At the recently held Capital Markets Day 2024, WPP unveiled its strategic roadmap for the future, centered around innovation, Artificial Intelligence (AI), and creative transformation.
Mark Read, CEO of WPP, kicked off the event by emphasizing the pivotal role that AI will play in the company’s strategy. Rather than seeing AI as a threat, WPP views it as an opportunity to revolutionize the industry and drive growth for both clients and the company itself. “AI is transforming our industry, and we see it as an opportunity, not a threat,” Read stated. “We firmly believe that AI will enhance, not replace, human creativity.”
WPP’s strategy revolves around four key pillars:
1. Lead through AI, data, and technology
WPP has positioned itself at the forefront of AI through a series of strategic moves. In 2021, the company acquired Satalia, a leading UK AI company. It has also made significant organic investments in AI, client technology, and data. Additionally, WPP has formed deep partnerships with industry giants, including Adobe, Google, IBM, Microsoft, Nvidia, and OpenAI.
Through these partnerships and investments, WPP has created a powerful ecosystem to deliver AI-enabled services and tools. These are facilitated by WPP Open, a common technology platform, and powered by proprietary AI models. The goal is to drive improved returns for clients while enhancing marketing performance through the utilization of proprietary data sets, client data, and market-level data. WPP’s AI services have already gained traction, with over 28,000 current users across the company and adoption by key clients such as L’Oréal and Nestlé.
One crucial aspect of WPP’s AI strategy is ensuring the protection of client information, brand safety, copyright, and ethical considerations. This commitment to ethical AI aligns with the company’s vision for responsible innovation.
2. Unlock the full potential of creative transformation to drive growth
WPP is not only harnessing AI but also maximizing its creative transformation capabilities. The company aims to expand its client relationships by leveraging its global scale, integrated offerings in creative, media, production, and PR, as well as expertise in emerging areas like commerce, influencer marketing, and retail media.
By capitalizing on its comprehensive suite of creative services and embracing the evolving landscape of marketing, WPP intends to capture a larger share of a rapidly growing market.
3. Build world-class, market-leading brands
WPP’s diverse portfolio comprises six powerful agency networks: AKQA, Ogilvy, VML, Hogarth, GroupM, and Burson. Collectively, these networks represent nearly 90% of WPP’s revenue. The company is determined to lead the industry through these agencies, with VML positioned as the world’s largest integrated creative agency and GroupM streamlining operations as the world’s largest media agency.
Furthermore, WPP is uniting its strengths in strategic communications by establishing Burson as a leading global agency, bringing together BCW and Hill & Knowlton.
4. Execute efficiently to drive strong financial returns
Efficiency is a cornerstone of WPP’s strategy. By creating VML and Burson and simplifying the operating model of GroupM, the company aims to deliver growth and structural cost savings. These measures are expected to result in annualized net cost savings of approximately £125 million in 2025, with a significant portion anticipated to be achieved in 2024.
WPP is also targeting £175 million in gross savings from efficiency opportunities across both back-office and commercial delivery. These savings will be reinvested to support growth and align with the company’s medium-term margin target.
In addition to these strategic pillars, WPP emphasizes disciplined capital allocation, continued organic investment, a progressive dividend policy, and a prudent approach to mergers and acquisitions. This approach is underpinned by a strong balance sheet and an investment-grade credit rating.
Updated Medium-term Targets
WPP’s updated medium-term targets include a 3%+ like-for-like growth in revenue less pass-through costs, a headline operating profit margin of 16-17%, and an adjusted operating cash flow conversion of 85%+. These targets reflect the company’s commitment to sustainable growth and profitability.
2023 Expected Out-Turn and 2024 Outlook
For the upcoming year, WPP anticipates a 2024 like-for-like revenue less pass-through costs growth of 0-1% and a 20-40 basis points improvement in headline operating profit margin (excluding the impact of foreign exchange). The company also plans to invest approximately £250 million annually in proprietary technology to support its AI and data strategy.
In conclusion, WPP’s Capital Markets Day 2024 outlines a bold vision for the future, where innovation, AI, and creativity converge to drive growth and value for clients and shareholders. The company’s strategic pillars, updated targets, and commitment to ethical and responsible AI position it to lead the industry into a new era of marketing and communication.
As Mark Read, CEO of WPP, aptly put it, “The past three years have demonstrated the power of brands, creativity, and investment in marketing to drive growth for clients and to build significant value. Research demonstrates that those companies with the strongest brands deliver the highest returns to shareholders.” WPP’s journey into 2024 and beyond is poised to demonstrate precisely that.
Stay tuned for WPP’s 2023 results, set to be reported on February 22nd, as the company continues to navigate a dynamic and ever-changing landscape while striving for innovation and leadership in the industry.
