WPP CEO labels group’s performance ‘unacceptable’ as it looks to SMEs
“Our recent performance is unacceptable.”
On Thursday, WPP reported a 5.9% decline in revenue less pass-through costs (the company’s way of reporting net revenue) to £2.5bn in Q3, issuing another profit warning for the full year.
In a statement accompanying the Q3 earnings release, CEO Cindy Rose candidly acknowledged the poor result, offering that she and her leadership team are “taking action to address this”.
The embattled holding group now expects like-for-like growth in revenue less pass-through costs of -5.5% to -6.0% in 2025. The company had previously forecast a -3% to -4% decline.
WPP’s global integrated agencies reported like-for-like revenue less pass-through costs were down 6.2% year on year, including a 5.7% decline for WPP Media (formerly GroupM) — a sequential deterioriation compared to Q2.
UK revenue less pass-through costs declined 8.9%, the worst of any region outside China (-10.6%). Revenue less pass-through costs was similarly down in North America (-6.0%), Western Continental Europe (-4.4%), and the Rest of World (-5.0%). In contrast, India (+6.7%) saw shoots of growth.
Analysis: Staking the future on AI
It is a challenging first earnings release for new CEO Cindy Rose, who began her tenure at WPP in September amid continued staff turnover and already-declining financial performance.
To help right the ship, Rose said WPP will focus on delivering “performance improvements” by positioning its offering to be “much simpler, more integrated, powered by data and AI, efficiently priced and designed to deliver growth and business outcomes for our clients.”
She continued: “We will significantly improve our execution, strengthening our go-to-market and dramatically simplifying how we organise ourselves internally, as well as building a high-performance team culture. We will expand our addressable market by pushing harder into enterprise and technology solutions. And finally, we will take a disciplined approach to capital allocation, with a focus on cost efficiency and maintaining a strong balance sheet while prioritising the parts of our business where we can deliver the greatest shareholder value.”
That is a lot to do, Rose admitted. “It will take time to see the impact, but in my first 60 days we are already moving at pace with some initiatives already announced and more to come.”
One such initiative the holding group is betting on is WPP Open Pro, “a groundbreaking new edition of its AI marketing platform” WPP Open.
Open Pro aims to put the group’s generative AI media planning, buying and creative tools “into the hands of a much wider array of businesses”. On WPP’s Q3 earnings call, Rose highlighted that the effort would “expand our addressable market and serve the long tail of smaller companies and emerging brands who may not be in the market for the sort of full-service offer that we typically provide to large multinational clients”.
In effect, this means WPP is — like many of the media owners it spends with — chasing after small- and medium-sized enterprises (SMEs). Such businesses have driven much of the total ad market growth in recent years, primarily by spending with Big Tech platforms like Google and Meta, which both reported double-digit earnings results in Q3.
Such a move was predicted by Media Leader columnist Omar Oakes, who suggested in May that the ad industry wrongly “keeps obsessing over whales” even as “the krill are paying the bills”.
However, as holding groups strengthen their ability to automate media strategy and creative development, it’s unclear why advertisers would choose a given agency over working directly with platforms that deploy similar tools or developing comparable in-house efforts.
As industry analyst and former WPP employee Brian Wieser pointed out in his Madison & Wall newsletter, Rose failed to provide details on “the specific competitive advantages of its tools vs. others in the market, nor of elements of the company’s go-to-market approach which would likely be required to encourage the product’s target customers to adopt such an offering”.
WPP has already lost a number of high-profile clients to competitors over the past year, and it’s not clear whether working with smaller businesses would fill such gaps.
Such clients have moved to competitors like Publicis Groupe, which reported 5.7% organic growth in Q3 and upgraded its full-year revenue growth forecast. Omnicom, which is slated to acquire Interpublic Group by the end of the year, also reported organic growth of 2.6% in Q3.
However, Wieser observed that spend from existing clients is likely down across major holding groups, with brands increasingly “shifting their billings directly to media owners while continuing to work with agencies in support of their campaigns”. He cited Publicis Groupe CEO Arthur Sadoun’s statement on its own Q3 earnings call that client spend was “not materially down”, which Wieser viewed as suggestive of a “slightly negative trend” despite client wins bolstering Publicis’ own organic growth.
Need for stability
WPP shares fell by over 12% in trading in response to its Q3 trading update. Year-to-date, WPP’s share price has fallen by over 62%, well below levels last seen during the 2008 global financial recession.
In a LinkedIn post, industry analyst Ian Whittaker advised Rose to ignore the share price and focus on WPP’s performance rather than “falling into the trap of ‘do something’ and rushing its decision-making.”
He also suggested that WPP “resist the temptation for more large-scale cost-cutting” and prioritise stability, warning that the scale of its ongoing media agency reorganisation is “arguably damaging its business”.
For Rose’s part, she insisted WPP has “strong foundations and the ingredients needed to succeed”, including long-standing, big-brand clients and “some of the most consequential agency brands in the market”.
This is even though the holding group has spent the past year consolidating those agency brands to better align with WPP Media CEO Brian Lesser’s streamlined vision of what was, until earlier this year, GroupM.
Since the spring, agencies including EssenceMediacom, Wavemaker and Mindshare have no longer operated as distinct businesses, and agency leaders were given new titles in September to reflect the change. However, the agency names live on as “client service brands” with “dedicated client teams”.