Ad market bouncing back, says WPP's Sorrell

Sir Martin Sorrell's ad group has reported a 36% jump in profits - driven, surprisingly, by the US.

Last Updated: 31 Aug 2010

Expect Mad Men-esque scenes of celebration at the normally discreet Mayfair head office of ad giant WPP today, after it revealed that profits have risen by more than a third over the first six months of the year.

The company, which is the world’s largest advertising group, reported profits up 36% to a respectable £244m. Boss and founder Sir Martin Sorrell says much of the recovery was driven by an impressive (and rather surprising) turnaround in the US market – where revenues were rising 8% by the second quarter, having dropped by 6% last year.

Sir Mart – celebrating 25 years at the helm of WPP, which incredibly also still makes the Wire and Plastic Products its full name suggests -  says he ‘cannot remember a more speedy recovery or turnaround of a region’  Some welcome good news for the storm-tossed American economy at last.

So for WPP, at any rate, the recovery seems to be underway with revenues rising by 3% to £4.45bn. The group says it’s seen a ‘sequential’ monthly rise in revenue throughout the year, with like-for-like revenues rising steadily each month. By the end of July, month on month growth was running at 3% - not bad.

Because of the group’s sheer size (it owns the likes of Ogilvy & Mather and JWT as well as numerous PR and research businesses, and counts global brands like Unilever and Vodafone among its customers), its results are a useful barometer for the industry as a whole. And things don’t look too shabby – as well as the anticipated strong growth in the Asian market, and the surprise results from the US, even the UK and Europe aren’t doing too badly. But he admits things are likely to get tough here in the UK as a result of the government’s fiscal tightening.  

The outlook for traditional media also looks fairly positive, according to a YouGov poll for Deloitte. Just over half of viewers still see TV as the most memorable form of advertising (although 90% with a digital recorder skip the commercial breaks), while 10% prefer newspaper ads.

Just 2% like online videos and only 1% are fans of online banner advertising, however, which suggests the industry has work to do on finding effective new digital revenue streams.

So, good news all round then? Well, up to a point, Lord Copper. The big question is whether WPP can keep up this encouraging performance, or whether we will be looking back on it in a year or so as a blip. Let’s hope it turns out to be the former.

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