These 5 trends defined a turbulent year for the world's biggest advertising company, WPP


FILE PHOTO: Mark Read, chief executive of WPP, leaves following the AGM in London, Britain, June 13, 2018. REUTERS/Toby Melville/File Photo

  • WPP and its holding company rivals faced significant headwinds going into 2019: Clients cut budget and digital ad buys dominated by Google and Facebook overtook traditional channels for the first time.
  • To counter these trends, WPP restructured its most valuable property, media-buying network GroupM.
  • WPP merged several properties and closed some small agencies in the US.
  • It also sold a majority stake in market research firm Kantar to Bain Capital for around $4 billion and sued to recover money lost in a previous acquisition.
  • WPP tried to grow new revenue streams with a division that helps clients take their marketing work in-house.
  • And while WPP won several pieces of new business this year, it also lost business with longtime clients Johnson & Johnson and Kimberly-Clark. 
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2019 was filled with dramatic changes for the advertising industry. Spending on digital ads overtook traditional media like print and broadcast TV for the first time in the culmination of a yearslong trend as Google, Facebook, and now Amazon command an ever-larger share of big brands’ budgets.

Mergers and acquisitions continued apace. Most prominent were the consulting firm Accenture buying creative agency Droga5 for about $450 million and holding company Publicis Groupe paying $4.4 billion for data management firm Epsilon.

WPP still dominates the ad world as the biggest holding company, and that scale brings attendant challenges: The company’s stock has lost about 45% of its value since its all-time high in 2015.

CEO Mark Read took a number of significant steps over the past 12 months that offer an overview of the ad industry’s ongoing evolution as his three-year plan to streamline the sprawling global network takes shape.

He restructured the company’s most valuable property: WPP just announced a big shake-up at its giant ad-buying network, GroupM

Read shook up WPP’s most important network, GroupM, in July by promoting Christian Juhl to global CEO; Juhl previously led Essence, which buys digital ads for Google. In early November, Business Insider broke the news that GroupM North American CEO Tim Castree had left after less than a year, and sources attributed his departure to the company’s struggles in its largest market.

Later that month, Juhl named four new executives and merged GroupM’s ad tech and software divisions, mPlatform and 2Sixty, in another attempt to streamline operations. Essence had long outperformed other WPP companies, and a source told Business Insider that Juhl aims to remake GroupM in its image. 

More mergers and agency closures in North America: Ad holding company WPP is continuing its consolidation spree with the Wunderman Thompson network absorbing 3 more agencies

The most visible element of Read’s streamlining strategy has involved hybrid mergers of digital and traditional agencies: In late 2018, VML and Y&R combined to form VMLY&R, and Wunderman and J. Walter Thompson became Wunderman Thompson.

That trend continued throughout this year. In November, Business Insider broke the news that Wunderman Thompson would absorb three additional agencies. About one month later, WPP confirmed that it would close one of those agencies, iStrategyLabs, along with a division of Wunderman Thompson called JWT Inside that created recruiting campaigns for the US State Department and T-Mobile. The two organizations employed around 60 people, but their revenues had declined in recent years.

Shedding “non-core” assets and suing to recoup lost investments: A lawsuit over an agency that allegedly inflated its worth by $120 million reveals Walmart’s earlier struggle to build an ad business

Most holding companies have spent billions to acquire data capabilities in recent years, but WPP went in the opposite direction in 2019 by aggressively shedding “non-core” assets like sports-focused marketing firms Chime and Two Circles. The most prominent divestiture was Kantar, an assortment of research, insights, and consulting businesses founded in 1992. WPP sold a majority stake in Kantar to Bain Capital Private Equity in a deal that closed this month and valued Kantar at $4 billion.

In another sign of financial crackdown, WPP filed a lawsuit alleging that Triad Retail Media, an agency acquired in 2016, had inflated its own value by more than $120 million.

Looking for new revenue streams: Ad agency giants WPP and Dentsu are fighting in-housing — by helping brands adopt the trend 

In 2019, WPP made the seemingly counterintuitive decision to more aggressively promote a service called Wunderman Inside that helps clients do more of their marketing work internally. The practice has existed since 2018, but this year WPP joined rival Dentsu in positioning such services as alternate sources of revenue in response to client budget cuts and an increase in short-term contracts.

The move showed that agencies are looking for money wherever they can get it, but WPP downplayed the overall importance of the in-housing trend, with Wunderman Thompson Inside managing director James Sanderson telling Business Insider, “We’re not lying awake at night worrying about in-housing.”

Big spenders moving their budgets elsewhere: WPP just lost a huge chunk of one of its oldest, most valuable accounts, Johnson & Johnson

WPP won several critical pieces of business from Mondelez, eBay, Google, and Electronic Arts toward the end of 2019, and its finances improved in turn.

But in October, Business Insider reported that the consumer goods division of Johnson & Johnson had restructured its marketing and shifted top brands like Listerine and Tylenol to rival MDC Partners. WPP kept the larger pharmaceutical portion of its J&J account, but closed the division launched to service that company in 2018. Less than one month later, Accenture and Droga5 won Kimberly-Clark’s child and baby-care portfolio in the US, Europe, and the Middle East.

WPP retained the baby business in Canada and Asia, but the loss encapsulates the complexities faced by holding companies in 2019 and beyond.

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