World's Largest Ad Company Crashes After Dismal Earnings, "Terrible" Guidance

If yesterday's tape bomb came courtesy of the most prominent UK subprime lender, Provident Financial, which plunged over 70% after it gave a "clearly awful" business update coupled with the resignation of its CEO, today's market shock belongs to ad giant, WPP, whose shares crashed the most since 2000 after the world’s largest advertising company cut full-year revenue forecast amid lower spending by customers, while reporting dreadful Q2 earnings.

In a clear warning to ad-dependent tech behemoths such as Google and Facebook, or rather their shareholders, WPP stock plunged as much as 12% after the company again slashed its revenue guidance, which is now expected to be between zero and 1% in 2017.

That’s down from an earlier 2% forecast. Just five months ago, in March, WPP,  which owns advertising agencies such as Ogilvy & Mather, Grey Global, and JWT, suffered its biggest drop since the financial crisis when it gave its initial forecast for 2% growth, the slowest pace since 2009. Now that number is down to 0%.

Source: Bloomberg

It wasn't just the company's forecast: in the second quarter, WPP’s "like-for-like" net sales fell 0.5% with July declining 2.6% and North America and Western Continental Europe were the poorest performing regions, according to Bloomberg. Worse, constant currency billings plunged 4.7% Y/Y, confirming just how little pricing power even the biggest market players in the field have. Q2 results confirmed unexpectedly weaker industry trends highlighted previously by U.S. competitor Interpublic.

The company, which according to analysts laid out dismal earnings and "terrible guidance", blamed populist politics in the UK and US, fake news on platforms like Facebook and Google, and short-term thinking in business, for the terrible start to the year.

WPP also blamed "technological disruption, cheap money, activist investors and zero-based budgeting models, which focus incumbents on short-term profitability and cost control," for putting companies off advertising and marketing. WPP said this is particularly an issue in the consumer goods sector, which accounts for a third of its revenues. As a result, 2017 has so far been "much tougher" than 2016, which was a record year for the business.

In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility, for example with the rise of populism typified by surprise election results in the United Kingdom and the United States and bumpy growth in three of the bigger BRIC countries of Brazil, Russia and China, although India continues to develop rapidly, despite introductions of demonetisation and a General Sales Tax.


Even the growth of the digital marketplace has been dogged by issues such as measurability, viewability, fraud, and fake news, let alone the duopoly of Google and Facebook and the growing dominance of Amazon in so many spheres, including, but not exclusively, ecommerce, retail, cloud computing and content.


In a slower growth world, both more recently and post-Lehman, inflation has been negligible, perhaps also suppressed by digital deflation. As a result, clients have markedly less pricing power and finance and procurement departments are very focused on cost. In this world, it is, perhaps, not surprising that clients have reduced spending.

It's not just WPP: advertising companies worldwide have been hit as brand clients like Unilever and Procter & Gamble focus on cost-cutting to cope with sluggish global economic growth and technological disruption. WPP singled out a decline in ad spending on consumer goods - items such as laundry detergent and toothpaste that make up about one-third of its revenue - as coming under particular pressure. As previously reported, Unilever, one of WPP’s biggest customers, said earlier this year that it would cut ad spending by up to 30% and cut the number of creative agencies it works with to 1,500 from 3,000. That followed a failed takeover bid by Kraft-Heinz, which was the “seminal” moment in the first quarter, according to WPP Chief Executive Officer Martin Sorrell.

“That sent a shock-wave through the industry,” Sorrell told Bloomberg by phone. “It obviously had an effect in terms of people spending, particularly in the packaged goods sector.”

Martin Sorrell, WPP Chairman and CEO

Following the dismal news, WPP comp Publicis dropped 2.9% in Paris, while IPG and Omnicom are set for a lower open in the US. Shares of European television companies including TF1, ProSiebenSat.1 Media SE and ITV Plc declined as well.

Meanwhile back to WPP, the company has already seen its shares slide 12% YTD amid "a difficult economic climate and pressure on its businesses in North America." Today's plunge has chopped off 20% of its market cap in 2017 while its biggest rivals, including Interpublic Group of Cos., Publicis Groupe SA and Omnicom Group Inc., are each down more than 8% this year. So far, names like Google and FaceBook have remained unscathed but one wonders how long before cost-cutting advertisers slash online spending next.

In the most troubling sign, however, and reminiscent of what Dick's CEO said when he warned about the pricing and market share "panic" gripping retailers, the ad giant blamed also said that competitors are turning to discounts and inducements to try and win business, saying: "These practices cannot last and will only result eventually in poor financial performance and further consolidation, the premium being on long-term profitable growth. Our industry may be in danger of losing the plot."

"For the short-term, therefore, we have to weather the storm," CEO Martin Sorrell said hoping to focus on efficiency, new high-growth markets, digital marketing, and "technology, data, and content."

