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I am an avid follower of Sir Martin Sorrell and his accomplishments. This 64-year-old Briton runs WPP PLC, the world's largest communications company by revenue, with more than 125 firms around the world, including Ogilvy & Mather, JWT, Hill & Knowlton and GroupM. Therefore, I was truly amazed that in a recent interview he was quoted as saying, "WPP can't fire people fast enough to keep up with the collapse of revenue". He went on in the same interview to say he had "misread" the advertising collapse: It's way worse than he thought.
In this interview, Sir Martin said that there was a 50% drop in profit. "The only thing that we can affect in the short term is our investment in people. We invest about $9 billion in people and $350 million a year in capital equipment. We made adjustments to our investment in people, which others could argue we should have done earlier. You can't bring the average headcount rate down in line with revenues that are falling at the rate they are falling at the moment; it's just too painful and demotivational. The number of people in the company was down by about 7% by the end of July, compared with Dec. 31, 2008. It continues to fall at a rate of about 1,000 a month. That will flatten out as we come through the end of the year and into next year.
I am also looking at some other the other major 4A Agencies and they too are not immune to profit downturn but I have yet to see those CEO's come out with such candor. I have no doubt that WPP will weather the storm and come out as will the other Agencies with a smaller workforce but still maintaining mainstream Brand dominance. I am attending the iMedia Agency Summit in a few weeks and hope to speak with the Regional Agency CEO's to get their perspective on what they are seeing and how they are finding the current climate. From my perspective, the Agency folks in China are much more bullish about the future and have probably been the least affected by a advertising downturn. Yes, budgets are down, campaigns are more short term focused but there is activity... Pitches are being called, budgets being discuss for 2010... some light here... abet not as bright as we all hope for.
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