Advertising Giant Hits All-Time High

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What's going on?

While the Mad Men era may be over, some advertisers are still doing pretty well: the worlds biggest advertising firm, WPP, saw its stock hit an all-time high on Wednesday as it reported first half financial results that were better than research analysts expected.

What does this mean?

WPP is an umbrella group that owns many advertising agencies such as Ogilvy and JWT (it also still spends hundreds of millions of dollars buying up small agencies each year). Advertisers use a metric called comparable net sales to measure their sales growth: WPPs climbed more than 4%, which was at the top of its class (i.e. better than peers Omnicom and Publicis). WPPs stock price also benefited from being a UK listed company, as its denominated in pounds but the companys income is primarily in dollars. So, when the pound weakens (as it sharply has in the wake of the Brexit vote), WPPs profit is higher in pound terms and its stock rises in response (all else being equal).

Why should I care?

The bigger picture: Advertising is another industry at risk of disruption.
As digital advertising becomes more popular, traditional advertising methods are being challenged (e.g. big TV ad campaigns). One of WPPs strategic priorities is to invest heavily in technology (e.g. programmatic ad buying and measuring advertising engagement levels). While theres still a role for Don Draper-type creatives (boorish behaviour aside), advertising, like many industries, is becoming very tech heavy.


For the stocks: Its been a fruitful year for advertisers next year looks to be more arduous.

The Euro soccer (a.k.a. football) championships, the Olympics and the upcoming US presidential election are all big 2016 advertising events – and WPP (along with other agencies) benefits from the overall increase in advertising spending. 2017 doesnt have quite the same line-up of major events planned, so itll be tougher for WPP and its peers to grow their sales.

Originally posted as part of the Finimize daily email.

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