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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
When Sir Martin Sorrell, the dominant leader of the advertising group WPP, resigned in 2018, after an investigation into his conduct, he reflected fondly on his rise to the top of the industry. “We have weathered difficult storms in the past. And our highly talented people have always won.”
His quiet successor, Mark Read, must hope that this faith will be rewarded again, and soon. While WPP struggles with stable sales following a corruption scandal in China and the setbacks in the United States, Publicis is moving forward. Ten years ago, WPP was twice the size of its French rival in terms of market value – and more valuable than Omnicom or Interpublic Group – but the situation has reversed.
It was a major debacle for Britain’s advertising champion, masterminded by Sorrell with the acquisition of Madison Avenue brands including J Walter Thompson and Young & Rubicam. Sorrell loved to prick Maurice Lévy, the former head of Publicis – there is no such pleasure for Read. He was painfully foiled by Arthur Sadoun, who runs Publicis.
Read and WPP are now vulnerable. Its turnover remains higher than that of Publicis, but its timid growth gives it a much lower valuation, with some hedge funds selling its shares short. It could become an acquisition target, having already sold assets to reduce its debts. Philip Jansen, former BT Group chief executive, will have a lot to consider when he takes over as chairman in January.
Since leaving WPP, Sorrell has hardly excelled. The value of its S4 Capital ad group has fallen a long way after several profit warnings. But it casts a long shadow: WPP still attributes part of its difficulties to having to unravel its creation. He ruled a sprawling empire by sheer force of his personality, while Read embarked on a long march to introduce conventional controls.
Read did not remain idle, although much of his time was devoted to simplifying WPP. It closed 840 offices, unified back-office technology and made more than 90 divestitures, including that of Bet of 767 million dollars within the communications agency FGS Global. It has also integrated some creative agencies, including JWT and Y&R, into digitally-led groups.
But executives are not rewarded for their efforts, and although WPP now looks more rational on a PowerPoint slide, it has been outmaneuvered by Publicis. This is partly because Publicis gets more of its revenue from the US, while WPP is exposed to tougher markets. It also reflects the fact that Publicis continued to expand while WPP retrenched.
Crucial deal with Publicis was for its $3.9 billion deal acquisition five years ago from Epsilon, an American digital agency that allows advertisers to target consumers with precision. Epsilon holds data such as email addresses, demographics and spending habits of 235 million U.S. consumers. Instead of trying to reach general fitness enthusiasts, for example, advertisers can reach millions of people individually.
This has a scary side (Epsilon insists that all its data was collected voluntarily). But that’s where the industry is headed: IPG’s $2.3 billion acquisition of digital agency Acxiom followed a similar logic. Media buying agencies that manage advertisers’ campaigns, like Publicis’ Starcom, need more data to tackle larger technology platforms like Google and Meta.
WPP’s media division, Group M, is the industry’s largest, but it lags behind Publicis in the United States and Read replaced its chief executive in July. WPP’s creative agencies have also underperformed, losing a major contract with Pfizer in 2023 and suffering a decline in revenue this year. A lot depends on the battle for big accounts; there was some relief recently when Group M retained the Unilever business and won an important Amazon mandate.
Following a charismatic leader identified with a company is difficult, as Jeff Immelt found when he succeeded Jack Welch at GE. Things at WPP aren’t that bad and if Read feels the pressure he doesn’t show it. He remains respected by WPP clients and tries to draw attention to the new AI Platform to plan and create advertising campaigns.
But Sorrell is long gone, and investors are looking to the future, not the past. Despite its asset sales, WPP remains more indebted than Publicis and has not found a growth engine like Epsilon. Unless it finds new momentum, it risks losing control of its destiny in a sector where old rivalries persist.
Fortunes can change in the advertising industry. Publicis itself was in disgrace a few years ago, experiencing weak growth as it tried to absorb acquisitions and restructure. It ultimately worked and Read’s reforms could work too. But it must happen soon.