Whether or not it can achieve that depends on both the economy, and what its competitors do. And while we wait to find out, here is a recap of the sellside's unhappy response to WPP's numbers, courtesy of BLoomberg.


  • Results “a clear miss” on organic growth and net sales; margins up less than expected
  • Margin improvement guidance not sustainable if growth remains slow into 2018, keeping talent and investing will be costly and required
  • Estimate revisions likely to be modest with recent positive currency exchange rates and unchanged margin guidance
  • Remains cautious on stock and generally the industry


  • Results show pressure on client spend and a weaker performance across all regions and segments
  • Deteriorating trading conditions are a concern; “minded to trim” FY pretax profit forecasts by 4%-5% to reflect the weaker outlook
  • Current valuation already reflects a weakening outlook following recent share price decline


  • Scale of the negative surprise is “unwelcome”
  • Nature of pressure is relatively narrow, even if deeper than originally feared
  • Even as headline shock is painful, the impact on consensus estimates is likely to be comparatively limited
  • Notes margin outlook maintained, which speaks to “relatively orderly” pressure on revenue, co. being comparatively well prepared
  • Sees 2%-3% downgrade risk to consensus EPS


  • Some of the weakness expected, report still “an incremental disappointment”
  • 2Q organic net sales disappointing, July weak and behind the budget


  • Results confirm weak trends seen across advertising companies/TV, with ad spending cuts in fast-moving consumer goods being the common driver
  • Key question whether pick-up in organic growth from 2H is credible
  • Goldman sees new organic growth guidance as “achievable,” based on comments by several consumer goods companies on higher ad spending in 2H, easier comparables, recent improvement in WPP’s new business performance


NoDebt MANvsMACHINE Wed, 08/23/2017 - 07:41 Permalink

Eventually somebody's going to figure out that all digital-based ad spend is throwing money down a toilet.  It's ALL FAKE.  All the clicks are bots.  All the stats are double, triple or quadruple-counted bullshit.  You ever clicked on a digital pop-up ad?  Me neither.Ummmm.... I gonna shut up now before the Tylers throw me off the board. 

In reply to by MANvsMACHINE

Gilnut NoDebt Wed, 08/23/2017 - 08:06 Permalink

Been telling my friends (both of 'em...LOL) that the advertising sector bubble was the one to watch at this peak.  LOTS of companies IT and non-IT absolutely depend on this overblown largess in order to survive.  It's been flat for a while, and just now beginning to roll over.   Bad bubble news.

In reply to by NoDebt

Thought Processor Gilnut Wed, 08/23/2017 - 08:39 Permalink

" the advertising sector bubble was the one to watch at this peak. " I agree, the whole 'Push" oriented economy is slowely dying.  Everything is transitioning to a decentralized 'Pull' economy (though this will be playing out for years to come).   The whole push based ad market is a great canary for this coal mine.  

In reply to by Gilnut

Cash Is King BennyBoy Wed, 08/23/2017 - 10:13 Permalink

Benny, while I agree in principle I strongly disagree with your premis. ZH is a for profit that doesn't charge us a fee for our reading entertainment and therefore needs to monetize in some form or fashion. It's not that I hate their advertising I hate the quantity and aggressive nature in which it's forced upon me (even while typing comments) while enjoying the site. They need to find a better, more intelligent way advertisers can reach our eyeballs but more importantly have pricing power! Higher rates for ZH should lead to lower ad numbers (quantity) and a higher or more positive user experience. JM2C.

In reply to by BennyBoy

Cash Is King flash338 Wed, 08/23/2017 - 12:51 Permalink

2 things: when I first joined ZH years ago there were no ads, material was notably better and you could donate all day long. $5.00 or more if you wished. That obviously was not a viable business model. And, two, even Adbloker Plus sold out and has white listed some that are willing to pay a "small" fee. Sorry to say but that's the sad truth! I hope ZH is careful not to let greed over take user experience. Even as a diehard fan I am guilty of threatening to stop visiting and that'd be a bummer.

In reply to by flash338

yogibear oak Wed, 08/23/2017 - 07:52 Permalink

Who really pays attention to ads anymore? Their like flies, annoying. With Amazon and Walmart competing for lower prices and cutomers  it's who's the cheapest.Usually the house bands are the cheapest.

In reply to by oak

Goatboy Wed, 08/23/2017 - 07:28 Permalink

I know its irrational but my heart always jumps with joy whenever something bad happens to (modern) advertising in any shape or form.It says: Fuck them manipulators, cheaters and liars.

