Strong and getting stronger

WPP is clearly getting it right. Against some expectations, 2008 was our strongest year ever, with record billings, revenues and operating profit. Last year was a maxi-quadrennial – when the Olympics in Beijing, the European Football Championships and a big-spending US presidential campaign combined to produce a powerful performance. That happened despite the credit crunch and the lack of a strongly anticipated ‘Beijing bounce’ in the third quarter.

Events and politics are critical. Of these, the American presidential campaign was perhaps the most exciting. It started early this time round, as far back as mid-2006, with the cost of nomination campaigns pegged at $150 million and presidential campaigns at $500 million. The only pity is that Michael Bloomberg, the mayor of New York, did not enter the race as an independent candidate or otherwise. That would have boosted election spending further by between $500 million and $1 billion to $3 billion – and that’s just the above-the-line figure.

Overall, in 2008, spending on worldwide communications services – advertising and marketing services – grew by 2-3% to $760 billion from an actual spend of $740 billion in 2007, based on more rigorous data now available to our Media Investment Management parent company, GroupM. WPP’s market share stood at nearly 10%.

Given the current crisis, the industry will probably contract globally by around 3-4% in the current year. GroupM forecasts a more than 4% fall in advertising, which now accounts for 40% of our business. The other 60%, while not immune, is less recession prone.

As a proportion of worldwide GDP, communications services probably fell during the recession of 2001-02, but grew between 2003-07 and probably stayed constant in 2008. Neither 2009 nor 2010 will be easy years, but we believe WPP is well placed to make the most of it. On the following pages, we will explain why.

Worldwide communications services expenditure 2008f1 $m

Advertising Market
Direct &
Sponsorship Total
North America 172,033 9,686 3,800 84,600 16,610 286,729
Latin America 18,766 1,430 265 19,500 3,400 43,361
Europe 124,244 13,300 2,400 99,000 11,700 248,644
Asia Pacific 116,603 4,300 980 32,700 9,500 164,083
Middle East, Africa
and Rest of world
12,968 1,900 14,868
World total 444,614 28,716 7,445 235,800 43,110 759,685

Worldwide communications expenditure 2004-2009f $m

Worldwide communications expenditure 2004-2009f  $m
Source: GroupM
Revenues cited here represent an estimated 80-90% of the worldwide market. Estimates exclude certain unmeasured trade/consumer promotional expenditures and very early stage economics.