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This is Business Live from BBC News, with Rachel Horne and Ben Thompson.
Advertising a slowdown, global giant WPP misses targets
as big companies pull spending on adverts.
Live from London, that's our top story on Wednesday 23rd August.
Consumer giants are cutting their ad spend with WPP, but is it a sign
of economic weakness or just a symptom of the shift
Also in the programme, Typhoon Hato causes havoc in Hong Kong,
leading to hundreds of flights being cancelled and a stock
We have the FTSE 100, down, the WPP share prices down already tempers
and this morning. We will bring you all of those figures in a moment.
And we'll get the Inside Track on the cost of keeping fit.
We meet one man flexing his financial muscles -
and boosting his gym empire in the depths of a recession.
And with the global fitness industry now worth a staggering $83bn
a year we want to know, how much do you spend
WPP - the world's largest advertising group -
has cut its sales outlook, after a drop in demand
from consumer goods clients and weak trading in the US.
Like-for-like net sales fell 0.5% while underlying net sales in the US
fell by 2.2% in the first half of the year.
Shares in he giant have tanked this morning ,
The advertiser is seen a bellwether for an industry that's changed
While the total spent by brands globally on advertising in 2016
was up at $493 billion, where it's being spent
were effectivly flat, global digital ad sales
That number will of course keep growing,
and by 2021 it's estimated it will account for 50% of all adverts.
Well, mostly to Facebook and Google, together they control
54% of the global digital advertising market,
But are adverts on these platforms even getting to their audience?
It's been estimated that invalid traffic, that's where a bot rather
than a human views an advert, is costing advertisers a staggering
$16.5 billion a year, and that number is expected to grow.
Well, a little earlier I spoke to Sir Martin Sorrell,
the CEO of WPP who explained what his company was doing
There are a couple of points here. First there is the bots issue, that
these ads are not being watched by people but by machines and we are
ever vigilant on that. Group M, our media planning and buying company,
which buys about $75 billion of media around the world, about 25% of
worldwide media that goes direct to agencies, or goes through agencies.
They have very high standards, in terms of viewability, measurability
to try and counter that. And then there is the consumer brand safety
issue, which you are sort of referring to, which is that some
material might end up in less than satisfactory, to put it mildly,
areas or parts of the internet. And that is an area it has become even
more important, fake news and fraud also becoming important. And that is
a question. You can't be 100% certain that you can cover this,
that you can be much more stringent, in terms of the rules. Facebook, for
example, and Google have made strenuous efforts recently, under
some pressure to do so, but they have made strenuous efforts
recently, and they dominate digital advertising.
With us is Stephen Woodford, Chief Executive at the
There is a lot for us to get through in these results but first of all it
is worth living at what advertising tells us about the wider economy,
because it is one of those things we call a bellwether, when advertising
is doing well, the economy tends to do well, and vice versa. So what
does this tell us about the economy? When you look at the contribution
advertising makes to the economy it is a very important bellwether. It
has a big impact on the overall economy, as well as being a big
sector in its own right. One of the things we should think about it is
2016 was a record year for the advertising industry, particularly
in the UK. 2017, we are still forecasting some growth. Why was
2016 so good? It was surprisingly good because in effect all of the
Brexit scare stories did not serialise, the this is where it
feeds through to the bellwether, because business confidence in a
sense determines a lot of advertising decisions, so it is
businesses's expectations of what consumers will be doing. What do you
think that these figures we have seen from WPP? The markets are
surprised, the share price has fallen by over 10% this morning.
Were you expecting the sorts of figures from WPP? I think we were,
in terms of potentially less organic growth may have had in the past but
I can't really comment on the share price fall, but I do think it is
worth saying about WPP, it is the world's leading company so it is a
very good bellwether for the global advertising industry, and it is also
a reflection of the British advertising industry, how many
industries is the world's biggest company a British one? I think WPP
is something we should be very proud of here in the UK. If it is a
bellwether, does it sound the alarm that they are growing their growth
predictions, sales have fallen, problems in the US? I can't comment
on the detail of that but I think there is overall a potential
softening of demand because of the overall global economy. That being
said, if the US carries on performing strongly I would expect
advertising to rebound. Certainly in the UK at our expectations are low
growth but still some growth in line with the economy. If you look at an
organisation like WPP, traditionally made a lot of its money from TV and
big billboard ads. Clearly that has now changed and it is now digital.
You might say a integrated agency that can do online, print, big
posters and TV is commandeering the market. Where is the growth coming
from? Digital platforms in particular, and the piece before
talked about the growth of Google and Facebook. But it is worth saying
all advertising media is going digital. Even the oldest media,
posters, is not for the 5% digital, in terms of digital outdoor display
ads and so on. The industry, television and radio and press is
going digital. This year, digital revenues up by 25%, a quarter of all
of their advertising revenue. Even press is very strongly going on the
digital channels, so I think the whole industry is changing towards
more digital channels. This dominance from Facebook and Google,
when it comes to digital advertising, can you see anybody is
coming in in the future and taking any share off them? It is hard to
predict the future. The rise of other platforms, Google and Facebook
will fear most new platforms coming, whether it is Amazon or others. It
is a strong overall indicator of the health of the market is the balance
between these two things. Generally, advertising works best when you use
a multiple of channels, ideally for the five different channels. TV on
its own can be very good, digital on its own can be very good, when you
use the two together you get better results. The best advertising tends
from using brand building advertising and short-term
advertising, which is usually digital. You have an update on the
WPP share price, you saw it on the screen, it is down 149 points this
morning, more than a 10% fall in the share price in the first 38 minutes
of trade for WPP, so investors not to thrilled.
