WPP is always the last major marketing services holding company to report its numbers and this quarter it quietly changed the way it structures its sector reporting and restated last year’s comparatives.
The PR & Public Affairs bucket has been renamed simply PR. And Ogilvy’s PR numbers have been moved from the PR bracket into the Advertising & Media Investment Management sector, which is part of the Global Integrated Agencies category.
WPP’s PR bucket is presumably now restricted to firms including BCW, Hill+Knowlton Strategies, Finsbury and Buchanan.
As part of the process, revenues for 2018 have been restated under the new structure. Unless I’m missing something, this means that if you subtract the restated number ($880 million) from last year’s original number ($1.136 billion) you will come out with Ogilvy PR’s revenue for 2018, which by this criteria is $256 million, not including pass-through costs.
Keen students of PRWeek’s Agency Business Report will notice that the $256 million revenue number is markedly lower than the one we stated for Ogilvy PR in 2018, i.e. $387.5 million. The discrepancy of more than $130 million between Ogilvy’s number and PRWeek’s estimation seems an extraordinarily high amount.
Either the PR numbers have fallen off a cliff in a short space of time; it has become increasingly hard to determine what’s PR and what’s integrated in the new One Ogilvy single P&L structure worldwide CEO John Seifert introduced in January 2017; or… nobody really knows what’s going on.
A spokesperson for WPP told me via email: "It’s not a simply a matter of comparing the new categorisation with the old format to arrive at Ogilvy PR’s revenues. There are more factors in play."
Ogilvy’s U.S. operation certainly seems to be in "a state of flux." This May, U.S. CEO Lou Aversano was moved to global chief client officer, with Seifert taking on Aversano’s previous role as interim CEO. Global CMO Lauren Crampsie was elevated to president of Ogilvy’s combined New York and New Jersey operations at the same time Aversano’s role changed.
Seifert was already running double duty as interim leader of Ogilvy’s global PR and influence function following the departure of Stuart Smith in January this year, with no replacement in sight despite one being anticipated "by the end of Q1."
Two other execs promoted into wider Ogilvy positions in the 2017 restructure, global communications officer Jennifer Risi and global chief business development officer Suresh Raj, have also both since departed the iconic WPP firm.
My understanding is that PR revenue has indeed taken a dive in the U.S. - it would be interesting to know how many PR folks are left at the company’s New York HQ on 11th Avenue. PR revenues have also apparently fallen - less-precipitously - in Asia-Pacific, but are growing in the U.K. and Europe.
No wonder Seifert was unwilling to give up the agency’s controversial work with US Customs and Border Protection following the recent high-profile employee activist incident.
The restated WPP figures suggest that, in terms of operating profit after pass-through costs, Ogilvy PR contributed $37 million in 2018 at a margin of 14.4%, less than PR & public affairs’ overall performance of 15.7% on $178 million profit.
Removing Ogilvy PR from the PR bucket improves the 2018 margin, with the restated division contributing $141 million in operating profit at 16%. In restated terms, PR was the most profitable WPP division in terms of margin, ahead of Global Integrated Agencies (Ogilvy PR’s new home) at 15.4%.
In Q1 2019, PR & public affairs accounted for 9.2% of WPP’s overall revenues. In Q2, following the removal of Ogilvy PR from the figures, it accounts for 7.1%.
I fully accept that nothing is ever as simple as it seems when it comes to these holding companies. Each network has numerous variations on the interpretation of principles- and rules-based accounting methods and every country has its own vagaries in the way companies report.
In businesses as complex, convergent and constantly changing as marketing services, there are several other layers where assessment of disciplines and reporting standards can be extraordinarily complicated and, often, not very logical. The way numbers are pro forma’d when they are moved about is an accounting art that is way beyond my limited layperson’s comprehension.
It may well be, for example, that Ogilvy has never formally split out revenues from PR teams in certain countries, especially in the Middle East, where Ogilvy does have comms operations - whereas PRWeek takes account of all regions in our annual Agency Business Report calculations.
Notably, in WPP’s Q1 numbers, before the restatement, it claimed particularly strong growth in the PR & public affairs segment in the Middle East, without admittedly attributing it to any individual PR firm.
PRWeek’s regional numbers for Ogilvy PR in 2018 were: $125 million in the U.S., $150 million in Asia-Pacific, $40.35 Million in the U.K., $36 million in Continental Europe, $15.5 million in the Middle East, $12.5 million in Africa and $7 million in the Americas (non-U.S.).
But, let’s be clear, the holding company agencies never formally give PRWeek official numbers for our Agency Business Report, ironically blaming Sarbanes-Oxley for this lack of transparency, so there’s an element of smoke and mirrors in the way we calculate figures too.
I contacted Ogilvy’s Seifert for further exposition on these issues, but none was forthcoming at the time of publication.
WPP says the re-categorization of the reporting has been carried out "to bring it into line with the various structural changes that have taken place over the last year and the simplification of the group’s structure." It wants to align its technological capabilities more closely with its creative expertise and create "fewer, stronger, integrated agencies."
One example of this last year was the merging of Burson-Marsteller with Cohn & Wolfe, and the reconfigured BCW brought in $70 million in new business in its first year as a combined entity.
WPP’s U.S. healthcare firms have also been realigned with agency partners elsewhere in the Advertising & Media Investment Management sector, and healthcare revenues are no longer broken out of the overall numbers.
Whatever the real truth behind the Ogilvy numbers, one fact is for sure - with the increasing concentration of marketing services disciplines around core offerings that are harder and harder to distinguish from each other, it’s going to be more and more difficult to assess the performance of the individual disciplines within all of the holding companies.
* This article was updated on 8/19/19 with a statement from WPP.