WPP's Sorrell blasts 'crazy' practices ruining ad industry

There’s a price war in Mad Men land as agencies resort to “crazy behaviour” to win clients, the world’s biggest ad guru is warning.

Speaking as he unveiled record profits that top £2 billion for the first time, WPP chief executive Sir Martin Sorrell said relentless cost-cutting by large corporations is placing pressure on the Soho world.

In a tough economic environment that will get rougher this year, “clients are generally grinding it out in a highly competitive ground game, rarely resorting to a passing game or Hail Marys”.

While WPP saw revenues jump 16% to £55.2 billion, while profits jumped 22% to £2.1 billion, Sir Martin admitted that favourable currency moves and acquisitions were behind a chunk of that growth.

The outlook this year is “pressurised” he told the Standard. “One or two competitors are doing crazy things,” he said.

These include up-front discounts on ads, reduced “creative and media fees, extended payment fees” and other promises on liabilities in order to win accounts “at any cost”.

“You are only as strong as your weakest competitor. These practices cannot last, and will only result eventually in poor financial performance and further consolidation”, he said.

The City took fright and the shares were at the bottom of the FTSE, down 6%, 109p, at 1802p.

Clients are worried about technology disruption from the likes of Uber and are struggling to hit profit targets.

Sorrell said he “continues to be concerned” about Brexit uncertainty, but says the Trump administration in the US is more business friendly than the previous one.

WPP employs 198,000 people in 113 countries at agencies include Mindshare and JWT. Its clients include most major corporations, including United Biscuits, maker of McVities. It said on Friday that net profit rose 21% last year to £1.4 billion ($1.72 billion).