WPP plans to spend big on AI as it slashes costs and restructures in a bid to revive growth at the world’s biggest advertising group.
CEO Mark Read, at a market briefing, revealed the company’s next phase of its strategy, aiming for faster growth, higher margins and improved cash generation.
WPP says it will lead the industry through agencies AKQA, Ogilvy, VML, Hogarth, GroupM and Burson, representing close to 90% of WPP’s revenue less pass-through costs.
The big investment will be £250 million (AUD480 million) each year in AI, which WPP sees as “as an opportunity not a threat”.
The plan comes with cost cutting. WPP is seeking annualised net cost savings of £125 million (AUD240 million) in 2025, with 40% to 50% of that expected to be achieved in 2024.
But to achieve this, WPP estimates it will need to spend about £125 million this year.
WPP’s growth has been pulled back by account losses in retail and consumer packaged goods and cautious clients in the face of a technology downturn and an uncertain economic climate.
The company will announce next month 2023 results with like-for-like revenue growth, less pass-through costs growth, of 0.9%.
For 2024, the guidance is between flat to 1% growth.
The strategy is lift that to 3% growth in the medium term.
WPP lags most of its global peers in terms of revenue growth.
“While we had to navigate a more challenging environment in 2023, we see strong future demand for our services and are confident we can accelerate our growth over the medium-term,” says CEO Mark Read.
Much of WPP’s structural savings will come from the restructuring of its creative, public relations and media arms.
This includes the merger of Wunderman Thompson and VMLY&R to be known as VML starting this month, the industry’s largest creative company with more than 30,000 people in 64 markets.
And this month WPP announced combining communications agencies Hill & Knowlton and BCW to form Burson.
The “simplification” of GroupM includes streamlining operations and back-office functions.
WPP has a target of £175 million in gross savings from both back office and commercial delivery.
“The past three years have demonstrated the power of brands, creativity and investment in marketing to drive growth for clients and to build significant value,” says Read.
“Research demonstrates that those companies with the strongest brands deliver the highest returns to shareholders.
“AI is transforming our industry and we see it as an opportunity not a threat. We firmly believe that AI will enhance, not replace, human creativity.
“We are already empowering our people with AI-based tools to augment their skills, produce work more efficiently and improve media performance, all of which will increase the effectiveness of our work.
“We also see opportunities to sell new AI-driven products and services to our clients and to capture more growth in areas like production.
“Our long-standing investments in AI, including our AI-powered platform, WPP Open, and our acquisition in 2021 of Satalia, a leading UK AI company, are at the heart of our competitive offer.
“An ongoing annual investment of £250 in data and technology to support our AI strategy is included in our 2024 financial plans.”
WPP's strategy is through four pillars: Lead through AI, data and technology; Unlock the full potential of creative transformation to drive growth; Build world-class, market-leading brands; Execute efficiently to drive strong financial returns.
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