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WPP is the advertising agency behind the Mayo cat of the feline family in a bow tie, which advises shoppers to eat leftovers with Hermann mayonnaise. Sadly, there is no similar trick to energize the company’s own outlook. After Mark Read’s CEO closes Monday, WPP should not lose time hanging a “for sale” sign outside the door.
WPP has reduced half its market value over the past seven years. Reading efforts to streamline the company’s structure and integrate its capabilities could have protected profitability. But neither does WPP’s investment in artificial intelligence to generate ads have led to significant growth so far. This year, sales are expected to remain flat and negative. France’s publicis aims to grow between 4-5%.
For WPP followers, a shift to allow businesses to continue in their current form is still possible. For example, it may be true that clients value an integrated approach, and the same company values an integrated approach in which they think, create and place advertisements. WPP also has a wealth of world’s largest media buying business and new AI capabilities: creative talent, production companies, and production companies. The hope here is that reading has done some heavy lifting and new bosses can even close the group.
However, the odds for this event are long. For one thing, the reads will continue to run WPP until the end of the year. This suggests that you may step on the water until then. And investors must wait for a new boss to come in and start swinging x around before things start looking up.
Meanwhile, companies such as Metaplatforms are using AI tools that can generate and place ads on the platform to redraw the advertising landscape. Such products may initially be more attractive to small businesses than WPP’s large global clients who are keen to maintain a consistent brand message across the platform, but they still point to the direction of travel. At the very least, it will raise competition and lower prices.
WPP’s stock price is very low, making it difficult to turn down an offer to all or part of the business. Its corporate value is currently in the region of £9.3 billion. The group’s media business, previously known as GroupM, may be roughly worthwhile if it is valued along Publicis, which trades at 9.6 times its operating profit. That calculation will allow buyers to acquire the remaining business of WPP, including brands such as Gray, Ogilvy, Hill, Knowlton, and generate about 40% of their operating profit for free.
Certainly, advertising is already a focused business, but the economics of disbandment are beginning to be compelling. Read’s resignation could pave the way for brave bidders to get a chance. As long as his exit is related to the industry disruption caused by AI, this technology could indirectly offer some enhancements to WPP shareholders.
camilla.palladino@ft.com