Give Me Some Truth Goatboy Wed, 08/23/2017 - 07:50 Permalink

This is a telling story. I've spent much of my life in businesses that must sell advertising to pay the bills. I can report first-hand that all of these businesses (newspapers, magazines, radio stations, TV stations, and I'm sure billboard companies and direct mail) are hurting, and have been for years. Now we see that a company that owns several giant advertising agencies is tanking. The reason for this is simple: There are fewer businesses in existence, the ones that do exist are cutting back on advertising expenditures. Everyone - well almost everyone - - is trying to save money either to survive, or to show "profitability" by cutting expenses (when revenues or units of sale are declining). Going futher: the reason all of these companies are suffering is that consumers are suffering. Consumers - their customers - have less disposable income to buy stuff and services.I'll say again - the media (which relies primarily on advertising to exist) - knows better than anyone the true state of the economy. And yet it is the media that persists in disseminating the lie that "all is well" in the economy.We live in Alice's Wonderland. 

In reply to by Goatboy

Omen IV Give Me Some Truth Wed, 08/23/2017 - 09:49 Permalink

when you can compare price and value in multiple screens simultaneously the personal anaylitical process trumps advertising.coupled with a firm belief in Fake News by MSM as indicated by JWT - there is no truth to focus on in an adbetter to spend the ad dollars on better pricing of product The Cultural Marxist Agenda of the elites will kill many of them as well as the middle class

In reply to by Give Me Some Truth

Give Me Some Truth Omen IV Wed, 08/23/2017 - 10:05 Permalink

As someone who has sold advertising for years, I'll say that advertising can work. If it targets the right audience, has something to say (or just increases "top of mind awareness" for Company X) and is consistent. The "consistent" part is the bugga-boo for most potential advertisers. It costs a lot of money to advertise consistently. Even the people who have done this in the past are cutting back. And the smaller operations aren't even thinking about that. They aren't buying at all. I'll also agree with others that many businesses that advertise are flushing $ down the toilet. I could fill this site with anecdotes from people who have been in the advertising sales business and how gruesome it is right now. 

In reply to by Omen IV

William Dorritt Give Me Some Truth Wed, 08/23/2017 - 10:23 Permalink

Don't most people get their impressions from consumer ratings now days?If this is true, the consumers have bypassed the Ad Agencies and Ads and have moved to the far more powerful and accurate "word of mouth" model? AKA Consumer Behavior.I suspect that ADs that advertise a good deal on something that consumers already want, work effectively.I also suspect that ADs that push the Culture War and Anti White and Anti Christian and Anti White Male agenda are falling on deaf ears with increasing frequency. 

In reply to by Give Me Some Truth

gmak Wed, 08/23/2017 - 07:28 Permalink

As y ou learn in any business 101 course, Ad spending is discretionary.  After cutting employees to the bone, then executive perks, there is ad spending...  All of those censorial fascist tech companies are going to learn this the hard way.  If reasonable people would stop being their other product by using non-monopoly services, maybe we can restore some sanity to the tech-o-spere.

Give Me Some Truth gmak Wed, 08/23/2017 - 08:14 Permalink

"Ad spending is discretionary." Exactly. If a business owner or mananger feels he must cut back "somewhere" advertising is one of the first places to cut back. And this story deals with a company that caters to the giant companies, the "crony" businesses if you will. They all do use ad agencies for media buys.Most businesses in America are much smaller, "Mom and Pop" type operations. These businesses make up the bulk of the "retail" world that newspapers, radio stations, TV stations, outdoor advertising companies depend upon to make payroll and pay their bills. All of these companies are struggling when compared to the billing they did, say, three or five or 10 years ago. I don't know where some of these companies would be if "new advertisers" like plaintiff trial lawyers hadn't picked up some of the slack.Utility companies and media companies know what's really going on "out there" in the "real world." Most media companies are going out of business, down-sizing or certainly panicking, firing "sales manager" after sales manager and putting more and more pressure on the "account executives" who are pounding the pavement, searching (in vain mostly) for "new business" or trying to get old business to buy more. These days, these people just hope that old, reliable businesses don't cut out their ad buys completely. Just "cutting back" is really a victory for them. (And think of the poor account executives, most of whom are paid on a commission basis. If they don't make a sale, they don't get paid. If their existing advertisers suddenly advertise at a much lower level, the AE's commission goes way down).Now why is it becoming such a great challenge to find businesses that can afford to advertise? Could the economy be much worse than we are being told? Are consumers being forced to cut way back, forcing businesses to cut way back?  Well, these are questions that should not be asked.BTW, "shrinkflation" and "substitution" are other ways that the "big boys" deal with shrinking profit margins. Real Inflation does enter the picture and largely explains why consumers have less money at the end of every month. I'll tell you one area that's probably not experiencing price inflation - the price of a 1/4-page ad or a 60-second commercial. If you do still advertise, it can and should be a "buyers market." 

