Month: March 2025

Green Square’s Tony Walford examines where things went wrong after the holding company’s 2024 results sent shares sliding. 2024 was something of an annus horribilis for WPP and Mark Read, posting the worst figures of the global groups in marcomms with like-for-like net revenue down 1.0% to £11.4bn in the year. This compares to Publicis leading the pack with 5.8% growth, Omnicom at 5.2% (although pre-pass-through costs), and even struggling IPG managing to grow a little at 0.2%. The only other group to report a revenue reduction was Dentsu, and that was only by 0.1%. WPP’s operating profit margin improved 0.2% to 15.0% due to cost savings and it continued to invest in AI and technology. Staff costs remained constant as a percentage of net revenue, which meant overall there had to have been salary savings – 6,000 staff in fact, around 3,000 in each half year. The January mandate that staff had to return to the office four days per week caused a stir internally but any impact this has had in terms of resignations would not be factored into the staff numbers for 2024. The only WPP region that posted positive growth in 2024 was Western Europe (representing 21% of WPP net revenue) with revenue rising 1.7% as Spain, France and Italy offset a 1% fall in Germany. The UK (14% of net revenue) was down 2.7%, North America (39% of revenue) declined 0.7% and China a whopping 20.8% (most of this in Q4) due to ”client losses and macro pressures impacting media and creative businesses.” The “rest of the world,” representing 26% of net revenue (including China) declined 2.6%, with India, LatAm, Middle East and Africa mitigating some of the Chinese hit. Interestingly, Read singled out TikTok as one of WPP’s fastest-growing trading partners, but I’m not sure this is something I would have championed given the fickle nature of US government sentiment that can turn this platform off at a moment’s notice. WPP’s share price immediately fell 20% on the news but has recovered a little to be 15% down at the time of writing. This is still a massive drop.

What’s gone wrong and how can WPP fix it?

Q4 was particularly miserable with net revenue dropping by 2.3%. Read singled out “project-based work across specialist creative agencies” as the main culprits, mentioning AKQA, Landor and Design Bridge in the Q&A that followed the presentation as being “0.8% of the drag”. Hogarth was flagged as a bright point with growth in “mid-single digits,” but AKQA suffered a fall in the “low double digits”. 2024 saw Ajaz Ahmed, founder of AKQA, and other key players within the agency depart. AKQA was combined with Grey in 2022, then rolled up with JWT, Y&R and Wunderman to form part of VML. A £237m impairment charge (basically writing down the value of agencies on the balance sheet) was taken in 2024, most of which related to AKQA. However, in the post-presentation Q&A, Read stated AKQA had “gained three major clients in 2025 so far and a good client win in VML yesterday”, which was some positive news. Q4 saw the disposal of FGS Global, a significant part of WPP’s PR portfolio. While PR only represents 9% of revenue, it fell 1.7% over the year but tellingly 5.3% in Q4, following the disposal of FGS. At 3% of revenue (one-third of the PR discipline), given bedfellow Burson suffered “mid-single digit decline” (Ogilvy PR wasn’t mentioned), we have to ask how much value WPP places on this element of its offer going forward. Key reasons for 2024 being such a car crash were given as the knock-on effect of client losses in 2023, with one particularly large healthcare client impact. The biggest revenue reductions sector-wise were healthcare (down 7.2%) and retail (down 7.8%). The latter is quite surprising as we at Green Square have seen retail as a strong sector for many of our clients in 2024. That said, WPP saw positive growth in CPG, telecom, media & entertainment, financial services, travel & leisure and even automotive, a sector which has struggled in the last few years. Read also made the point that while revenue overall was down, the top 25 clients grew 2% last year. A huge amount of emphasis was placed on the behemoth that is GroupM which is clearly being seen as the saviour for the group. GroupM represents 40% of WPP net revenue, saw 2024 growth of 2.4% and WPP brought back Brian Lesser in September as CEO (he had previously headed GroupM until 2017 and before that was at WPP’s 24/7 Media). Emphasis was placed on the success of WPP Open (WPP’s AI operating system which integrates all its services, data and tech into one application, enabling clients to see results in real time) and how it helped WPP win major new clients Amazon, J&J, Unilever and Kimberley-Clark. A big chunk of the earnings call presentation was effectively a pitch of what GroupM does and how it’s investing in new leadership, integrating WPP Open and building proprietary data assets through AI to integrate and drive marketing across every channel. This compares favorably to Dentsu’s presentation, which made no mention of AI (apart from what others were doing), instead focusing on turning its decline around through greater efficiencies. The GroupM presentation was impressive stuff, but it’s clear there’s still lots to be done here and Read acknowledged that GroupM’s growth had not been as good as its peers being “around 10% down from where it should be”. Given its prominent position within WPP, we have to ask what WPP would be without it – probably not much!

