WPP to invest £250 mn in AI; aims to save £125 mn by 2025 through consolidation efforts

WPP has revealed intentions to allocate £250 million for investments in artificial intelligence in the year 2024.

Last week, Publicis Groupe too announced an investment of €300 million in AI.

WPP, headquartered in London, has outlined its strategy for growth by harnessing the power of AI, technology, and data. The company has taken substantial steps in this direction, including the acquisition of AI specialist Satalia in 2021, as well as establishing partnerships with industry leaders such as Adobe, Google, IBM, Microsoft, Nvidia, and OpenAI.

WPP intends to broaden the accessibility of its AI services via WPP Open, highlighting that the platform boasts over 28,000 current users within the company, including key clients such as L’Oréal and Nestlé. Additionally, WPP aims to "implement adequate safeguards for client information, brand safety, copyright, and ethics."

WPP CEO Mark Read, said, “AI is transforming our industry and we see it as an opportunity, not a threat. We firmly believe that AI will enhance, not replace, human creativity. We are already empowering our people with AI-based tools to augment their skills, produce work more efficiently and improve media performance, all of which will increase the effectiveness of our work. We also see opportunities to sell new AI-driven products and services to our clients and to capture more growth in areas like production.

The company aims to achieve cost savings of £125 million by 2025 through its consolidation efforts, with 40-50% of these savings expected to materialize in 2024. In October, WPP merged Wunderman Thompson and VMLY&R, resulting in the formation of VML. Additionally, the company recently merged two of its agencies, Hill & Knowlton and BCW, to create Burson.

Consequently, AKQA, Ogilvy, VML, Hogarth Worldwide, GroupM, and Burson collectively account for 90% of WPP's business.

In addition to the AI investment, WPP provided a preview of its 2023 earnings, with the complete results scheduled for release on February 22. The company anticipates reporting a 0.9% growth in revenue for 2023 (excluding pass-through costs), aligning with the 0.5-1.0% guidance issued in Q3 2023.

Furthermore, the operating profit margin is expected to witness a 14.8% growth in 2023 (15.0% on a constant currency basis), consistent with the guidance range of 14.8-15.0%.

Looking ahead to 2024, WPP has projected revenue growth (excluding pass-through costs) of 0-1% and an improvement in the operating profit margin of 0.2-0.4%. The company clarified that these projections account for the AI investment.

In the medium term, WPP forecasts a 3% growth in revenue, an operating profit margin between 16-17%, and an adjusted operating cash flow conversion of 85%.

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