The rising cost of advertising on network television is forcing
more clients to consider alternative media, according to Martin Sorrell,
chief executive of the WPP Group.
In a statement detailing record profits for WPP in the year to 31
December 1997, Sorrell took a swipe at the ’oligopoly of media owners’
who have forced up the real cost of network television by as much as 10
per cent per year in both the UK and US.
’As long as network price inflation continues, clients will increasingly
experiment with alternative media,’ he said. However, Sorrell added that
the increase posed an opportunity for agencies. ’If companies like
Procter & Gamble are spending pounds 3 billion on advertising, they will
be looking to their agencies for how to spend it.’
WPP’s results, which were released on Tuesday, caused a 12.5p leap in
its share price by the end of the day. Turnover was up 2.9 per cent to
pounds 7.3 billion and pre-tax profits rose 16 per cent to pounds 177.4
million. Combined advertising revenues at J. Walter Thompson and Ogilvy
& Mather Worldwide rose by 9.3 per cent.
Sorrell said rising TV costs were one reason why revenues in core
advertising operations had grown more slowly than the double-digit
figures posted by WPP’s information and consultancy, public relations
and specialist communications companies.
He observed that there was still an opportunity to improve margins as
WPP trailed behind rivals such as Interpublic and Omnicom. These had
operating margins of 13-15 per cent, compared with a WPP margin of 11.8
Sorrell predicted that the Pacific Rim advertising market would grow by
nearly 10 per cent this year in spite of the area’s economic turmoil.