and MindShare, said its advertising and media investment management revenues rose 29 percent over 2004, reflecting the acquisition of Grey Global and its MediaCom unit. On a like-for-like basis, those revenues grew 4 percent.

Direct and interactive revenues now account for more than 15 percent of WPP's total revenues, averaging about $10 billion for the year. Of that, Internet-related revenues represented about $500 million, or about 5 percent of WPP's total revenues.

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

WPP said the main drivers of this shift continue to be "network television price inflation," "declining audiences," and "fragmentation of traditional media."

Following the company's earnings release, CEO Martin Sorrell, told CNBC that WPP still has an aggressive acquisition strategy, but is likely to focus on smaller deals in new media and emerging markets. He indicated WPP is still interested in both VNU's assets, and in the Aegis Group, but implied the market value of VNU is too high, and that Aegis would only go into play if its largest shareholder, French investor Vincent Bollore, opts for that.