WPP Finds Rising Cost Of Network TV Forces Advertisers To Alternative Media

WPP this morning released its financial results for the year ended 31 December 1998 (see WPP Reports 1998 Pre-Tax Profits Up 20%). In its review of 1998 business operations, the global media group notes that the cost of network television, the primary advertising medium, continues to rise by as much as 5-10% per annum on both sides of the Atlantic. WPP believes that this is caused partly by increased pricing by an oligopoly of media owners and partly by a decline in network audiences.

As a result of this TV inflation, many advertising clients are experimenting with alternative, lower cost media. “Non traditional alternatives will continue to grow faster, particularly with the fragmentation of traditional media and the rapid development of new technologies,” says the WPP statement. These findings echo the results of research conducted by the Radio Advertising Bureau which showed that advertisers may turn to lower cost media, such as radio, if network television price inflation continues at the current rates (see Advertisers Feel TV Is Becoming Prohibitively Expensive, Finds RAB Research).

1998 was the first year in which WPP’s non-media advertising activities accounted for over half of the group’s revenues. These activities include information and consultancy, public relations and specialist communications. Advertising, media planning, buying and research accounted for 49.6% of WPP’s revenues. These activities, run through WPP’s J. Walter Thompson and Ogilvy & Mather agencies, rose by a combined 8.1% last year. JWT generated net new billings of £226 million and O&M Worldwide £212 million. MindShare generated net new billings of £478 million.

The internet is starting to take its place strongly in WPP’s activities. In 1998, internet and internet-related billings totalled approximately £75 million, with ad revenues coming in at around £37.5 million or 4%.

WPP is keeping its 1999 growth predictions fairly conservative in line with recession forecasts and the instability in the Asia Pacific and Latin America economies. Predictions expect like-for-like year on year revenue increases of over 4%. Data for January 1999 so far shows a year on year increase of over 6%.

WPP: 0171 408 2204 … http://www.wpp.com/