WPP the worlds largest advertising services group had an interesting effect on wall street after reporting its quarterly earnings recently. WPP posted a decline in profits for the first time in recent quarters with poor outlook for 2018. Sir Martin Sorrell, the founder and CEO of WPP said that there are many factors which had lead to the decrease in his companies revenues and his guidance for 2018. Given the current low growth world, companies are focused on cost and marketing services are first the taste the impact. What was most important to wall street says Hansen Naidoo, Global CEO of Extrordinair Group is that its a preview of the cost cutting intitiatives by the worlds largest advertisers for 2018, this will impact the marketing services industry and the media industry at large.
Hansen Naidoo - Global CEO Extrordinair Group & BELOUGE
What is more worrying for wall street and the marketing/media industry is the payment terms that large advertisers are demanding. Companies like 3G capitals ABI-SAB/Miller are demanding 120 payment terms, with an extension to 150 days. The industry could collapse with these demands and would cause major consolidation in the advertising holding company space. Wall street took into account all of the correlated stocks which would be effected by this and adjusted them accordingly. Next year looks to be the same of low growth combined with low inflation which leads to a lack of pricing power for cpg brands.
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