In reply to by gmak

bigkahuna Wed, 08/23/2017 - 07:28 Permalink

It always seems that even though the market averages are at records - there are always tell tale signs that the economy has been hitting the skids. But hillary keeps on touting the record stock market for some reason? Unless she is a complete moron, she must realize that it is going to hit the fan. So she's a moron - correct?

Give Me Some Truth bigkahuna Wed, 08/23/2017 - 08:30 Permalink

"Touting the stock market"The stock market (apparently) is one area that can be rigged. The goal is to continue to create the illusion that "all is well." For most people, the direction of the stock market is the only "metric" they look at. (Also companies can massage their numbers to give the illusion of profitablility). Anyway, because they can rig this barometer, they of course do.Economic stats like inflation, unemployment and GDP can also be fabricated. And are.Potentially negative indicators - like the prices of gold and silver - can also be rigged so they don't start going higher. And these markets are rigged to make sure any ominious signals are NOT transmitted to the masses.Ad sales by millions of advertising account executives at thousands of businesses that sell advertising cannot be as easily rigged. These numbers can be ignored, I guess. And have been. Hell, advertising sales have been declining for years (anyone checked the stock price of Cumulus Media recently? Anyone actually counted the number of ads in their local papers?)Speaking of certain stories being ignored by the MSM, anyone think this story will make it onto the "NBC Nightly News" tonight? And then ask this question: Are corporate media franchises such as this in the business of broadcasting the truth or concealing it?P.S. Note who advertises on the "NBC Nightly News." Seems to me 60 percent of the sold spots are placed by Big Pharma. Big Pharma apparently still has a big advertising budget. If they didn't, there would be no "NBC Nightly News."

In reply to by bigkahuna

Last of the Mi… Wed, 08/23/2017 - 07:42 Permalink

You can't drive by any of those big box retailers without noticing the big red and white sign proclaiming "best prices" "everything on sale" or what the fuck ever. These retailers just don't get it. The days of selling a few items at cost or below so you can mark up other merchandise massively are over. Everybody can price everything on Amazon, or elsewhere for that matter, in a few seconds. The national mindset has changed from "oh I'm out of that" to "let me go check the price on the internet" and it's not going back any time soon. A lot of this is due to income cash flow pricing of all goods and services within the tech and healthcare industries. Prices are based on what percent of the household cashflow they can command and have nothing whatsoever to do with competition or "value". All of their goods and services are protected by contracts and therefore not subject to price/value discovery. Excellent example is healthcare premiums. $1200/mo is common. The fact is that is a massive amount of money for most households and the difference is made up in buying online. Hell, I do it all the time. I saw my favorite toothpaste, which I usually pay around $3 for over $8 at one of the pharmacy "box retailers". These retailers have no idea how this sort of pricing reinforces the online pricing segment. The extra $5 for a tube of toothpaste reinforces in my mind they are crooks and charlatans and it is my JOB to do better. I'll say it again, box retailers have to focus their marketing like a laser on the customer. Even a 3 acre superstore can only offer a small percentage of what online retailers offer and it's all available in just a few seconds. Box retailers have to get busy and do their homework if they want to survive. And open up some of those fucking check-stands!

Give Me Some Truth Last of the Mi… Wed, 08/23/2017 - 08:39 Permalink

Re: Opening up those check-out stands ...They can't open them up. They are trying to save $ everywhere they can and adding employees and all their associated costs (beyond salary) isn't a strategy to do this. Plus, having fewer employees does allow them to keep prices as low as possible, which they must do to get the sales they do get.P.S. Their vendors are doing what they can to help "keep prices low" by shrinking packages and substituing cheaper ingredients. 

In reply to by Last of the Mi…

Give Me Some Truth prymythirdeye Wed, 08/23/2017 - 08:42 Permalink

Re: "Cutting the cord"Don't worry people will do this. Heck, they ARE doing this. It's a necessity, and will only become more of a necessity to more people in the future.It's called a "work around" I believe. All the things we HAVE to do to get by. It's how the "man on the street" must respond to the policies and frauds our masters have perpetrated on us all.... Lots of "work arounds" these days ...with more to come, I'm afraid.

In reply to by prymythirdeye

NoWayJose Wed, 08/23/2017 - 07:59 Permalink

Fake news on Facebook and technological disruptions? How about the real issue for ad companies --

TV networks cancel every show that depicts a normal family (Last Man Standing) and instead keep bringing out shows about divorced transgenders raising drug dependent Hispanic children.

TV news is so far left that no one watches anymore. Throw Fox in there now.

The NFL is three hours of repetitive commercials, interrupted by a few seconds of plays - and loudmouth players have turned off viewers.

Historic ad revenue from magazines and newspapers are, well, history.

Drivers cannot see billboards while they are texting.

Even Search Engines come up with nothing but trash, so people do not search as much - rather they go directly to a handful of sites in any given day.

There literally is no 'place' for any big 'ad campaign' to go out to.