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WPP's AI-focused strategy and cost-cutting measures unveiled
WPP, the London-based advertising conglomerate, is making tremendous breakthroughs in artificial intelligence (AI) and cost efficiency.
Mark Read stated that WPP sees AI as an opportunity rather than a danger, and that AI would complement, not replace, human innovation.
WPP, the London-listed advertising conglomerate, has launched an ambitious strategy aimed at leveraging the power of artificial intelligence (AI) while reducing the costs through restructuring. According to the Financial Times. WPP said at a capital markets day presentation in London that it has completed a bigger restructuring that consolidates its marketing, advertising, and public relations agencies into six networks: AKQA, Ogilvy, VML, Hogarth, GroupM, and Burson.
This combination is predicted to result in annualised net cost savings of around £125 million by 2025, with roughly half of that amount anticipated in 2024. WPP intends to save an additional £175 million in gross savings by cutting costs in its back office and other business sectors. However, the restructure will cost over £125 million in 2024.
WPP CEO Mark Read emphasised AI's tremendous impact on the sector. The corporation intends to invest £250 million per year in AI technology, which some analysts feel poses a threat to traditional advertising agencies. The funds will be allocated to AI systems capable of developing, planning, and purchasing marketing for major companies. AI has the ability to help more businesses conduct their marketing tasks independently.
Mark Read stated that WPP sees AI as an opportunity rather than a danger, and that AI would complement, not replace, human innovation. WPP's AI technology platform, WPP Open, is already used by over 28,000 workers throughout the firm and has been accepted by clients including L'Oréal and Nestlé.
The CEO acknowledged the uncertainties around the impact on employment in the field, saying, "It's much easier to see all the jobs that AI will disrupt than all the jobs it will create." According to the Financial Times, Read believes that AI will make creative persons even more important, levelling the playing field and emphasising fresh ideas.
According to the Financial Times, WPP's capital markets day focused on the company's ambitions for a progressive policy and a rigorous approach to mergers and acquisitions. The potential of private equity pushing for a break-up or sale of the business is being considered, and WPP is considering selling its 40% investment in Kantar, a company that conducts market research
The company established medium-term financial targets, aiming for over 3% sales growth less pass-through costs and a headline operating profit margin of 16-17 percent. WPP's 2023 performance is predicted to increase.The prediction for 2024 is a 0-1% increase in revenue pass-through costs, complemented by a 20-40 basis point growth in the operating profit margin.
Despite predicting challenges in 2024, particularly related to client losses in the previous year, Mark Read, expressed confidence in the business's return to growth in the near future.
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