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As WPP posts record pre-tax profits, what can we learn from the big four marketing groups?

By Jim Houghton

March 1, 2013 | 4 min read

As WPP today announces another record financial year, posting pre-tax profits £1.3bn, Results International partner Jim Houghton reads behind the numbers delivered by the big four networks - IPG, Omnicom, Publicis and WPP.

Jim Houghton looks at what we can learn from the 'big four'

The global marketing communications world is pretty flat but, as always, averages inherently sweep away the insights. It might be flat globally but this ranges from a (i) 1 per cent organic growth backdrop (discounting acquisitions and foreign currency effects) at IPG attributed to major client losses in 2011 biting in 2012, (ii) to 4 per cent at Omnicom, (iii) with both Publicis and (iv) WPP growing at 3 per cent.

So, what are the insights you can draw on for your business today?

It looks like healthcare isn't quite the safe bet that it has been in recent years, with Omnicom, Publicis and IPG all reporting soft or shrinking healthcare verticals.

If you're looking at overseas expansion from wherever you're reading this, then markets to avoid are those using the Euro where revenues have shrunk between 0.3 per cent and 9 per cent for the big four over the last 12 months. If that doesn't seem like rocket science, then perhaps the fact that UK revenues are up between 2 and 6 per cent is at least a pleasant surprise.

Less surprising is the return to modest growth in the US, which we've all been reading about and the boom-time growth rates in "Rest of World".

WPP grew 11 per cent in Latin America last year while Publicis' BRICs+MISSAT region was up 10 per cent so, if you can find that on a map, it could be worth setting up shop there, whilst the various definitions of Asia used by the Big 4 point at this being the Holy Grail for growth in this decade with revenues up as high as 15 per cent.

And what services should you be opening in your shiny new BRICs+MISSAT hub operation? Digital (not defined) and advertising (including digital presumably) are two hot disciplines that if you could actually cut through the definitions being used in the stock exchange reporting, would seem to be worth focusing on.

Clearly there's more than a slim chance that your agency might not have quite the balance sheet or client list to open in Beijing later this year, so what closer-to-home operational insights or solace can you draw from the Big 4? Do you frequently beat yourself up for not hitting 20 per cent margin and not keeping staff costs below the golden 55 per cent of revenues? You're in good company. Publicis tops the pile at 16 per cent margin while IPG came in last year at 10 per cent. Staff costs averaged around 60 per cent of revenues across the board.

What else can the big four teach us? A bit of well-considered early stage ad tech investment can pay off, witness Buddy Media (WPP) and Facebook (IPG) adding the odd hundred million or two to profits and the bank account last year.

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