is it better to be big in a recession?
Interesting to see the different predictions currently being made on how the recession is going to affect our business.
Last week in Campaign magazine, in an article about ‘micro-networks’ suggesting that 'the end is nigh for the little guy', journalist Arun Sudhaman quoted WPP Chief Executive Martin Sorrell as saying that agency ‘Goliaths would fare better in the downturn than ‘Davids’. This view was echoed by the Global Chief Exec of (WPP owned) Ogilvy and Mather. And an unnamed ‘senior network agency head’ is quoted in the piece as suggesting that if he was Sir Martin he would approach Wieden + Kennedy’s clients and ‘offer the Wieden bit for free’. Brilliant plan! Exactly how doing loads more work for free would boost the network's profits or improve the quality of service to clients is not explained in the article.
Meanwhile, in Sunday’s Observer, there seemed to be an alternative view of things:
Global advertising firm WPP will cut a total of 7,200 jobs this year, many in Britain, Europe and the US, where growth has been falling as the recession forces companies to slash their advertising and marketing budgets. Scores of people in London, as well as elsewhere in the UK, could be affected.
Last week, Sorrell indicated that WPP's like-for-like revenue would probably fall by around 5% this year, about double what he predicted two months ago.
(WPP’s) share price has taken a beating as investors worry about its debt pile of £3.75bn. Morgan Stanley said in a recent note: "[WPP] has by far the highest leverage, and has delivered weaker growth rates than competitors in recent quarters. It has also performed poorly in the last two recessions."
At the end of March, Standard & Poor's, the credit rating agency, revised its outlook on WPP from stable to negative. "It is likely that WPP will suffer a greater revenue decline, on an organic basis, than it has budgeted … deleveraging will be difficult before 2010."
So, two quite different views on how WPP and big networks are placed to see out the recession. For my part, I don't think ‘big’ or ‘small’ is the issue. Bigger isn't better: better is better. Good agencies (large or small, whether part of a network or not) will survive the recession. Not so good ones won’t.
But none of us knows what will happen. If governments, banks and economists can get it so wildly wrong, then there’s no point me trying to guess. All we can do is to keep focusing on the main thing and try to do the best work we can for our clients and ourselves.