The outlook for 2025

And what of the outlook for 2025? The forecast is for net revenue to be flat at best but could decline by up to 2%. Apparently, the year has started pretty grimly, with the first two months impacted by global uncertainty making clients cautious to spend, together with the run-off impact of client losses in 2024. We were told it will take a little while for new client wins to ramp up, and that H2 will be where the growth will come (if any). The profit margin is expected to be constant at 15%. On staff retention, this “is not an issue, and we look for other ways aside from remuneration to reward staff.” The indication then is there’s not going to be much in the way of pay rises and, coupled with the revolt against the “four days in the office” mandate, I’m scratching my head as to what these “staff retention incentives” could be. As for M&A, there was little mention of this aside from “adding up to 1% of revenues,” so on £11.4bn, that’s up to £114m more revenue from M&A overall then. Not much in the grand scheme of things, so we shouldn’t expect any seismic deal announcements this year. In sum, WPP appears to be putting everything on red in getting behind GroupM and Open, which may not be a bad shout given the issues it’s having elsewhere. In selling off FGS to KKR (and back in 2019, 60% of Kantar to Bain), we’ve witnessed some key assets being divested under Read’s tenure and I’m wondering if we’ll see a number of smaller disposals over the coming months as WPP continues to focus down on its six agency networks. Mark Read has had a pretty tough ride as CEO, and today’s announcement hasn’t helped. I wish I could say it was a rollercoaster, but there haven’t been many “ups” for the guy. I truly hope 2025 is better than the guidance given today, but pinning it all on a hopeful recovery in the second half doesn’t bode well. Read more    

R/GA has become an independent agency again after 23 years under IPG management. With backing from private equity firm Truelink, it plans to create a new model. Green Square’s Barry Dudley looks at the deal. I met Bob Greenberg around 20 years ago during my time at Naked Communications when we discussed how we may work with R/GA. I’ll never forget the unique nature of their New York offices, rabbit warren like, then opening out into big open-plan spaces with a very clear vibrancy and energy. And Bob struck me as someone who was always looking to the next thing, a mix of genius professor, visionary and quiet taskmaster. Almost certainly a rose-tinted perspective. He is said to have commented, “I believe in reinvention. Every nine years, we reimagine the company.” Whether we are at one of these nine-year points, I’m not sure, but the next reinvention is clearly kicking off. But before looking at this it is worth quickly considering a bit more history. It was founded in 1977 by brothers Robert and Richard, hence the original name R / Greenberg Associates, as a production company specializing in motion graphics and visual effects for film and television. Their work included creating visual effects for movies like Superman, and Alien; designing the iconic title sequence for Ridley Scott’s Blade Runner and developing digital effects for Predator. Through the 1990s and early 2000s, its first reinvention took it into becoming a digital agency focusing on interactive and web-based experiences. It then expanded into interactive advertising and became a leader in integrating technology, data and digital experiences. Then came the natural move into consulting and business transformation. Which brings us to current times and today’s announcement that management and private equity have bought the business out of IPG. So, the next chapter and reinvention begins. R/GA’s press release announcing the deal said: “Creative innovation agency R/GA is proud to announce its return to independence as a privately owned company after 23 years as part of IPG, following a new partnership between R/GA’s global management and private equity firm Truelink Capital.” IPG have been looking to sell Huge and R/GA for some time, with Huge subsequently being acquired by AEA Investors, a ‘global private investment firm’. Whilst there are undoubtedly big differences between Truelink Capital and AEA Investors, they are both private capital businesses. I expect to see plenty more of these sorts of transactions as the big holding company shakeout continues. The release went on to say: “R/GA’s global CEO Robin Forbes and chair and global chief creative officer Tiffany Rolfe are two of the global leaders, together with others, who are investing in the company as part of the deal. R/GA’s next chapter will be fueled out of the gate by a $50M Innovation Fund, enabling the company to invest in new skillsets and talent, and acquire new capabilities, emerging tools and platforms. Additionally, R/GA has established a Strategic Advisory Council of senior marketing and technology executives to support emerging AI client transformation opportunities across multiple sectors.” So, it’s going to have a $50m ‘Innovation Fund’. I really like the sound of these two words, not least because it fits with the R/GA legacy for reinvention. More than ever, businesses have to continually challenge themselves, question whether their offer is still relevant, experiment with new services, and innovate. When did you last work through such things? And who would you do this with – R/GA have a ‘Strategic Advisory Council’. If you don’t have one of those, I’m always around for the price of a coffee… The next paragraph of the press release also throws up some interesting questions: “As an independent company, R/GA is activating an AI-enabled model to better serve clients [Are you genuinely AI-enabled?], unburdened by the restrictions and overheads of traditional corporate structures. New remuneration models based on outcomes [When did you last review your pricing?], agile new team structures, and scaling up its flexible talent model ‘R/GA Associates’, are among the initial changes being implemented [Is your organisational structure fit for the future?].” As you would expect AI is marked out to be key. Luke Myers, co-founder and managing partner at Truelink Capital, said: “We see the growth of AI-enabled experiences playing an increasingly important role in unlocking value in marketing services…” And Tiffany Rolfe said: “At R/GA change is a feature, not a bug, and we believe in the power of brands to transform – which is what we do for clients, and now we’re doing it for ourselves…” I am looking forward to seeing this unfold and to seeing other businesses take similar steps. Read more

