Ad Market Sees Slowdown In 2009, WPP CEO Sorrell Says
The advertising market could be in for a slowdown in 2009 as a new U.S. administration takes painful steps to right economic imbalances early in its term, Martin Sorrell, chief executive of U.K. advertising and marketing giant WPP Group PLC warned.
In an interview, Mr. Sorrell said financial-market problems and falling U.S. house prices raise concerns about the outlook for next year, but it’s “too soon” to assess their impact.
“The issue that I’m more concerned about is what happens after the elections in America in 2008,” he said. A new administration might try to deal early in its term with the problems of budget and trade deficits and a weak dollar, he said, and that could hurt economic prospects in the short run.
“If there’s anything unpleasant to do, you do it earlier rather than later,” he said.
For next year, he said, the Beijing Olympics, the U.S. presidential elections and the European soccer championship are expected to add about 1% to ad spending, helping offset any economic softness.
Longer term, Mr. Sorrell said WPP aims to increase its business in the fast-growing emerging markets to reduce reliance on the less-dynamic U.S. and Western Europe. He said WPP now gets about a quarter of its $12 billion in annual revenues outside those markets and aims to raise that share to a third over the next five to 10 years.
In Moscow for a WPP board meeting, Mr. Sorrell said WPP wants to quadruple the size of its Russian business over the next five years.
“Our business in Russia is the smallest in the BRICs, but it’s the fastest-growing” he said, referring to Brazil, Russia, India and China. New acquisitions in Russia this year have brought WPP annual revenue in the region to about $125 million, growing at about 35% this year. WPP wants to bring that to about $500 million over the next five years, he said.
Mr. Sorrell said forecast economic growth in the BRIC countries, adjusted for increasing spending on marketing and advertising, could bring emerging markets’ share of WPP’s revenues to about 38% by 2014 — from about 25% now — even without additional acquisitions.
In Russia, WPP’s main business is a partnership with media-services company Video International Group. In September, WPP announced the acquisition of 49.9% of PBN Holdings LLC, a strategic communications consultant with operations in the U.S. and around the former Soviet Union. Mr. Sorrell noted the PBN deal also helped WPP in its drive to reduce reliance on traditional advertising, shifting to areas like public relations, which have increasing influence on consumers.
Gregory L. White is a writer for The Wall Street Journal’s online edition wsj.com
Compliments of wsj.com
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