Improving market conditions are encouraging advertisers to increase spending with the result that WPP, one of the world’s leading communications services groups, is “climbing further out of the bath”, the company said today.
WPP announced record third quarter revenues in excess of $1 billion and intimated that the second half of the year is looking stronger than the first half (see
WPP Enjoys Healthy Third Quarter).
Chief executive Sir Martin Sorrell has used a bath tub analogy to explain the nature of the ad economy. A marked decline was followed by a long period of flat growth and only now is the market proceeding on an upward curve (see Ad Market Begins To ‘Climb Out Of The Bath’, Says WPP).
“There is evidence of clients switching their attention from three years of cost management to top-line revenue growth,” WPP said in a trading update.
However, growth is occurring at different rates across the globe. The North American market has not only stabilised but has started to pick up with accelerated rates of growth in each of the last four quarters.
According to WPP, the United Kingdom is still heavily affected by the recession and business is better in Continental Europe. Asia Pacific, Africa and the Middle East has experienced consistent revenue growth in 2003 and Latin America has shown a significant improvement. However, this was largely due to weak comparables, particularly in Brazil and Argentina.
There is widespread optimism about 2004 with the US presidential election, the Athens Olympics and the European Football Championships likely to stimulate advertising. Sorrell has already predicted that US advertising and marketing growth will be at the top end of a 2-4% range (see WPP To Prosper From Advertising Resurgence) and there should be knock-on effect in other economies.
The longer term outlook is not entirely bright. In particular, WPP has warned that government deficit spending on both sides of the Atlantic could lead to inflation in 2005. There are already signs of this in commodity prices, the long-end of the bond market and gold prices and a returned incumbent or new US president may have to take corrective action.
