‘AI won’t replace creativity’ says Mark Read as WPP boasts strong 2022 performance
After top client Coke doubled down on AI, WPP’s CEO brushed off the potential impact the tech will have on its creative businesses at its earnings update.
WPP published its preliminary financial results for 2022 today / The Drum
The advertising industry has been awash with the launch of new AI-based tools and services. This week, Coca-Cola – a $4bn client for WPP – inked a deal with consultancy Bain & Company to explore how the creative process could be enhanced through OpenAI, which is behind programs such as ChatGPT and Dall-E.
James Quincey, CEO of Coke, said: “[We are] very excited about what AI and the alliance with OpenAI can do for us and may do for us in terms of upping our game in terms of marketing creativity.” He added that it had the potential to “enhance the creativity of [Coke’s] marketing department”.
During an update on its financial performance for 2022, chief executive Mark Read told analysts that, in the longer run, AI tools and tech have the potential to deliver efficiencies for WPP. “There isn’t going to be an area of our business that is not touched by it,” he said.
But, he stressed, “it’s not going to replace creativity, but will be an aid to it.“
“More of our production work will be automated. It will help us produce creative work more efficiently and help us deal with the plethora of channels we need to operate in.“
Overall, WPP recorded “very strong” growth in the UK, despite fears the country’s economy would slip into recession.
The British holding company’s performance was “surprising given the negative economic headlines at the time,” said chief financial officer John Rogers in a presentation to analysts and colleagues at its Sea Containers House headquarters in London. The company, which owns agencies such as Design Bridge and Partners, Ogilvy and AKQA, increased net revenue by 6.9% overall and brought in £11.79bn ($14.18bn) over the course of 2022, up from £10.39bn ($12.5bn) in 2021.
In the fourth quarter of the financial year, its UK revenues increased 12% – ahead of the US, India, China and Germany.
“We had a continued, strong and broad-based performance for the year… despite fears we’d see a slowdown,” said Read, who predicted that the wider global economy was set to enter a “longer, more resilient period than what people feared in October and November.”
Ogilvy, AKQA, Hill + Knowlton, Landor & Fitch and Hogarth were among the strongest performing agencies in the portfolio – each delivering double-digit growth. Rogers said that creative agencies grew more than expected, while growth at GroupM and WPP’s media agencies was slightly lower than expected.
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Read said that the company’s tilt towards CPG clients – which make up 24% of its business – puts it in a strong position as demand for business and digital transformation continues apace. “We’re in a much stronger competitive position,” he said. Rogers suggested that as China’s economy recovers from the impact of Covid last year, it would cease to be a “drag” on the business and add growth.
While most client categories grew – in particular, revenue from travel/leisure, healthcare and financial services clients – the company’s revenues from the automotive sector declined 6%.
In 2023, the company expects to see net revenue growth of between 3% and 5%, in line with the predictions of competitors such as Publicis Groupe.
“We enter 2023 in a strong financial position with good momentum from new business and the many opportunities ahead of us,” said Read. “While there will no doubt be challenges, the continued need for major companies to build brands, sell products, reinvent and transform their business, understand their data, invest in technology and exploit the potential of AI remains, as does their need for modern partners who can help them navigate this new world.”
According to Rogers, the firm has racked up over £375m in savings relative to its 2019 costs. That has been driven in part by savings on office costs; WPP has been on an ongoing mission to centralize its agency offices in ‘campus’ locations across the world. In 2022, it opened five new campuses and Rogers said it expects to open another six this year, adding that the firm’s eventual goal was to have 75% of its staff worldwide located in campuses.
Rogers said the company plans to review its property portfolio in the United States, suggesting the firm may seek to make further savings on its real estate footprint over the next year. Furthermore, travel costs were half what they were in 2019 despite the return of international business travel last year.