Today’s topic du jour isn’t even a word but an abbreviated name. Whereas yesterday markets were somewhat spooked by a relatively obscure British firm, Provident, today they are again by still another. This time it’s WPP Plc, an advertising aggregation firm that owns a sizable portfolio of ad agencies located all around the world.
Given that position, the company’s fortunes, or misfortunes, can provide a proxy for macro conditions. Their guidance today was worse than expected, suggesting that quite against “reflation” hopes there might still be the opposite tendencies in the global economy. Worse, if WPP is right, these negative factors are bleeding out from North America, meaning primarily US firms.
As a company tied to the advertising business, the cutbacks they have seen (including losing some banner clients) makes one wonder what is really going on here. But like so many others in similar positions, the nature of the problem is tangled up in other issues.
“The digital disruption is a fundamental one,” Sir Martin Sorrell, WPP’s chief executive, said in an interview. “If you’re a manufacturer and you have to reach people directly through, for example, Alibaba then it’s going to change things.”
The business itself is undergoing a radical change, hand in hand in some ways to what’s taking place in the retail industry. Mass marketing by its very nature is inefficient and has become quite costly. The upside, its effectiveness, has been questionable from the very beginning of mass media.
The rise more recently of social networking through American giants Facebook and Google has threatened to alter the status quo. These firms are at their very core data collection tools, and their products have always been you. They claim to know everything (or close to it) necessary to more effectively promote especially company brands to people who voluntarily identify their own core selling characteristics (as well as other information, whether they know it or not).
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