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International: Sorrell: Web holding back the ad market

30-October-2006
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International: Sorrell: Web holding back the ad market

WPP chief executive Sir Martin Sorrell said today the relentless rise of the internet was a key factor in the depressed state of the overall UK advertising market.

The UK has a significantly higher proportion of advertising online than in many other countries, which has been an additional drag on the more traditional advertising media.

In WPP's case, UK revenues were up just 1% in the third quarter of the year, lagging behind the 3% growth seen in western continental Europe and 8% in North America.

In Britain, the web is set to account for 14% of advertising spend this year, ahead of radio, outdoor and even national newspapers, and double the global average.

Sir Martin said the web's importance would continue to rise, citing research from Google that 20% of people's time is spent online.

"I've got no pessimism about the future of the advertising and marketing services market, there are six or seven reasons why we should not be.

"But there's going to be a reapportionment of share. Google said we spend 20% of our time online, so in theory, and I stress in theory, that's where the internet market should go. It shouldn't just be 14%, it should be more than that."

Sir Martin also pointed to the factors making Britain an "aggressive" market for commercial operators - free newspapers, the role of the BBC and problems at ITV.

"We have got a very competitive market with BBC and Freeview in effect subsidised public corporations, which makes it more competitive than most," he said, speaking from New York. "Then there are special issues facing ITV - investment in product, no chief executive."

Looking ahead on a global basis, Sir Martin predicted 2007 would prove similar to this year.

"2005 was a good year, 2006 has been a reasonably good year, with 3-to-4% growth, 2007 we'll probably see the same."

He said although it was too early to make predictions for 2008, he was expecting growth to be boosted by spending on the Beijing Olympics and the US presidential elections.

"We are getting Beijing spending in advance," he added. "It's not all going to be in 2008."

WPP, the world's second largest advertising firm after Omnicom, said today growth had slipped in the third quarter, reflecting weakness in the UK market and a slowdown in Eastern Europe.

The group, which owns JWT and Young & Rubicam, said like-for-like sales growth was still ahead by more than 4% and said it continued to gain market share.

Revenues for the quarter rose by 4.6% to £1.41bn and operating margins were in line with its target of 14.5%.

WPP said it remained on target to meet margin targets for this year and next, "despite continuing concerns among some commentators about the prospects of the United States economy, its twin deficits, the indebted consumer and the direction of interest rates and commodity prices, and their impact on inflation".

The strongest regions for growth were Asia Pacific, Latin America, Africa and the Middle East, where revenues were up almost 16%.

Strongest growth was seen in the communications services sector, public relations and public affairs, with sales up by almost 14%, followed by branding and identity, healthcare and specialist communications, up almost 12%. Information, insight and consultancy was up over 8%, and advertising and media investment management up over 4%.

Net new business billings of $1.43bn (£756m) were won during the third quarter, taking net new business billings for the first nine months of 2006 to $5.5bn, an increase of almost 19%.

For the nine-month period, like-for-like growth was almost 5%. The group said: "Industry experts are still forecasting that advertising and marketing services will grow at 4% this year, which for the first nine months the group has exceeded, therefore growing market share."

But the market took fright at the third-quarter slowdown and WPP was one the biggest FTSE 100 fallers today, down 25p to 664p by lunchtime, a fall of almost 4%.

Source: Mediaguardian

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