WPP’s new chief executive, Mark Read, will consider grouping agencies together, rather than just merging them, as he seeks to simplify the holding company.
“I don’t think the task is bigger than I thought,” Read insisted to Campaign, after unveiling worse-than-expected Q3 results that showed a 1.5% slide in like-for-like revenues less pass-through costs, including a 5.3% plunge in North America.
WPP operated more than 160 agencies as recently as last year, and Read is expected to step up the work of his predecessor, Martin Sorrell, in slashing the number of agency brands.
Read, who has already merged VML and Y&R, is due to complete a strategic review in December. Last week, WPP said it is disbanding its WPP Health & Wellness brand and merging three healthcare specialist shops into marketing agencies. Sudler & Hennessey will be combined with the newly formed VMLY&R, creating the VMLY&R Health practice; Ogilvy CommonHealth will join Ogilvy; and ghg will merge with Wunderman, becoming part of Wunderman Health. The holding company expects to finish integrating the firms in the first half of next year.
Asked about speculation that he wants WPP to have only around 30 agency brands, he said: “We need to have fewer, stronger, more integrated companies, but we need to get to that in the right way.”
Read suggested that mergers are not the only option: “It could take a number of different forms, from an association to an alignment to something more structural, so we are looking at that broadly.”
He said he has “an impatience to move more quickly” but added that it was important to take a long-term view, so he is waiting until the strategic review before announcing bigger changes.
Read took interim charge in April but got the job officially at the start of September, when the group reported its best sales in five quarters. However, third-quarter results on October were a setback.
He said WPP has been “too slow” to change – without naming Sorrell – and pointed out that the group had lost a string of client accounts, including Ford, American Express and GlaxoSmithKline.
WPP’s share price has tumbled more than 16% from above £10.50 to around £8.75 since the third-quarter results.
Insiders said that the mood at the recent three-day strategy meeting in Brooklyn was positive, but some were surprised that their new boss was so bearish when addressing investors.
How does he reassure staff and clients?
Read said WPP must face up to the “realities” of its position and the latest results “strengthen our resolve” to shake up the group.
“We’ve got many fantastic people, assets, and resources within WPP. We just need to make it simpler and easier for clients to get access to,” he said.
“When I talk to clients, they want to see a successful WPP,” he added, promising to “invest more in creative talent,” “strengthen what we do technologically,” and “build a culture that attracts the best people to the group.”
Clients “are confident that we can do that and pleased we are addressing the issues and getting on with it,” Read said.
He pointed out that most of the recent account losses date back to reviews that began before he took charge and that WPP’s recent underperformance can be traced back to the start of 2017, following the loss of the Volkswagen Group and AT&T media accounts in 2016.
Turning around North America
Some observers have suggested that WPP’s leadership is dominated by Britons when North America accounts for more than 35% of group revenues.
“I do spend a lot of time in North America and many of the businesses are led from North America,” Read replied.
“If you look at the businesses that are doing well or the businesses not doing so well, there’s not a correlation between where the leadership is based or their nationality and the performance of the business.”
He admitted that WPP needs to invest in “stronger leadership,” particularly “creative leadership,” but pointed out the marketplace is changing because of what he called “the creative regionalization of North America.”
Read explained: “It’s no longer the case that Manhattan is the creative centre of North America.
“WPP has strong agencies like Swift in Portland and Deeplocal in Pittsburgh and David in Miami and AKQA in San Francisco and VMLY&R in Kansas City.”
It means “we need to think about where we invest” in different parts of the U.S.
Too soon to blame Brexit for U.K. slowdown
The U.K., WPP’s home market, suffered a surprise 2% drop in like-for-like revenues in Q3.
“I don’t want to blame it on Brexit,” Read said. “We’ve had a tougher quarter in a number of our businesses in the U.K. – creatively, in our insight business, in our media business.”
Read has warned that WPP’s creative agencies, in particular, are suffering but he played down suggestions by financial analysts such as Liberum Capital that the media buying operation, Group M, may also be coming under pressure.
“Our media business grew well in the quarter, perhaps a little bit softer than in previous quarters, but I don’t think there are significant problems in media,” he said.
Group M has had a mixed record in recent months, winning Mars and Adidas and losing American Express, HSBC, and some of GSK in the past six months.
Making technology more consistent
Stephan Pretorius, whom Read promoted to be WPP’s first chief technology officer, was said to have impressed colleagues when he spoke at the Brooklyn meeting.
“Historically, each of our companies has developed its own approach to technology,” Read said.
“At a time when clients want more integration of their work, we need to approach technology more from a group perspective… so that we can measure the impact of a piece of creative work, so we can target it effectively and measure its response.
“In terms of investment, we want to move from developing our own technology to a more agnostic approach and building technology in partnership with others.”
Given the scale of platforms such as Google, Adobe, and Salesforce, “our money is better spent applying intelligence to those platforms than trying to invest in more fundamental [WPP-owned] platforms,” Read said.
New senior leaders from the outside?
Read, who is parting ways with Paul Richardson, the long-serving finance director, said he wants to “build a new team.”
His first move has been to promote internal talent such as Pretorius.
“We want to make WPP a destination for the best talent in the world; that’s both people inside the group and outside the group,” Read said. “If there are fantastic people outside WPP, I’d love to hear from them.”
Some WPP insiders say privately that they are worried about how their own wealth has fallen as the share price has halved in 18 months.
One WPP ally said that, paradoxically, the low share price could attract some external talent because there might be an “upside” for “the first time in a long time.”s
This story first appeared on campaignlive.co.uk.