Aug 23, 2017

WPP cuts growth estimates due to weak ad forecasts

Pierre Metivier / Flickr cc

WPP, the world's biggest advertising agency and holding group, saw shares fall over 10% Wednesday morning after the group reported slowed growth in sales during its second quarter. The company also said that ad spend for the remainder of the year is expected to drop even further due to economic volatility affecting the advertising industry in key markets, like the U.K. and U.S. The company revised its second-half of the year sales forecast down further to 0-1% growth — its lowest point in nearly a decade.

Why it matters: WPP's estimates mainly reflect a slump in advertising for consumer goods, which the company says make up roughly 1/3 of its revenue. Some of the biggest consumer goods companies, like Procter and Gamble and Unilever, have been pulling back ad spend, particularly on digital, as a results of the overall economic volatility within the retail and packaged goods industries that are being upended by technology. In a separate interview Wednesday, WPP Chief Sir Martin Sorrell alluded to this, suggesting that tech giant Amazon was earning nearly twice what market estimates had projected on advertising this year.

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