Global digital advertising spend broke through the $100 billion barrier last year, according to eMarketer, meaning that desktop, laptop, tablet, and mobile advertising now accounts for about 20% of the market. While the milestone made for eye-catching headlines, it represents only the first phase of an inexorable revolution which will see the advertising and marketing communication industry go entirely digital within a decade, predicts Mark Read, head of strategy and CEO of WPP Digital, a scheduled speaker at the March 1st London Web Summit.
“That is the transition we are going through,” says Read, who is viewed as a leading contender to take over from Sir Martin Sorrell when the WPP CEO, who is 68, eventually steps aside. “And we’re not done yet by any means.”
Today, some 32% of WPP’s business is digital, making it the seventh-largest digital media company globally. That is good news for the UK.
Placing the Internet at the core of big corporations’ businesses is key to ensuring that London becomes one of the top five global tech hubs, says Saul Klein, a partner in the London office of Index Ventures and a co-founder of Seedcamp. He maintains that since the Internet economy is now worth more than 8% of the UK’s GDP every company in the FTSE 100 should be doing at least that much of its business digitally. (See the cover story for more information.)
Going digital often means bringing innovation in from the outside, benefiting start-ups that set up in close proximity to London’s thriving advertising sector. For example, the Bakery — a newly-launched East London accelerator supported by the Institute of Practitioners in Advertising, Tech City Investment Organisation, and UK Trade & Investment to help fund marketing and advertising technology start-ups — is helping connect young companies to big brands as well as advertising agencies such as Vizeum, Havas Worldwide, MBA, Karmarama and KitCattNohr Digitas, to help solve industry challenges.
Digital Shopping Spree
WPP has also sought outside aid to go digital. For the last six years it has been on a digital agency buying spree — a sort of corporate giant’s version of supermarket sweep. In 200, the company bought New York-headquartered 24/7 Real Media (now 24/7 Media Inc.), a digital marketing agency with 18 offices in a dozen country. “That [acquisition] was critical for us to develop a really strong bench-strength of digital media technology and we’ve used that, in partnership with [media investment management operation] GroupM, to launch businesses like Xaxis, an audience buying company,” which claims to house the world’s largest pool of audience data, says Read.
“Other highlights, if that’s the right word, include AKQA, which we bought last year,” says Read. “They are obviously a fantastic digital agency — you could almost call them an innovation or digital technology agency. Their work goes beyond just communications, into helping clients re-adapt their business for this digital environment.”
WPP has acquired a variety of new skills through its recent acquisitions, says Read. In keeping with its focus on emerging markets, it bought F.biz, Brazil’s leading digital agency. It also snapped up Blue State Digital, a company credited with helping U.S. President Barack Obama win the 2008 and 2012 elections, which focused on political, non-profit and commercial work globally. Another acquisition, Acceleration, helps marketers and publishers integrate technology such as ad-serving analytics systems.
Additionally, earlier this year, WPP bought UK-based e-commerce digital agency Salmon, which builds e-commerce sites and other digital consulting services for retail clients including Argos, Morrisons, Game and Halfords in the UK. “Acquiring Salmon reminds us that digital is an opportunity for WPP to get into new areas of business which weren’t in before,” adds Read.
At WPP “digital is now the lead medium,” he says. “We are now at a stage where — from our clients’ perspective — increasingly digital thinking leads the creative process. What you might call a ‘media neutral’ idea is often a digital idea, if it’s still possible to differentiate between an analog and digital idea anymore, which I’d argue is hard to do. Five years ago, for example, you would have thought about digital at the end of the campaign; now it’s the thing you do at the beginning. Often we summarize our strategy, as a group, as ‘China and the Internet.’”
The data certainly supports WPP’s digital-first approach: digital is forecast to climb steeply — to $163 billion by 2016 — when it will account for 26% of the total spent on ads in all media globally, with 36.7% of digital spending in North America, 23.7% coming from Western Europe and 29.8% from Asia-Pacific, according to eMarketer. From social networks to Big Data, digital’s roll-out is making advertising and marketing communications far more complex.
Read argues that this very complexity is good news for WPP. Part of its business has become helping its clients find signal in the noise. “Clients need experts and independent advice to help them navigate their way through [the digital space],” says the 46-year-old executive. “That’s why I see it as an opportunity — if we are on top of what is going on. The other thing for WPP, which is helpful, is that we’re not like media owners or technology companies, who have to bet on particular technologies. Whilst we have to have a good understanding of technology, of course, we are to some extent agnostic. Our job is to reach consumers, wherever they are, in any channel. And that is beneficial to us — if mobile takes off, for example, we need to be in mobile, but we don’t need to make a bet on whether or not it will.”
Going For Growth
The key is to focus on the growth areas, says Read. “The mistake that everyone makes is assuming that TV is going away. I would say press, print and magazines are very challenged. But our projections for TV show that global ad spend is due to increase over the next couple of years, not decline. Part of that is that TV is growing very strongly in markets like Brazil, China and India, with their rapidly-developing TV platforms, fast-growing middle classes and the need for brands to build themselves up and reach consumers. But I’d say that if you looked out five years away, it’s going to be a TV and digital world — not one or the other. It is both. And success for WPP and for WPP’s companies means adapting to, understanding and operating in that environment. So, I think we will see less split between traditional and digital channels and more integration of them. But they might play different roles — TV may be more the brand-building channel and digital may be more the close-the-sale channel, as it were.”
He is notably far less bullish about print media. “I think, newspapers and magazines have a very challenging future,” he predicts, choosing his words carefully. “The shift to mobile is going to make life even more challenging for them. If you go to Pret A Manger at lunch time, and look at how many people are reading newspapers, the answer is not very many these days.”
Asked to name the big trends WPP sees looming ahead of it in the digital firmament, Read lists mobile, e-commerce, social media and data. “Those would be the four things at the highest levels of the group that we are worried about,” he says. “This might be a dangerous thing to say, but they might well be the same four things we’re worried about five years from now. We will have largely made the transition to mobile by then — certainly 50% of page views will be on mobile. E-commerce will still be, in some parts of the world, something that traditional retailers are wrestling with and others are taking advantage of. Social will be critical, but I think we will be better at managing it by then.”
Of the four, data is likely to be “the one we’re most worried about in five years’ time,” says Read. “It is going to have to be even more interoperable. We set up an initiative called The Data Alliance to bring together all the data we have across WPP and help to connect it. The trick about Big Data is not having the data, but how you make it available at the time and place you need it to make marketing decisions. That’s why, if I had to pick one, I’d say data is the area we are — and will be — wrestling with the most, as we look ahead,” he says.
Some Key WPP Digital Acquisitions
What? E-commerce digital agency
Price tag? Undisclosed
What? Digital agency
How Much? Undisclosed
Who? AKQA Holdings Inc.
What? Digital agency
Where? U.S., UK, France, Germany & China
How Much? $540 million
What? Marketing technology
Where? UK, U.S. and South Africa
How Much? Undisclosed
Who? Blue State Digital
How Much? Undisclosed
WPP By the Numbers
Employees: 162,000 (including associates)
Reported Revenues: £10 billion (31st December 2011)
Reported Billings: £44.8 billion (31st December 2011)
Market Capitalization: £10.8 billion (May 2012)
(Source: WPP website)