WPP looks to AI to boost bottom line following collapse in advertising giant's profits

By Louis Goss

Advertising giant WPP on Thursday outlined plans to use artificial intelligence to increase its profitability after reporting a collapse in its profits for the full-year 2023.

WPP's plans will see it start selling AI products and consulting services to clients, while also using the technology internally to "augment" positions inside the company and increase its own productivity.

The British conglomerate's plans follow its January pledge to invest GBP250 million a year into AI technologies that it hopes will help it cut its operational costs and increase its revenues by improving the outcomes of its work.

In a statement, WPP CEO Mark Read vowed to embrace the opportunities offered by AI, saying the technology "will be fundamental for our business."

The CEO comments follow an underwhelming set of results that saw the FTSE-100 company report a 70.1% drop in its pre-tax profits for the full year 2023.

WPP CEO Read blamed the drop in profits on lower spending by its technology clients, which it said would likely continue into 2024, as the technology boom continues to subside.

Shares in WPP (UK:WPP), which owns advertising giant Ogilvy, fell 4% on Thursday, having lost 26% of their value over the previous 12 months.

In a call with investors, WPP CEO Read explained the firm plans to use AI to "augment, not replace" roles inside the company in order to increase productivity.

The CEO noted that major companies will continue needing work that is "copyright proof" - despite the emergence new generative AI tools such as OpenAI's SORA that is able to produce videos from text prompts.

Read, who succeeded WPP founder Martin Sorrell in 2018, said the firm has already seen that "augmented work is driving better return on income for our clients."

Read added that the shifts enabled by AI could eventually see WPP "shift away from hours-based compensation to remuneration more linked to results, particularly in areas such as commerce, media and production."

The WPP chief said AI could also help the advertising firm cut its "back office costs" and make the company "more efficient" in order to boost its profitability over the medium term.

At its capital markets day in January, WPP previously vowed to invest GBP250 million in a year in developing its own proprietary AI technologies.

The company plans to train these new AI tools using its own, and client, data, with a view to improving its clients marketing performances.

-Louis Goss

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02-22-24 0848ET

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