2016: The View From Adland

This article was first published by The Drum

My thoughts and predictions for 2016 on some of the big issues affecting the advertising and marketing services business – from the role of technology, content and data to the race for the White House, China's longer-term prospects and the referendum on the UK's membership of the European Union. 

1. Industry performance – more of the same

A boring prediction to open with but, in economic terms, 2016 will be very similar to 2015, maybe a little bit better for our industry. Globally, nominal GDP growth is looking like 3.5 to 4 percent, or 3 to 3.5 percent real. That’s pretty much what you’re going to see at WPP. We have forecasted like-for-like revenue growth of around 4 to 5 percent and net sales growth well in excess of 3 percent.

2. A maxi quadrennial year

2016 is what we call a maxi quadrennial year, meaning it will have a number of significant four-yearly events that typically boost investment in advertising and marketing services. The Olympics in Rio will be a stunning event. The recent announcement that Globo are going long with the IOC is very good news for not only for the Brazilian Olympics and the IOC but for the Olympic Games generally, for the Tokyo Olympics in 2020, for the PyeongChang 2018 Winter Olympics, for the Beijing Winter Olympics in 2022, and for whoever gets the Games in 2024. We’ll also have the UEFA Euro 2016 Football Championship, which helps too, and, last but not least, the US Presidential Election.

3. Hillary for the White House

I believe Hillary Clinton will emerge as the first female President of the United States. We don’t benefit that much directly from political advertising, but it does stimulate the media market, and that will add a little more growth. I think the US will continue to be good for us. The question is what impact the Fed’s decision on interest rates will have – the American recovery is there but it’s more fragile than people think.

4. Brexit?

The UK has been a very strong market for us. It will continue to be good, but not quite as good as it was, and that is partly due to politics. George Osborne is preparing the Conservative Party for his leadership into the 2020 election. We know that the Prime Minister won’t seek a third term and will perhaps retire some time after the Brexit referendum result, which we may get this year. The Chancellor, as we saw from his Autumn Statement, is managing the economy to the election in 2020. In other words, we have fiscal tightening at the moment ahead of, he hopes, more positive news as we go into 2019 and 2020. It’s the flight path to an election. The Brexit result is going to be crucial in terms of who leads the Conservative Party. If we vote to stay in I would guess it will be George Osborne. If we vote to come out, perhaps Theresa May or even Boris Johnson.

5. Strong Germany; France too big to fail

In Western Continental Europe we’re seeing more growth, albeit from a low base. Germany is strong. The Euro is very weak and it gives German exporters an advantage, despite the challenge of Ukraine and the Russian sanctions. Eastern Europe is tougher for those reasons. Spain has recovered from its low point and we’re seeing a little bit of strength there. Italy is recovering, again from a low base. France is still not recovering as yet, although I think it will – it’s just too big to fail.

6. Bullish on India and China (still)

We’re seeing a little more growth forecast for this year in Asia Pacific. Australia and Japan are still under pressure and while China will continue to be volatile this year I remain a raging Chinese bull over the longer term. In the next couple of years we can expect to see a resumption of significant growth there. India continues to be good. There are question marks over Modi’s ability to deliver, and his bench strength, but I think he will do so. He’s a rock star, certainly on his journeys abroad to the US and the UK, and he’s done an incredible communications job. Other markets like Vietnam, the Philippines and Indonesia continue to prosper.

7. Positives in Latam; Africa the continent of opportunity

In Latin America, obviously there are big challenges in Brazil, but the election of President Macri in Argentina is good news. We’re seeing increased strength in Mexico, despite the oil price, and Colombia continues to improve and do well. Africa remains the continent of opportunity, particularly Nigeria, which President Obama rightly describes as the China of Africa. And, although very volatile, there is considerable strength in the Middle East, particularly in the Saudi economy – again despite downward pressures from oil prices.

8. The functional perspective

From a functional point of view, advertising and media investment management continue to be extremely strong, along with digital. Public relations and public affairs has been stronger recently, and we’re seeing a little bit of life on the top line within data investment management. We want to see more but, importantly, the integration opportunities in the areas of technology and data and content with our media investment management business are very strong. Together, media investment management and data investment management are now one half of our revenues: over US$10 billion out of 20.

9. Clients under pressure

The DuPont/Dow merger is an extraordinary transaction that obviously sends waves (not necessarily shockwaves, but waves) across all categories. We’ve also seen AB InBev and SABMiller getting together, another major deal which has created a business with a market capitalization of US$200 billion. These are incredible achievements by Nelson Peltz and 3G, but if you’re running what I call a legacy business, you are facing a lot of significant pressures these days. At one end of the spectrum you have the disruptors like AirBnB and Uber, at the other end you have the zero-based cost budgeters like 3G, Valeant and Endo, and then in the middle you have the activist investors like Nelson Peltz, Bill Ackman and Dan Loeb, who are pushing for immediate results. That’s the environment our clients face, and no surprise, therefore, that they continue to be cost-focused and risk averse.

10. 113 countries?

Last year we entered our 112th country when we established our Man in Havana, and we may have our 113th in 2016 if Iranian sanctions are lifted. Iran is a sophisticated country with over 80 million people and very high levels of education. So, despite the political and social issues that surround it, it could be a very interesting commercial development.

11. Technology, data and content make the difference

Geography is easier to predict than technology. Who knows what 2016 will bring, or what will emerge from some garage-based start-up in California, Mumbai or Beijing? From an agency point of view, I’m very focused not just on the traditional differentiation of creativity, talent and pricing, but also technology (as we’re doing with Xaxis and AppNexus), data (as we’re doing with Rentrak and comScore) and content (as we’re doing with our investments in Vice, Refinery29 and Fullscreen, to name but a few). Expect to see more of this in 2016.