In Hong Kong, the city's stock market has been shut down
and flights have been cancelled by Typhoon Hato, which has been
Sharanjit Leyl is in our Asia business hub.
What impact is that storm having on the financial markets, they have
been shut, schools and businesses shut, what impact will that have on
the city? You pretty much said it, all of those things are shut down.
Hong Kong has come pretty much to a standstill. The typhoon really a
category eight storm, down from category ten, which means the struct
of Winscombe huge waves, uprooted trees, flooded streets, closed
businesses. No trade for the Hang Seng. We know it is the worst storm
the special administrative territory hasn't Jordan Silk -- since 2012.
More than 400 flights have been cancelled and cafe Pacific said the
storm would severely impact flights. We are told only one flight managed
to land earlier this morning. Now the schools are closed, all of the
skyscrapers in Hong Kong's iconic skyline are shrouded in darkness, as
workers stay home. Bearing in mind it had been a category ten typhoon
warning initially and this was really only the third time one had
been issued since 1997 when the former British colony was handed
over to China. Even though the territory suffers the storms on
pretty much an annual basis, this one may well be bad enough to have
an impact on businesses and the economy. Thank you very much.
Let's take a look at some of the other stories making the news.
Chinese car-maker Great Wall Motor has said it has not held
talks with Fiat Chrysler, putting a possible bid
Great Wall confirmed it had researched the US-Italian car-maker
but made no substantial progress towards a deal.
On Monday, the car-maker expressed interest in buying
Shares in the Chinese firm fell 2% in Shanghai after the announcement,
Amazon's blockbuster deal to acquire Whole Foods Market for $13.7 billion
Whole Foods shareholders are voting today on the deal,
which would propel Amazon further into the grocery business
The size of the gender pay gap in the movie industry has been
It estimates the top ten actors earned $488m last year -
three times their female counterparts - who took home $172m.
Transformers star Mark Wahlberg tops the male list at $68m, compared
with $26m for La La Land's Emma Stone.
Let's look at how the markets have been getting on. Markets in Asia
generally up just a little, following a surge they saw yesterday
running with a bit of optimism over US tax reform plans. The Hang Seng
is actually closed at the minute because of typhoon Hato, so that is
why it is flat. Wall Street, the dial up almost 8%. An even higher
rise on the Nasdaq. Much more attention will be on the central
bank meeting duties. Tomorrow. Will the Federal Reserve boss give any
plans about the bank's plans to wind in its huge bond holdings? We will
talk about that in a moment. Let's see European markets have been
doing, the FTSE is down ever so slightly. WPP share prices down more
than 11% now this morning. Future growth down from 2% to between zero
and 1%. In Europe, central bank chief, the ECB chief, Mario draggy,
he is going to speak today. Investors will be looking to see
what he says. Let's go to Wall Street and Michelle Fleury. When
Hewlett-Packard split into two companies, HP ink which has as its
printer and copier business was considered the runt of the letter.
Investors saw for growth opportunities in the enterprise side
but HP think has surprised many, in a good way. -- HP Ink. Given the
lacklustre PC and printer market, profits are likely to fall. Look out
for more news on America's housing market. Recent data shows house
prices have recovered. The latest figure is expected to show an
increase in July but investors are watching the signs of weakness. So
well concerned over a looming slowdown hurt profits at home
improvement retailer, Lowes, which shows its second-quarter results.
Joining us is James Quinn, business editor, Telegraph Media Group.
We spoke about WPP at the start of the show. Is this a shock? I think
it is one of those bellwether stocks. If you look at the global
economy, pretty stark words from Martin Sorrell earlier. I think it
is a surprise, yeah. Possibly an element of surprise. The share price
will probably end the day six or 7% down. When a company share price
drops this far, this fast, will you now see people going, let's by a
bargain? There will be some bargain buyers looking for activity. It is
August. A lot of traders will be away. A lot of problematic trades
kicks in there. Then real-life traders return. Sally is not here
today. She gets very excited about the central bank action. I will play
that role. We will hear from Mario Draghi today. What we expect from
Mario Draghi? She has started speaking while we have been on air.
He is largely talking about Monetary Policy Committee regulation. Not
talking too much about tapering. The initial reaction was quite muted. At
the same time we have strong numbers from Germany today showing how
strongly the German economy is growing. That is quite interesting
in terms of what he and Janet Yellen will talk about. I think she will
avoid talking about tapering. Her speech will focus on financial
stability. The speeches are analysed to the nth degree. On the on this
programme can we talk about someone making a speech to avoid something.
