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Ad giant WPP sees profit slump as tech giants slash spending

 (WPP)
(WPP)

WPP saw a 70% slump in profits for the year as big tech pulled back on advertising amid a sluggish global market.

The ad giant behind agencies Grey, Ogilvy and Wunderman Thompson is betting £250 million on AI to drive future business.

CEO Mark Read said: “We don’t see AI replacing human creativity. But computers can write copy, take photos and create videos to help us produce work more efficiently.”

The company will need “different types of people” on staff, but not necessarily fewer, says Read.

Profits tumbled from £1.16 billion to £346 million, partly a retrenchment after two strong years as the world emerged from Covid.

And partly due to write downs in the value of some of WPP’s brands. Headline profit fell 4.8% to £1.52 billion.

WPP was behind four of the top five Superbowl ads, including one for Verizon featuring Beyonce.

The Superbowl – won by the Kansas City Chiefs – was the highest watched TV show ever since the moon landings.

WPP and Read in particular have come under fire from former CEO Sir Martin Sorrell, who said in November of his successor, “He's been at it for five years, so when is he going to take responsibility?"

Sorrell’s S4 Capital has got its own problems lately.

At WPP revenue for the year was up 2.9% to £14.8 billion.

Read said in a statement: “AI will be fundamental for our business and we are embracing the opportunities that it presents, putting it at the heart of our operations and our work for clients. Our AI-powered platform, WPP Open, is now being used by more than 30,000 people across WPP with growing adoption by our clients.

“While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year with 0.9% like-for-like growth and a 0.2 point improvement in our headline operating margin at constant currency.”

WPP shares slipped 14p to 766p, which leaves the business valued at £8.2 billion. The stock is down 25% in the last year.

Mark Crouch, Market Analyst at eToro, said: “Advertising is typically first on the chopping block in times of economic uncertainty and with inflationary pressures hampering businesses across the globe in recent times, this has translated into an underwhelming set of results for WPP.

Sophie Lund-Yates at Hargreaves Lansdown said: “WPP is being hit by lower technology spending in the US. The media, analytics and advertising giant is in the firing line for any slowdown in corporate spending or sentiment, as its products are often nice-to-have, rather than something that helps companies keep the lights on.”