Close-Up: Live Issue - Has WPP been good for the industry?

Critics argue that it slashes prices and curtails creativity. Are they right, Emma Barns asks.

Starting out 20 years ago with a share price of just 28 pence, there is no questioning that Sir Martin Sorrell's WPP empire experienced enviable success. Its revenues are now £4.3 billion and it has a share price of 577 pence. However, apart from lining its shareholders' pockets, has WPP made a contribution to the UK ad industry as a whole?

Over recent years, WPP has helped shape the global ad scene. Since 2000, its acquisitions have included Young & Rubicam, Cordiant Communications and earlier this year, Grey Global Group, which it bought for £845 million. It employs 84,000 staff in 106 countries and its first-quarter revenues were up 16 per cent.

In 2004, this translated into the year's biggest new-business wins. HSBC and Samsung consolidated their communications accounts, worth a combined £450 million, into WPP. And as the only UK-headquartered holding company, WPP puts London firmly on the map of global power.

Bob Willott, the editor of Marketing Services Financial Intelligence, adds: "It's important for the aspirations of entrepreneurs in the British industry to have a communications group such as WPP on the stock market. It shows them that there are ways forward other than just selling out. And we could do with more publicly listed communications companies."

But what about the work?

WPP has been a key player in global consolidation. Global advertising and strong creative work are not frequent bedfellows. When WPP secures a global account, the work, more often than not, will move out of local agencies perhaps better-positioned to push the creative boundaries.

Peter Stringham, the group general manager of marketing at HSBC, argues that this is unfair criticism.

"JWT has had a dry spell but it's coming out of this and Ogilvy & Mather has done some terrific work around the world. It's not unusual for agencies' work to go in peaks and troughs. They are doing very well for us," he says.

Nevertheless, few could argue that WPP's closest holding company rival, Omnicom, has the creative edge. The awards tallies for its TBWA, DDB and BBDO networks are impressive.

Because of its scale, WPP is also frequently charged with offering discounts that price the smaller agencies out of the market. Its competitors complain this makes account wins become price-led decisions rather than ones based on the best creative solution or strategy.

"It gives clients the perception that services can be given away for free and this damages the business as a whole," Johnny Hornby, the managing partner at Clemmow Hornby Inge, says.

However, Willott believes that, overall, WPP has been positive for marketing services in the UK and worldwide. "Sorrell has focused management attention on the commercial running of a communications business," Willott says.

And, as you might expect from a former finance director, Sorrell has enhanced the focus on financial performance and operational efficiencies.

The right balance between this approach and giving creativity room to flourish is important. But, if WPP has helped to filter a more commercial outlook into an industry which was once perceived as being strewn with excess, then this is a worthwhile contribution.

- Got a view? E-mail us at campaign@haynet.com

THE CLIENT VIEW

Peter Stringham, group general manager marketing, HSBC

"WPP does distinguish itself from other holding companies by adding extra value to its clients. It is trying to do this through its model of being a parent company rather than a holding company. As a parent company, WPP provides its clients with the best possible people and gives them access across all its networks. This compares with the holding company model, which is just a financial institution that holds the reins across the piece.

"WPP's is largely an unproven model at the moment, so I'm not sure that it's the best for the business. But it is evolving and it's working for us."

THE INDEPENDENT VIEW

Johnny Hornby, managing partner, Clemmow Hornby Inge

"It's unfortunate when WPP or large holding companies negotiate as a holding company because it becomes less about the big idea and creativity and more about a bundled communications offering. This is unfortunate for the client, who should be searching for something bigger than a procurement-led bundle. It's also unfortunate for the agencies they are pitching against that are not part of a network. Money does become the discerning factor.

"Having said that, new-business league tables have been dominated by independents and not holding companies such as WPP over the past few years. This gives me faith that creativity will win through."

THE INDEPENDENT VIEW

Mark Lund, chief executive, Delaney Lund Knox Warren & Partners

"WPP has been good for advertising in terms of making it more aware of itself as a business. In the late 80s it was fantastically indulgent and not sufficiently business-oriented to care whether it was effective for its clients. Sorrell has put a focus on agencies performing well financially and on making sure that they are helping their clients' businesses.

"The only negative is that, by reputation, WPP regards those running its agencies as interchangeable. Undervaluing its people is not a good thing for the business."

THE WPP AGENCY VIEW

Simon Bolton, chief executive, JWT

"WPP has modernised the business in relation to what clients want. Advertising does not exist in the same way as it used to. It's so much more in tune with clients' issues than it was.

"WPP envisions what the business will do in five years' time and sets a plan along this agenda. This has helped to move the business forward faster than it would have done naturally. Sorrell has championed the cause for the holistic approach to communications as opposed to the traditional 30-second ad."

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