Mark Read has insisted he has not been slow to simplify WPP and pointed the finger at his predecessor, Sir Martin Sorrell, for “30 years of inactivity” when it came to moving agencies onto common operating systems.
Read, the chief executive of WPP since 2018, was speaking to Campaign after announcing two “significant” moves—the merger of VMLY&R and Wunderman Thompson to form VML Group and a “simplification of the operating model” at Group M.
Together the two units represent close to two-thirds of revenue and Read expects to make US$120 million (£100 million) of savings from the restructure.
Asked whether he has been slow to simplify WPP and move agencies onto common systems, such as IT and accounting, Read told Campaign: “I don't think we've been slow but we're dealing with 30 years of inactivity on that topic.
“We started with 250 enterprise resource platforms [ERPs] about five years ago and it does take time. If you went to an IT expert, they would tell you most standardisation programmes are five- to seven-year programmes.”
The comment about “30 years of inactivity” was a reference to Sorrell, who was chief executive from 1986 to 2018. Asked whether Read was “blaming” his predecessor, he replied: “It’s a fact.”
Sorrell built WPP through hundreds of large and small acquisitions. He also oversaw some significant internal mergers, notably in his final year in charge, when MEC and parts of Maxus combined to form Wavemaker and some of WPP’s branding and design agencies united to become Superunion.
The former WPP CEO has been a frequent critic of his old company since he left and set up a rival, S4 Capital. Read has largely refrained from making criticism.
Read was speaking to Campaign at WPP’s Q3 results when revenues went into reverse, dropping 0.6%. The agency group has been hit by a slowdown after good growth in 2021 and 2022.
Read has a long-term strategy to simplify the group, which previously suffered four years of declining revenues between 2017 and 2020.
Here is a transcript of the interview:
Q3 appears to be a pretty tough quarter and some people will be surprised by this decline in revenue.
We did have a tougher Q3 than expected. We are facing some challenges. Spending by our technology clients is down in the third quarter on last year and down by more than it was in Q2, and that's inevitably had an impact on the top line.
We already know about the VML merger and now you have announced a further simplification drive at Group M. Tell us about that and what those two moves mean in terms of £100 million (US$120 million on) savings.
Christian Juhl and the Group M leadership team embarked on their “synergy” project—this simplification plan—three years ago. And you have seen various stages of that – [most recently in September] with the creation of Group M Nexus.
This is the next phase of that programme, which is to have our three main media agencies, Mindshare, EssenceMediacom and Wavemaker, and really support them by [ensuring there are] common functions in investment, in trading, in finance and in HR—rather than have those functions duplicated across the agencies.
On this issue about duplication across the agencies, Campaign recently spoke to VMLY&R and Wunderman Thompson, following their merger, and it was surprising to hear that some of the back-office systems at the two agencies are different. And reading these financial results, there appears to be a lack of common systems in some of the agencies. It does take time to do these things [to simplify and standardise business operations] but has WPP been slow to move the agencies onto common systems?
I don't think we've been slow but we're dealing with 30 years of inactivity on that topic. We started with 250 enterprise resource platforms [ERPs] about five years ago and it does take time. If you went to an IT expert, they would tell you most standardisation programmes are five- to seven-year programmes. I think we are within the standard timetable but we have a degree of complexity that is very hard for an outsider – and sometimes for an insider – to understand.
On that point of “30 years of inactivity”, that would appear to be blaming your predecessor [Sir Martin Sorrell].
It’s a fact.
On the £100 million (US$120 million) savings, where is that coming from?
We are working to improve our margin and the best way to do that is to take out structural costs and inefficiencies inside the business. In the case of VML, it's very early days to say exactly where that will come from. But we've done enough work to be able to give a target that we hope to be able to exceed and we’ll work over the next three to six months and share some more detail at our capital markets day [in January].
The target is to achieve this by 2025 and we hope to be able to do it with the minimal job losses possible.
Let's look at some positives, even though we can see overall you're in decline.
The business grew internationally by close to 2% and primarily the drag on our growth in Q3 is in the US, and that's primarily cuts in spending from technology clients and retail.
Our technology client spend was down 13% in Q3, having been down 9% in Q2 and 1% in Q1. You may have seen Meta said in their earnings statement last night that they cut marketing spend by 24%. So, what we’re saying should not be that surprising. We have a very strong portfolio of technology clients that I think in the long run will be successful.
We do see good growth in [some of] our creative agencies. Ogilvy is growing 3% to 4%, which is a creditable performance, and Devika [Bulchandani, the CEO] and Liz [Taylor, the chief creative officer] have really turned that business.
Group M in North America has had a tougher time on new business—part of that is down to the number of reviews that we have had. We want the business to be more competitive and I think it can be. The changes that we're making to the way that Group M operates are designed to increase our investment in product and people to deliver a better service to clients and make it more competitive.
What more can you do in North America? There must be questions about whether you need stronger leadership, and that might include at Group M.
We have significantly strengthened our leadership in WPP in North America—Devika has had an impact at Ogilvy and Corey duBrowa coming into BCW is making an impact.
The VML merger will create a much stronger North American organisation and the Group M consolidation will also clarify how Group M works in North America and deliver a stronger offer.
On the subject of Group M, what can you say about the Chinese economic police’s investigation into the agency group and allegations of bribery?
As we said in our statement, we've dismissed one of the executives involved and we're taking further action to investigate what’s happened and strengthen the leadership team in China.
One more question about VML. Some people say it’s yet another internal merger and the question is: Is it a distraction to the business?
The world is changing very rapidly and we need to adapt our structure to what clients need. There has been a lot of commentary in the last few weeks, including a report from the WFA [World Federation of Advertisers], that says agency structures are too complex and too complicated, and I think a simpler structure will better serve our clients.
What's the outlook because the new business pipeline would seem to be your best bet in terms of turning things around?
There are a lot of new business opportunities and I come back to the fact that clients are going to want to continue to consolidate and simplify their roster.
I would point out that two of our clients, Coca-Cola and Verizon, have had very strong results this week. Coca-Cola singled out marketing as being [a driver] behind their sales growth and Verizon had a very strong quarter, having started to work with Ogilvy over the last three to six months.
So I think that marketing can make a difference and we can help clients to succeed.