Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
When Sir Martin Sorrell, the dominant leader of the WPP advertising group, resigned in 2018 after an inquiry into his conduct, he reflected fondly on its rise to the top of the industry. “We have weathered difficult storms in the past. And our highly talented people have always won through.”
His lower-key successor, Mark Read, must hope this faith is rewarded again, and soon. While WPP struggles with flat sales following a bribery scandal in China and setbacks in the US, Publicis is powering ahead. A decade ago, WPP was twice the size of its French rival by market value — and more valuable than Omnicom or Interpublic Group — but that has been reversed.
This is quite a comedown for the UK advertising champion, thrown together by Sorrell with acquisitions of Madison Avenue brands including J Walter Thompson and Young & Rubicam. Sorrell enjoyed needling Maurice Lévy, Publicis’s former leader — there is no such fun for Read. He has been painfully outmanoeuvred by Arthur Sadoun, who heads Publicis.
Both Read and WPP are now vulnerable. It still has higher revenues than Publicis but tepid growth has given it a far lower valuation, with some hedge funds shorting its shares. It could become an acquisition target, having already shed assets to reduce debts. Philip Jansen, former chief executive of BT Group, has much to consider when he takes the chair in January.
Since leaving WPP, Sorrell has hardly excelled. The value of his S4 Capital ad group has fallen a long way after several profit warnings. But he casts a long shadow: WPP still places some blame for its troubles on having to untangle his creation. He ruled a sprawling empire by sheer force of personality, while Read embarked on a long march to introduce conventional controls.
Read has not been idle, although a lot of his time has been devoted to simplifying WPP. He has shut 840 offices, united back office technology and made more than 90 disposals, including its $767mn stake in the communications agency FGS Global. He also folded some creative agencies, including JWT and Y&R, into digital-led groups.
But chief executives don’t get marks for effort, and while WPP now looks more rational on a PowerPoint slide, it has been outsmarted by Publicis. That is partly because Publicis gains a higher share of revenues from the US, while WPP is exposed to tougher markets. It also reflects the fact that Publicis kept expanding while WPP retrenched.
One crucial Publicis deal was its $3.9bn acquisition five years ago of Epsilon, a US digital agency that allows advertisers to target consumers with precision. Epsilon holds data such as email addresses, demographics and spending patterns for 235mn US consumers. Instead of trying to reach fitness fans in general, for example, advertisers can speak to millions individually.
This has a spooky side (Epsilon insists that all of its data was gathered voluntarily). But it is where the industry is going: IPG’s $2.3bn acquisition of the digital agency Acxiom had a similar logic. Media buying agencies that handle campaigns for advertisers, such as Publicis’s Starcom, need more data to take on larger technology platforms such as Google and Meta.
WPP’s media division Group M is the industry’s largest, but it has lagged in the US against Publicis and Read replaced its chief executive in July. WPP’s creative agencies have also underperformed, losing a large Pfizer contract in 2023 and suffering a fall in revenues this year. A lot rests on the battle for big accounts; there was some relief recently when Group M retained Unilever’s business and won an important Amazon mandate.
Following a charismatic leader who was identified with a company is difficult, as Jeff Immelt found when he took over from Jack Welch at GE. Things at WPP are not as bad and if Read is feeling the pressure, he does not show it. He remains respected by WPP clients, and is trying to draw attention to WPP’s new AI platform for planning and creating ad campaigns.
But Sorrell left long ago and investors look forward, not back. Despite its asset sales, WPP remains more highly leveraged than Publicis, and it has not found an engine of growth like Epsilon. Unless it regains momentum, it is at risk of losing control of its destiny in an industry where old rivalries linger.
Fortunes can change in the ad business. Publicis was itself out of favour a few years ago, experiencing weak growth as it tried to absorb acquisitions and restructure. That worked eventually and Read’s reforms may work too. But it has to happen soon.
john.gapper@ft.com
