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WPP is the advertising agency behind the Mayo Cat, a cat with a fly that recommends the buyers to enlarge the remaining food in Hellmann’s mayonnaise. Unfortunately there is no similar trick to live the company’s own prospects. After the managing director Mark Read Termination on MondayWPP shouldn’t lose time to hang a sign for sale at the door
WPP has given up half of its market value in the past seven years. Reads efforts to optimize the structure of the company and integrate its functions may have protected profitability. But neither the nor the WPP’s investments in artificial intelligence to generate advertisements have so far led a lot of growth. This year it is expected that sales are flat too negative. France’s publicis aims at growth of 4 to 5 percent.
For WPP believers, a turnaround that enables the company to continue in its current form is still possible. For example, it can be true that customers appreciate an integrated approach in which the same company produces and provides their ads. And WPP has a lot of creative talents, production companies, the world’s largest business with media and new AI skills. The hope here is that Read has made part of the heavy lifting and a new boss has dropped the group even further.
However, the chances of winning extend. On the one hand, Read will continue to operate WPP by the end of the year, which indicates that it can step water until then. And then the investors would have to wait for a new boss to come in, come down and swing the ax before things look up.
In the meantime, companies such as META platforms are newly drawing the advertising landscape, with AI tools that can generate ads and place on their platforms. While such a product can initially be more attractive for smaller companies than for the large, global customers of WPP who want to lead a coherent brand message via platforms, this is nevertheless an indication of the direction of travel. At least it will increase the competition and reduce prices.
The WPP share price has dropped so low that the entire or parts of the business is difficult to reject. The company value is now in the region of 9.3 billion GBP. The group’s media business, previously known as GroupM, may be worth approximately so that it is in line with publicis, which deals with the 9.6 -fold operating profit. This billing would include a buyer for the brands such as Gray, Ogilvy and Hill and Knowlton and generated about 40 percent of the operating profit – free of charge.
It is true that advertising is already a concentrated business, but the economy of a separation looks convincing. Read’s resignation could pave the way for a brave bidder to take his chance. To the extent that its exit is related to the industry disorder caused by AI, the technology – indirectly – can offer the shareholders of WPP some improvements.
