WPP, a global leader in advertising and marketing services, has announced a significant restructuring plan coupled with a substantial investment in technology and artificial intelligence (AI). The company is set to invest £250 million annually in technological advancements while undergoing a £125 million restructuring process aimed at consolidating its network and achieving cost efficiencies.
Strategic restructuring for future growth
The restructuring initiative, although set to incur a cost of £125 million this year, is forecasted to yield annual savings of the same amount by 2025, with around half of these savings expected in the current year. The plan involves some job reductions, though specific numbers have not been disclosed. This move is part of a broader strategy to streamline operations, with anticipated gross savings of £175 million from efficiency improvements in both back-office and commercial delivery.
This consolidation will see the merger of VMLY&R and Wunderman Thompson into VML and the simplification of Group M, which are key steps in achieving operational efficiencies. The group anticipates moderate revenue growth, expecting an increase of 0.9% in 2023 and projecting a growth rate of 0-1% for 2024.
WPP’s announcement has been met with a mix of reactions in the market. Investors and analysts have given a cautiously optimistic response, with an initial rise in WPP’s share price, followed by a slight decline. Industry analysts regard the company’s strategy as practical and well-conceived, though not particularly groundbreaking.
Investing in technology and AI
WPP is not just focusing on cost-saving measures; it is also channeling significant resources towards technology and AI. The planned £250 million annual investment reflects the company’s commitment to remaining at the forefront of the advertising and marketing industry. This move builds on its previous acquisition of AI Satalia in 2021 and partnerships with major tech players such as Adobe, Google, IBM, and OpenAI.
The company has outlined four strategic pillars for growth, with the first being a leader in AI, data, and technology. This involves leveraging AI-enabled tools and services across WPP Open and utilizing proprietary data sets to generate improved returns. The other pillars include unlocking the full potential of creative transformation, focusing on key agency brands, and realizing the cost savings from the ongoing restructuring.
A vision for the future amidst industry changes
Mark Read, CEO of WPP, emphasizes the transformative impact of AI on the industry, viewing it as an opportunity to enhance human creativity rather than a threat. He highlights the company’s focus on empowering its workforce with AI-based tools to augment their skills and improve efficiency and media performance. This approach, according to Read, will not only increase work effectiveness but also accelerate the company’s growth over the medium term.
This move by WPP comes on the heels of Publicis Groupe’s recent announcement of a €300 million investment in AI over the next three years, underscoring the growing importance of AI and technology in the advertising and marketing industry. Publicis Groupe also reported a promising financial outlook, with a 6.3% increase in revenues.
WPP’s dual strategy of restructuring and technology investment positions it strongly for future growth and competitiveness in the evolving landscape of the advertising and marketing industry. By focusing on operational efficiency and embracing technological advancements, particularly in AI, WPP is setting itself up not just to navigate the challenges of the current environment but also to capitalize on the opportunities of the future.
