Mark Read has offered an optimistic view of how WPP is changing and becoming a “modern marketing partner” for clients, despite – and even because of – the Covid-19 crisis.
He spoke to Campaign after reporting a 15.1% decline in revenues less pass-through costs in Q2, which he said was better than expected. It was also ahead of three of WPP's five major rival agency groups.
WPP has under-performed the sector, with revenues declining for the past three years in a row, and Read, who became chief executive in September 2018, plans to update his turnaround strategy at an investor day at the end of this year.
The fact that WPP’s revenues did not drop as much as ad expenditure, which was down 20% to 40% in many key markets in Q2, was a sign that the group is diversifying beyond communications in three other areas – commerce, experiences and technology – and that Covid-19 is accelerating change, he said.
“If you were to sit through a client presentation or if you were to sit through meetings we have, it’s not Mad Men, we’re not sitting there thinking about 30-second TV ads,” Read said, as he hosted an investor presentation, while insisting communications still remain important.
Asked by an analyst if WPP has the right balance of people with skills in TV versus digital, Read said it already did: “We have a very broad range of skills and if you look at our people – the average age of someone who works at WPP is less than 30 – they don’t hark back to the 1980s, luckily.”
Here is an edited version of Campaign’s interview:
Campaign: The Q2 numbers are, to an extent, history, but what stands out in terms of the key trends?
Read: There is the relative resilience of our largest clients and the sectors in which they are resilient – technology, healthcare, packaged goods. The US was our best-performing region for the first time in several years. And you can see the pattern of the impact of the lockdown, primarily in the second quarter, and then the pattern of relative recovery. May was our worst month in the quarter [and then we have seen improvement each month from] May, June, July.
By sector, there was relative strength in marketing technology, ecommerce, public relations. Then if you look at our business, [it performed better with a 15.1% decline] relative to media advertising spend [in terms of total expenditure] that was down 20% to 40% in most parts of the world. Adspend in the second quarter was down 22% in the US whereas our business was down 10%. In the UK, you saw ITV’s results [where ad sales fell 43%] and we were down 23%.
At the height of the lockdown, it impacted our business 20% to 30% but as it [the economy] comes out of it, particularly given the pattern of our clients, [we have] relative strengths.
What happened between May and July and beyond? Do you see continued recovery or could you see some flat-lining in the near-future?
If you compare our July number [of 9.2% decline] with our [previously announced] outlook for the year, you conclude we were cautious about the second half and the speed of the recovery. While the worst may be behind us and the second quarter may be significantly better than we expected or feared, we do remain cautious.
I do think it is going to take some time for consumer confidence to build. We have to see what happens in the US. The US economy has been surprisingly resilient over the last five months.
We also have to see what the second order of the pandemic will be. The level of government support to the economy means things have held up relatively well as we come out of the worst of the lockdowns.
Is this pandemic something you think WPP is going to have to live with this for the next two, three, four years?
I’m not in the health predictions business. There’s a tremendous amount of work going on with the vaccines and hopefully we’ll see positive developments in that light.
What’s it like for staff? You say you are going to take out more cost in the second half of the year.
I did a call with a small group of our people in London and New York earlier this week to see how they are. People have done a fantastic job over the last six months, working with clients and building much stronger relationships with clients. Our client satisfaction scores have gone up.
It has been a very challenging time for people – not just how they have lived at home but also [managing] the separation of work from being at home. I’ve been really impressed by how our people have looked out for each other and their well-being, particularly at that account director level, over the last four to five months, to keep the work going, to continue to deliver for the clients and look after the teams.
Regrettably, we have had to make some redundancies but the steps we’ve taken mean we have managed to mitigate that as much as possible and that is what we look to do for the balance of the year.
We get anecdotal stories from individual agencies about continuing redundancies. Is there any sense that you are salami-slicing, that you are not making all the cuts in one go? You have said you lost 5,000 posts by the end of June.
We are trying to manage each business as carefully as we can to protect as many jobs as we can and I think the best way is to respond appropriately to local situations, rather than to put in a top-down edict.
The number of people in WPP offices is stunningly low – 1% in the United States, 3% in the UK and so on. What’s the future for the office?
The changes over the last six months are much more profound than whether people are working in their office or at home. They involve very different ways of working, different ways of collaborating, using video, travelling less.
I looked at my diary for the last three months and I’ve had 50% more client meetings, each of them have lasted half as long, and I’ve done that without travelling -- my expenses claim for the last month was £48.
We are working in very different ways and after this we need to make sure we take away the positives. People are now looking to us for a reason to come back into the office, rather than work from home. Until we get significant numbers of people to come back, it’s going to be challenging to provide people with a clear reason to come back into the office.
There really has to be a push to put the office back in the centre of the way we work and I am sure in the future we will have less office space, our offices will perform different roles and people will continue to work in very different ways.
How much time are you spending in the office?
Probably four days a week. I’m trying to encourage people to come back into the office. People I spoke to in the UK were very keen to come back into the office, very keen to see their friends and colleagues, but it’s very challenging to come back into the office if all you’re going to be doing is video calls to people who aren’t in the office.
The situation in London appears relatively good at the moment so we are going to try to encourage some people to come back in September but we have to be flexible and look carefully at the health and safety factors.
The UK was not a good performer in Q2. Is that a WPP-specific problem?
The UK has been one of the economies worst hit by the pandemic this year and that is reflected in our numbers.
Media agencies were more impacted than creative during lockdown. Is there a significant trend?
No, I just think that in most markets, advertising expenditure was down 20%, 30%, 40% relative to our results at 15%. Clearly the media agency companies which are focused on advertising spend are more impacted by that than our creative agencies that have a much broader base of work that includes CRM and experience and marketing technology.
It reflects the changing pattern of our business and, when advertising recovers, I am sure we will see very strong growth from our media businesses in the medium and long term.
What are you seeing from clients in terms of new pitch behaviour and their need for radical change?
We had a really good new business record in the first half of the year and I have no doubt that as clients look to the recovery, they will also start to look to change how they market much more fundamentally.
I think we will see a continued pattern of clients looking at how they market and reviewing the arrangements with partners and looking to work with companies like WPP that can provide them with really strong creative work integrated with a very solid understanding of technology and how that’s changing in the world in which we work.
We have seen a tremendous change in the work and types of questions that clients ask us in the last three years and the last six months have accelerated that tremendously. The notion that the 30-second television ad is the centre of what we do has clearly gone.
What about all of the new competitors to WPP? Accenture has been acquiring creative companies in lockdown and smaller businesses such as You & Mr Jones and S4 Capital have been growing in the first half.
We have done a tremendous amount over the last two years, and before, to invest in new capabilites at WPP and we’ve outlined some of the work we’ve done in terms of training and equipping our people with the skills [such as accreditation for using Salesforce, Adobe and other platforms] that we need for the future.
I am confident that we have the right capabilities to be a partner to clients who are looking for modern marketing partners. I can only point to what you see competitively in terms of our new business performance [in a global ranking of account wins for Q2, produced by independent consultancy R3 Worldwide, in WPP's investor presentation].
And if you look at the table (above), it’s WPP at number one, Accenture at six.