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Sorrell sees "tough times" ahead

News, 30 June 2009

LONDON/CANNES: Sir Martin Sorrell, chief executive of WPP Group, the marketing services conglomerate, has pointed to a combination of fierce agency competition and clients wanting more for less as the main dampeners on levels of profitability this year.

Sorrell's comments dovetail with a recent report from Group M, WPP's media arm, announcing that it expects global advertising to drop 5.5% in 2009 – a revision on the 4.4% it forecast in March.

Speaking to the Financial Times at the Cannes Lions International Advertising Festival, Sorrell said: "These are very tough times and clients are behaving in quite a tough way. And it's a pretty brutal environment, more so than it has been for some time."

As a result, he explained that it would be "very difficult" for WPP to meet its 14.3% target for adjusted margins, an indicator of profitability.

Increased involvement of client procurement and finance teams in communications purchasing, a growing trend of advertisers to call pitches in search of better value and "fierce price competition in the media business" were all contributing factors, he said.

Looking to the future, the GroupM suggests a modest recovery in the global advertising market in 2010, with spending stabilising at around $411bn (€292bn; £248bn), although this will still amount to a year-on-year decline of 1.4%.

The "BRIC" markets and other new economies are expected to lead the recovery, whilst GroupM's prognosis for the US – the word's largest advertising market – was gloomy.

A contraction of 4.3% in 2009, said the media outfit, would be exacerbated by a 6.5% drop in 2010 – a sentiment tempered by Sorrell who suggested it was "unduly bearish".

Data sourced from eMarketer and Financial Times; additional reporting by WARC staff