Sir Martin Sorrell, CEO of WPP, appeared on CBNC yesterday, to review 2008 results and talk a bit about prospects for 2009. Despite slightly missing analysts’ expectations for revenue and margins, WPP shares reacted positively in the market. Sir Martin tempered expectations for 2009 in his comments. As is the case with virtually every business worldwide at this point, WPP is feeling pressure from the reduced budgets of current customers and fierce competition for new business. A couple of tidbits worth noting from his comments and analyst reaction:
• Sorrell noted that traditional media, especially television, has become relatively inexpensive in the current environment. This would appear to indicate that the migration of advertising dollars out of TV, radio and newspapers to new media has resulted in rate cutting on the traditional side in an effort to stop the bleeding. While predictable, this may have the effect of slowing that migration that is so important for digital out of home network owners. The guess here is that rates will fall on the new media side, at least in the next quarter or two.
• Analysts were bullish on WPP for two specific reasons. First, their push into emerging growth markets worldwide; and second, their strategic entry into the digital space, which most certainly includes DOOH. Analysts believe that WPP’s presence in these faster-growing areas and disciplines will serve to mitigate some of the impact of price and spending downturns.
• Overall, it sounds as though WPP is looking at about a 2% revenue decline in 2009, while its main competitors are positioned for larger declines.
From a DOOH perspective, we could certainly not expect a rosy ad spending outlook in this economic climate. Impressions that we got talking to people who should know at DSE and since indicate that the first quarter will turn out to be rather difficult, and that there will be new money released in our sector beginning in April. Clearly, a lot of network plans will rest on that activity for the next 9 months, and network owners may have to moderate expectations in terms of holding to their rate cards in order to compete. From all accounts, there is strong belief that new media is where the action is, we just need to increase our industry’s share of a pie that is shrinking.