LONDON — Advertising giant WPP has blamed populist politics in the UK and US, fake news on platforms like Facebook and Google, and short-term thinking in business, for a slow start to the year.
Advertising, marketing, and public relations holding company WPP said in its half-year results, released on Wednesday:
“In the last year or so, growth has become even more difficult to find, perhaps due to increasing social, political and economic volatility, for example with the rise of populism typified by surprise election results in the United Kingdom and the United States and bumpy growth in three of the bigger BRIC countries of Brazil, Russia and China, although India continues to develop rapidly, despite introductions of demonetisation and a General Sales Tax.
“Even the growth of the digital marketplace has been dogged by issues such as measurability, viewability, fraud, and fake news, let alone the duopoly of Google and Facebook and the growing dominance of Amazon in so many spheres, including, but not exclusively, ecommerce, retail, cloud computing and content.
“In a slower growth world, both more recently and post-Lehman, inflation has been negligible, perhaps also suppressed by digital deflation. As a result, clients have markedly less pricing power and finance and procurement departments are very focused on cost. In this world, it is, perhaps, not surprising that clients have reduced spending.”
The dour assessment came as WPP, founded and run by Sir Martin Sorrell, reported billings down 4.7% on a constant currency basis to £26.9 billion.
Like-for-like revenue, which strips out any gains from new acquisitions, was down 0.3% in the first six months of the year. Revenue growth in July was down 4.1%. WPP, which owns advertising agencies such as Ogilvy & Mather, Grey Global, and JWT, is forecasting revenue and sales growth of between 0% and 1% for the full year.
The advertising giant blamed “technological disruption, cheap money, activist investors and zero-based budgeting models, which focus incumbents on short-term profitability and cost control,” for putting companies off advertising and marketing. WPP said this is particularly an issue in the consumer goods sector, which accounts for a third of its revenues. As a result, 2017 has so far been “much tougher” than 2016, which was a record year for the business.
WPP also said that competitors are turning to discounts and inducements to try and win business, saying: “These practices cannot last and will only result eventually in poor financial performance and further consolidation, the premium being on long-term profitable growth. Our industry may be in danger of losing the plot.”
“For the short-term, therefore, we have to weather the storm,” WPP said. The conglomorate says it will focus on efficiency, new high-growth markets, digital marketing, and “technology, data, and content.”
However, WPP warned investors that “2018 is unlikely to be much different.”
Also on Wednesday, WPP announced the acquisition of design agency Design Bridge for an undisclosed sum. Clients include AkzoNobel, Diageo, Mondelēz, and Unilever.
Get the latest Google stock price here.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.