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WPP targets 45% digital revenue by 2018

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WPP, Advertising, Digital Media


WPP targets 45% digital revenue by 2018

No media business is immune from serious disruption as the growth of digital, data-driven advertising continues unchecked, says Sir Martin Sorrell, the sloganeering leader of advertising and marketing giant WPP.

Addressing investors and analysts this morning, Sir Martin was clear that not even the bulletproof TV market, gets out of this lightly: "Pressure on traditional media is not just confined now to newspapers and magazines but also free-to-air television. We do about 40 countries' TV audience measurement. There’s degradation."

"The big switches that are still to come newspapers and magazines, pressures will continue they will not go away. The Bezos Washington post transaction will be very interesting to see what happens at what we call the Washington Kindle," he says, referring to Amazon boss Jeff Bezos' acquisition of the Washington Post.

"In the absence of him finding some brilliant solution to 'analogue dimes, digital pennies' these trends are going to continue. That’s still a $20 billion opportunity in the US."

Sir Martin was presenting the company's impressive first half figures this morning, which showed a rebound for the struggling UK advertising economy, with UK sales rising 3.7 percent in Q2, against a backdrop of falls in Western Europe.

Sir Martin Sorrell's company increased pre-tax profits by 19 percent in the first half of 2013 to £427 million, with revenues seven percent higher at £5.3 billion, 32 percent of which is from digital media.

WPP H1 2013 results slides - revenue growth

But the strong trends at WPP continue and they affect the entire media jungle:

(1) investment in emerging and fast-moving global markets

(2) the transition from traditional to digital media and

(3) the increased use of automation and data-driven advertising techniques.

 

Emerging markets, emerging technologies

Here's WPP today, with new markets making up 30 percent of revenue and new media 34 percent - meeting the company's own ambitious long-term targets in both areas.

WPP H1 2013 results slides - revenue growth by sector

And here's what Sir Martin wants that mix to look like by 2018. It's worth asking whether the rest of the consumer-facing, advertising-driven media economy in the west is advancing into these areas with anything like the same urgency.

WPP H1 2013 results slides - revenue growth, future looking

On the growth of programmatic trading, Sir Martin says: "[We have] Invested in all our businesses in digital through training recruitment acquisitions, build our specialist expertise with web development, with demand side platforms, with mobile, search, social... and established a proprietary platform, basically Xaxis."

He adds that despite the benefits of improved first party data from media owners, WPP's programmatic efforts are "going to be doing more direct. It Gives us an opportunity to invest and control data for WPP and client benefit."

The emerging markets strategy is crucial. WPP bought, in whole or part, 26 business in fast-moving economies in H1, raising overall revenue by 3.1 percent and adding to the 122 it bought during 2007-2012 (see our detailed data analysis on this).

WPP is mastering the art of buying innovative companies at the cutting edge of interactive marketing, data management and PR.

WPP H1 2013 results slides - ad groups by digital revenue %

Sir Martin isn't overly concerned about Publicis Omnicom Group (POG) knocking WPP off its perch as the biggest advertising holding group, pointing out that his group was the winner in terms of market reaction. He says: "We believe a post-POG world presents us and other competitors, as a result, with enhanced opportunities and is at worst neutral and at best highly positive, resulting in further consolidation and concentration"

WPP H1 2013 results slides - the post-POG world

 

Re-hashing one of this favourite slides - borrowed from KCPB's Mary Meeker - Sir Martin again asserted that advertisers spend too much on print and not enough on digital and mobile platforms

WPP H1 2013 results slides - mobile opportunity

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