Forecasts booming digital demand
British advertising giant WPP on Thursday posted a huge first-half loss on asset writedowns linked to the coronavirus pandemic but forecast booming digital demand from online-savvy consumers shunning high streets.
WPP said it suffered a net loss of £2.6 billion in the six months to the end of June, after a net profit of £312 million a year earlier.
The advertising giant, which was hit hard by corporate cost-cutting in the face of the health crisis, added that it has taken £2.7 billion in impairments linked to the impact of COVID-19.
Revenues sank 12.3 percent to £5.6 billion compared with the last time around.
WPP, considered a bellwether for the advertising industry, forecast that the world ad market will shrink 11.8 percent this year after a 6.2-percent expansion in 2019.
However, it predicts a strong jump in digital revenues as more and more consumers spend increasing amounts of time in front of computer screens and smartphones.
“Digital media is expected to increase to 54 percent of total spend in 2020, from 48 percent in 2019, as the impact of COVID-19 accelerates an underlying structural trend,” WPP said.
“As consumers increased their time at home, we generally saw heightened levels of consumption of media and a rapid expansion of e-commerce activity. As a result, businesses are looking to grow their e-commerce and multi-channel capabilities.”
WPP believes the impact of COVID-19 will be more pronounced in Europe, which has been particularly hard hit by the deadly disease and was already a sluggish market prior to the outbreak.
Chief Executive Mark Read argued that the worst is over for the sector, provided that there is no second wave or re-imposition of lockdowns.
“Assuming there is no second wave nor major lockdowns, the second quarter is expected to be the toughest period of the year, although we remain cautious on the speed of recovery,” Read said.
“Our strategic transformation remains on track but as COVID-19 accelerates the change in our sector, we are accelerating our plans.
“We continue to attract new talent, invest in technology and e-commerce, and train our people in the skills they need for the future.”
He added: “We are working with our clients to help them get back to business, adapt their marketing strategies at speed and reshape their operations for a new world. Brands are seeing increases in online sales of 100 percent and more, and we are supporting eight of our top ten clients on e-commerce strategies.”