A Changed World: WPP and Advertisisng

One of Britain's most successful companies in recent decades is WPP - originally Wire and Paper Products - whose success is almost entirely ascribable to the genius of its long-term Chief Executive. Though it is still a London-listed company, it has a truly global reach; which means that for at least twenty years its fortunes have largely been independent of the ups and downs of the British economy. When Asia has been in crisis, the Americas have generally been strong; when Europe has stagnated, Asia has thrived: so WPP has been able to expand in most years, as a global conglomerate.

Like Warren Buffet, Martin Sorrell entered and then took over an existing company that was not doing particularly well, re-oriented its business by moving into a completely different sphere of activity where it proved uniquely innovative and deservedly became a leader in its field. The chosen field for Wire and Paper Products was advertising: precisely at the tie when brands were becoming globally important and technologies were advancing rapidly. Standards of living worldwide were rising, and consumers were becoming more conscious of their power in the market. Consumers were also better-informed than ever before, as firms increased their advertising and sales budgets. By the use of better-informed I do not imply that the quality of the customers' understanding was enhanced: simply that more information was being presented to them, much more professionally. Commercial television was in most homes in the advanced countries; radio was still expanding as a means of disseminating news, information and entertainment [particularly popular music]; and print media - books newspapers, magazines and journals [both popular and targeted at specific groups] were more affordable and better-presented than ever before. In that world, WPP thrived: and as more countries entered the consumerist age [at least, for the upper and middle classes] so WPP could bring in its expertise and marry it with an intelligent development of local methods and traditions.

But with apparent suddenness - this week - the past year's results from the company show a downturn in business that has instantly been associated by commentators with major global trends.

Over two decades entertainment and information have been digitised: people now look to their smart phone for data on almost every topic. Companies have responded, so that it is now possible from one's armchair to find out which shop in the locality currently stocks which item. As this process has developed, so the great organisers of information - most obviously, Google - have responded by developing the means largely to predict what a user will want as soon as he or she types in [or says] the first fragment of the request. Hence the demise of traditional advertising is confidently predicted; though it is recognised that new brands, products, services and approaches will always have to be promoted, and most promoters will not want to have to put their fate entirely in the hands of the giants like Amazon and Google. Thus independent advisers who are up-to-the-minute on technology and offer an affordable service will always be needed; but this will be a niche rather than a mass-market business. Print media are declining. Families no longer sit around looking at one TV set, as all members have their own access to their own preferences: so the value to a firm of advertising through that medium needs to be focused on specific groups - like the elderly - who are likely still to watch 'conventional' TV.

If any affected firm can keep abreast of these developments it is the highly-adaptable WPP; but how much of the world's business will need to use such services in the future is an increasingly disputed area of prediction. Most of the pundits expect WPP to survive for at least a decade, but probably in a shrinking context: unless, of course, some as-yet unimagined innovation comes to their rescue. In his eighth decade, Martin Sorrell remains an outstanding innovator and developer of ideas. I would not yet write off him or his firm; despite the changed world in which he is now operating.