WPP plans big for AI, allocates annual investment of £250 million

WPP has announced the next phase of its strategy to capture the opportunities offered by AI, maximise the potential of creative transformation and deliver faster growth, higher margins and improved cash generation.

Four strategic pillars support these goals:

Lead through AI, data and technology

Capitalise on WPP’s lead in artificial intelligence built on: the acquisition of Satalia in 2021; organic investment in AI, client technology and data; and deep partnerships with Adobe, Google, IBM, Microsoft, Nvidia and OpenAI

Drive improved returns to clients through a set of AI-enabled services and tools, delivered by WPP Open, our common technology platform, and powered by proprietary AI models

Fuel AI services with WPP’s proprietary data sets together with client, platform and market-level data to improve marketing performance for clients

Ensure appropriate safeguards for client information, brand safety, copyright and ethics

Expand the reach of our AI services through WPP Open, with more than 28,000 current users across WPP and adoption by key clients including L’Oréal and Nestlé

Also read:

Publicis flexes AI muscles, rolls out 300 mn Euros investment over 3 years

Unlock the full potential of creative transformation to drive growth

Expand our client relationships by further leveraging WPP’s global scale, integrated offer in creative, media, production and PR, and capabilities in growth areas such as commerce, influencer marketing and retail media to capture share in a growing market

Build world-class, market-leading brands

Lead the industry through six powerful agency networks – AKQA, Ogilvy, VML, Hogarth, GroupM and Burson – which now represent close to 90% of WPP’s revenue less pass-through costs

Realise the opportunities from VML as the world’s largest integrated creative agency and leverage GroupM’s simplified operating model and scale as the world’s largest media agency

Establish Burson as a leading global strategic communications agency bringing together BCW and Hill & Knowlton

Execute efficiently to drive strong financial returns

Deliver growth and structural cost savings as a result of the creation of VML and Burson and simplification of GroupM, unlocking scale advantages and further efficiency savings. Structural savings to deliver annualised net cost savings of c.£125m in 2025, with 40-50% of that saving expected to be achieved in 2024. Associated restructuring cost of c.£125m in 2024

Target c.£175m gross savings from efficiency opportunities across both back office and commercial delivery which will be used to invest in growth and support delivery of our medium-term margin target

This strategy will be underpinned by a disciplined approach to capital allocation with continued organic investment, a progressive dividend policy and a disciplined approach to M&A supported by a strong balance sheet and an investment grade credit rating.

Updated medium-term targets

3%+ LFL growth in revenue less pass-through costs
16-17% headline operating profit margin
Adjusted operating cash flow conversion of 85%+

Previous medium-term targets, outlined at WPP’s Capital Markets Day in December 2020, were for 3-4% growth in revenue less pass-through costs including an M&A benefit of 0.5-1.0% annually; with a headline operating profit margin of 15.5-16.0%.

Mark Read, CEO, WPP, said, “AI is transforming our industry and we see it as an opportunity not a threat. We firmly believe that AI will enhance, not replace, human creativity. We are already empowering our people with AI-based tools to augment their skills, produce work more efficiently and improve media performance, all of which will increase the effectiveness of our work. We also see opportunities to sell new AI-driven products and services to our clients and to capture more growth in areas like production.”

He further said, “Our long-standing investments in AI, including our AI-powered platform, WPP Open, and our acquisition in 2021 of Satalia, a leading UK AI company, are at the heart of our competitive offer. An ongoing annual investment of £250 million in data and technology to support our AI strategy is included in our 2024 financial plans.”

“While we had to navigate a more challenging environment in 2023, we see strong future demand for our services and are confident we can accelerate our growth over the medium-term,” Read added.