WPP says ‘too early’ to know whether AI overhaul will hit advertising jobs

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WPP, the London-listed advertising group, has set out plans to invest hundreds of millions in artificial intelligence as part of an overhaul of its operations to meet new client demands for tech-led marketing.

In a capital markets day in London on Tuesday, the group said it would spend £250mn on AI development this year, with plans for similar investments in the future.

Mark Read, chief executive of WPP, said it was “too early” to say whether these moves would lead to more or fewer jobs in the sector. He told the Financial Times that the strategy reflected “how we think the company needs to be organised to succeed in an era of AI”.

He added: “It’s much easier to see all the jobs that AI will disrupt than all the jobs it will create. But it’s going to make creative people even more important because it can level the functional playing field and make the idea itself even more critical.”

WPP lost about a fifth of its value over the past year as investors remained concerned about how the stalling global economy was affecting its business, as well as the existential threat of new technology such as AI to its traditional marketing operations.

Read warned on Tuesday that there would continue to be challenges for the business in 2024, pointing to the impact of some client losses last year, before predicting a return to stronger growth.

WPP shares initially rose more than 6 per cent on Tuesday after the group upgraded its medium-term financial targets on the back of cost-cutting measures, before falling back to trade at about 1 per cent higher.

WPP said it had completed a broader restructuring of its marketing, advertising and PR agencies under six networks — AKQA, Ogilvy, VML, Hogarth, GroupM and Burson.

This merger process would deliver annualised net cost savings of about £125mn in 2025, WPP forecast, with close to half of that expected to be achieved in 2024.

It is targeting a further £175mn in gross savings from cost reductions in its back office and other parts of the business. However, WPP warned that there would be an associated restructuring expense of about £125mn in 2024.

WPP will invest an annual £250mn in the sorts of AI technology that many analysts believe poses a threat to the sector, with the potential to replace many of the functions of an advertising agency in creating, planning and buying marketing for big brands. AI could also allow more companies to carry out their own marketing functions.

Read said “AI will have a profound effect on our business”, pointing to the opportunities for AI-enabled services and tools for its clients to help create marketing campaigns at scale.

WPP Open, its AI technology platform, is used by more than 28,000 people in the group and has been adopted by clients including L’Oréal and Nestlé.

WPP said it had a medium-term target of more than 3 per cent growth in revenue, less pass-through costs, from a previous goal of 3 to 4 per cent — a figure boosted by mergers and acquisitions. Headline operating profit margin in the medium term would be 16 to 17 per cent, it said, up from 15.5 to 16 per cent. 

It said that like-for-like 2023 revenue, less pass-through costs, was expected to be 0.9 per cent, at the upper end of guidance of 0.5 to 1 per cent, with an operating profit margin of 14.8 per cent, again at the top end of guidance.

For 2024, like-for-like revenue, less pass-through costs, was forecast at zero to 1 per cent, with a headline operating profit margin improvement of 20 to 40 basis points.