The ad industry is reeling from the collapse of the visual effects giant and its advertising arm The Mill. Green Square partner Nick Berry examines how production is changing and what will fill the void. Many people are still reeling from Technicolor’s sudden fall from grace, going into administration with the loss of up to 10,000 jobs across MPC, The Mill and Mikros Animation globally. Some have been quick to note that the signs were clear for all to see, and warnings such as the collapse of Deluxe Entertainment in 2019 should have acted as a wake-up call. But for most people the loss of a pioneering force with an incredible legacy, still working on the biggest movie titles and advertising campaigns in the world, is an unimaginable outcome. Technicolor’s collapse will continue to be examined for some time. It will be correct to cite the massive impact of the pandemic in 2020, followed by the writers’ strike in 2023. But alongside those hammer blows the unprecedented acceleration in technology, automation and the power of the cloud – allowing immediate scalability without huge tech infrastructure – has resulted in the goalposts being uprooted and thrown away, as opposed to simply being moved. Hindsight is a wonderful thing. The strength of the 110-year-old stalwart of the global movie and advertising industry was once its scale of tech infrastructure along with wonderful offices in the best creative hubs in the world. Unfortunately, this legacy technology and physical infrastructure in expensive locations, became antiquated in what seems like the blink of an eye. All of that said, there can be no question as to the creative quality and talent employed across MPC, The Mill and Mikros Animation, each responsible for iconic work and setting the gold standard across entertainment and advertising right up until the end. My thoughts go out to all of those directly impacted as there will inevitably be life-changing ramifications for many people. For Technicolor’s peers there will be an immediate gold rush opportunity. There are massive movie and advertising projects now in limbo with panicked clients needing quick solutions. There will also be an injection of much sought after talent into the market. As the dust settles, however, I would bet my bottom dollar that the energy, creativity and hunger released into the marketplace, not least from those displaced from Technicolor, will result in a new exciting era for the creative production industry, and further market fragmentation seems inevitable. Smaller independent production houses now armed with scalable cloud-based VFX technology pipelines, lower overheads, access to cost-effective global talent networks that can work seamlessly on projects wherever they are in the world, now have a wonderful opportunity to blaze a new trail. I will also bet on there being a surge of new startups from ex-Technicolor staffers, ready, willing, and able to feed on the insatiable desire for content. So, the King is dead, long live the King(s), along with the princesses and princes… The demand for content across the entertainment and marketing sectors is unrelenting, and in industries driven by craft and innovation, change is the only constant. The question is how production houses can maintain workable margins while still prioritizing and safeguarding creativity. Technology and the cloud have gone a long way to leveling the playing field for smaller independent players. Established divisions and snobbery between different forms of production output are being discarded. Many production companies now seamlessly work across different genres of entertainment and advertising as opposed to being pigeonholed. When managed well, this agility can mean added resilience and opportunity. Compared with a decade ago in the advertising world, production studios no longer feel completely subservient to all-powerful agencies of record. Nearly all production houses now confidently call themselves “Creative Production Studios.” They have less fear of the established advertising agencies when approaching brands directly to offer creative ideation and strategy, as opposed to staying downstream in the shallower waters of execution and post-production. Those that don’t change their operating model may well struggle in the brave new world, but the inherent strength of the US entertainment and advertising markets will be fertile ground for existing and new progressive creative production houses to flourish. The same can be said for the UK, where the incredible growth in new studio facilities can’t be ignored. Increased capacity along with unquestionable levels of talent, is leading some to predict that by 2027, once Sunset Waltham Cross studios are fully open, in addition to established facilities at Elstree and Leavesden, Hertfordshire alone will produce more long-form movie content per year than Hollywood. It’s a shame there’s not many hills in Hertfordshire to put a big sign on. So given the demand and foundations exist in the US and UK, the vital factor in shaping the future of creative production across entertainment and advertising is the shift in balance between artist and technology. Technology is clearly now leading the way, with AI at the vanguard. Artists and producer roles must pivot to manage and harness technology to maximize creativity and efficiency, as well as communicating the art of what is possible to clients in a tangible and meaningful way. The creative production studios that crack this code to maintain healthy margins and protect the perceived value of creativity will be the winners. As sad as it is to see the loss of Technicolor and its family of incredible creative studios, I eagerly await an array of new superstar creative production houses stretching the boundaries of visual effects even further, to fill the void left by Technicolor, and our screens with joy and wonder. Read more