The Amazon Effect? WPP Reports Massive Slowdown In Ad Spends, Shares Tank 12%
The world’s biggest media company, WPP, has reported a stunning slowdown in ad spending by consumer product companies, sending its share price into a spiral and a shiver across the entire media landscape.
WPP stocks plunged as much as 12 per cent yesterday after the company again slashed its revenue guidance, which is now expected to be between zero and one per cent for 2017. That’s the slowest growth the company has experienced since the end of the GFC in 2009.
The company has blamed a dramatic decrease in spending by FMCG and packaged goods clients who are getting smashed by the likes of Amazon and other e-commerce retailers. It also follows dramatic cuts to digital spends by the world’s biggest advertiser, Proctor & Gamble, following the YouTube fiasco earlier this year.
According to analysts WPP laid out dismal earnings and “terrible guidance” and also blamed populist politics in the UK and US, fake news on platforms like Facebook and Google, and short-term thinking in business, for the terrible start to 2017.
WPP also blamed “technological disruption, cheap money, activist investors and zero-based budgeting models, which focus incumbents on short-term profitability and cost control.”
Following the announcement of WPP’s guidance numbers, a number of other media companies’ shares took a hit including Omnicom, IPG, German publisher Axel Springer, British broadcaster ITV PLC. In the US, shares of CBS, CNBC parent Comcast and News Corp were also much lower.
Commenting on yesterday’s results, WPP’s CEO Sir Martin Sorrell told the US media site CNBC: “Anybody who runs a packaged goods company, or has been involved in it, knows when the volume starts to slide that’s where their issues are.
“Consumer staples companies have also been challenged by activist investors to cut costs. “They are going to have to invest more in innovation and branding,” he said.
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