Mark Read has been looking on the bright side. Despite the Covid hammer blow to the advertising industry, the chief executive of WPP has lauded the new ways of working.
“I did an analysis of my diary during the three months of lockdown,” he says. “I saw 50pc more clients than I did for the same three months last year.
“There are many elements of working [remotely] that are more efficient and productive. We made a TV commercial for a client in 16 days that pre-pandemic may have taken 16 weeks.”
Read needs to remain upbeat. WPP, an £8bn holding company for a vast web of advertising agencies, will demand all his energy in the coming months as he attempts to set a path through the gloom that has fallen on adland since lockdown.
Companies looking to shield their cash from the economic turmoil have taken a hatchet to their advertising budgets over the past seven months.
As much as $49bn (£37bn) is expected to be wiped off industry advertising sales this year, according to Philip Thomas, chairman of the industry jamboree Cannes Lions.
That has hurt WPP. The world’s biggest advertising group sunk to a £2.5bn loss in the first half of 2020, compared to a £409m pre-tax profit the year before. Revenues have also fallen 12pc to £5.6bn over the period.
Investors have responded by sending shares down 38pc since the start of the year. After spending two years overhauling WPP by offloading scores of businesses and cutting its debt by 71pc to £1.5bn, Read has now become embroiled in a fresh battle to keep the company on track.
The 52-year-old is certainly not afraid to take drastic action. Read took control of the FTSE 100 company in Sept 2018 following the departure of founder Sir Martin Sorrell, who left over misconduct allegations, which he denied.
Read set a course to “sustainable growth” by unleashing a mammoth restructure, prompting thousands of job losses and a move to close, or merge, 180 offices globally.
Its £3.5bn controlling stake in data company Kantar was sold, along with more than 100 businesses, to reduce its debt from £5.2bn to £1.5bn. Digital agency Wunderman and marketing firm J Walter Thompson were merged, along with VML and Young & Rubicam.
Read wants to make WPP a more agile, digitally-focused, business that is in step with the demands of his clients. That move has only been accelerated by coronavirus.
Efforts to expand beyond traditional advertising towards digital and data have seen 20,000 staff trained up to work on platforms such as Google, Facebook and Salesforce. That digital push is now facing an imminent test.
WPP is currently battling French rival Publicis to retain a £465m advertising and marketing account with Walgreens Boots Alliance.
WBA – the owner of retail chain Boots in the UK – is looking to speed up its digital shift in response to the pandemic. A decision on the contract is expected to be made within weeks.
Yet despite analyst fears advertisers could bypass WPP and buy straight from Google, Read is still edging closer to the American tech giants.
Rather than competing with Google by building its owns advertising technology, WPP wants to own the best tech that can be integrated into these platforms to give companies more control over who sees and responds to their adverts.
That means buying more data and tech-focused businesses, but Read doesn’t envisage a return to the Sorrell era when WPP was financially structured to keep swallowing agencies into its vast network.
“I would describe our previous strategy as acquisition led,” he says.
“I think WPP needs to be organic led with acquisitions used to fill in capabilities, and bring in expertise that we didn’t have before; particularly in the technology and the e-commerce area.”
While WPP is on track to cut between £700m and £800m worth of costs this year, Read does not expect to be selling businesses at the rate seen at the start of his tenure. Although he admits there is still “a little bit more [WPP] can do around the edges”.
One media banker said WPP’s £4.7bn cash firepower means it can be both a buyer and seller during the downturn.
They said: “[WPP’s] challenge will be: do they really want to spend the cash on a middling type agencies, or on the premium crown jewels? That will be their dilemma because you can probably get average stuff quite cheaply because of the pandemic.”
Either way, Read will be eager to get WPP back to its pre-pandemic performance as quickly as possible.
Investors are hungry for growth and more work is needed to transform it into a more nimble business that is capable of staving off threats posed by Sorrell’s digitally-focused S4 Capital, or the advertising empire being forged by consultancy Accenture.
A glimpse into the challenge awaiting Read will come on Thursday when WPP gives an update on its third-quarter performance.
Analysts expect revenues to be down around 10pc for the three months to September.
Despite the prolonged slump, the horizon is brightening for WPP.
Consumer goods companies are starting to loosen their purse strings again after harming the company by cutting advertising spending in recent years.
Analysts have also seen strength returning to TV and radio advertising, while the appetite for digital ads remains buoyant.
Revenues at Sorrell’s S4 Capital grew 61pc to £141.3m in the six months to June.
Yet the real test for Read is likely to come when the pandemic fades.
If the coronavirus vaccine provides a rebound for global growth, then shareholders will be expecting a similar reaction from WPP.
Investors may soon run out of patience if the advertising juggernaut continues to stutter while the world races ahead.
Until then, Read must continue to find a balance between keeping costs in check and pursuing growth.
But the threat remains. The vital signs of the advertising industry may be improving, but resurgence in the virus and a spate of lockdowns could easily cast a dark shadow over adland once again.