Expectations Reset and New Turnaround Plan Can Lead to Short-Term Pain, but It Is Long Overdue

Before the rise of the internet, agencies like WPP generated revenue by shepherding advertising campaigns on traditional media. Over the past 20 years, the pace of digital advertising growth has far outpaced that of traditional media to the point where digital ad spending now comprises 80% of total ad spending, up from 40% in 2016. This shift creates an opportunity for agencies with the most robust consumer identity graphs to improve campaign targeting. Unfortunately for WPP, we believe its approach to orchestrating client data is inadequate compared with Omnicom and Publicis. The lack of owned data is likely to keep WPP's value proposition at a relative disadvantage and keep its shares at a persistent, but appropriate, discount to its rivals.