We will talk more in awhile. For now, thanks.
Still to come, the business of fitness - we hear from the man
who's bucking an economic slowdown and running one of the world's most
successful gym chains in South America.
You're with Business Live from BBC News.
Identity theft has hit new record levels, according to the Fraud
It says nearly 90,000 cases were recorded by the group
in the first half of the year, with young adults
The BBC's personal finance reporter, Kevin Peachey,
Kevin, what do the numbers tell us? They show that cases went up by 5%
in the first half of the year. That takes it to 500 cases a day.
Name-macro says it has reached epidemic levels. -- Theresa May. It
is not the old and vulnerable. It is people in their 30s and 40s. People
with a digital footprint to have been online are social media and so
their identities have been stolen. What can people do to prevent it? Is
it as simple as constantly changing your password? There is an element
of that. Some people don't realise they have been victims because the
fraudsters have taken out a loan in their name. They are getting their
details from public records and the dark web, part of the Internet that
is not available on a conventional search. So Cifas says yes, people
should be changing their passwords. They should be using... Employers
should be educating staff on how to keep on top of fraud prevention and
making sure they are changing passwords and keeping safe online.
What is really interesting is that young adults are the most likely
target. When we think about online fraud, we thought maybe it was older
people? Absolutely. The over 60s are the only age group cases are going
down it is coming up the fastest among 20-year-olds. That is clearly
because they are part of social media. They have a strong online
presence. The 30s and 40s are where the most cases are overall.
Thank you, Kevin. Go and change your password. There is an interesting
story on the Business Live page. The new Heathrow boss slamming -- the
former BA boss slamming Heathrow over its new runway. He says the
plans are not credible. Sir Rod Eddington is advising a rival scheme
proposing an alternative to the runway at Heathrow. Nonetheless, he
knows what he is talking about. This claim will have some weight. That is
on the website. Our top story - the world's biggest
advertising group, WPP, has cut its sales outlook,
following a drop in demand from consumer goods companies
and weak trading in the US. Let me show you what the markets are
doing. WPP one of the big fall is so far. Currently down almost 11%.
Investors somewhat surprised by that lowering of the growth forecast.
That is probably why the FTSE 100 has tipped into the red. The pound
weakening once again over the course of the week. That has been a
continuing trend stop And now let's get the inside track
on the fitness industry... Globally the industry
was worth $83.1bn in 2016, and it continues to grow,
specially in Europe and the USA. Latin America has seen slower
growth, but 20 million consumers there use more
than 65,000 health clubs. In Brazil, one man has
been defying all trends. Edgard Corona's Smart Fit now has
365 gyms across the continent. The BBC's Daniel Gallas metup
with him in Sao Paulo. He began by askinghim how he has
expand the business in the middle the whole idea is that -- at the
beginning is less divine. When we want uniforms, we chose fashion
designers. It is a very important factor. Everything together. The
system that you provide, the programmes that you create, help us
to be different from the market. If you are in the US, from the total
number of members, you have 70 weight percent in this business. --
seven to 8%. The people come. What makes members stay is the right
process to deliver results. What we are looking for and trying to
improve his results in a short period of time. So the great value
that you have is time. If I ask you to exercise two hours a day, you
will say, I don't have this time. But you can come here three times a
week, 30 minutes. Increase your metallic -- metabolism speed, reduce
your weight, improve your health. You will see a healthy, more
beautiful, thinner... A lot of people say that Brazil is a very
hard place to do business, that it is risky to invest here. Why do you
do it and how do you do it? For sure, maybe it's not an easy place
to do business. But in Brazil, everything that you do, regulations,
regular Tories and everything, is very, very tough. A lot of laws, a
lot of rules to improve people's lives. And most expensive. Maybe
Latin Americans understand how to work in this kind of environment.
Expanding in a downturn. Some markets are pretty resilient. We
have been asking you how much you would spend on keeping fit. Amanda
says walking and housework are free. Ed says, how much of that ?83
billion, it's actually dolorous, is made up of multiple gym memberships
going on used? Jerome says he pays ?90 per month, which is ?300 for
every swim he takes. Samantha says ?85 on running trainers, worth every
penny. Good trainer is important. Andrew says YouTube provide advice
for exercise at home. Lots of free online sessions. Jim locations are
very smart these days. Mine is next to a KFC and a McDonald's. It is a
vicious circle. James Quinn is back with us. There is a really nice
story in the Guardian. Poor and overpriced funfair rides could be
closed under new rules. There is a shining light on this, we may get
better rides? That's right. The competition authority has decided to
look at this sector, questioning whether when one funfair comes to a
town, whether another one can, the same time, whether pricing too high.
They are really expensive. If you want to go on the merry-go-round, it
is $5, $6. Yes. Some pricing is in question. The showman 's Guild of
Great Britain, the governing body of the funfairs, has said, yes, we
agreed. Maybe some of our practices are not up to scratch in the modern
era. Let's wrote in the New York Times. Apple plans for a self
driving car. It is a crowded market. It seems Apple has decided they will
put their technology to use in a self driving car. Apple's
headquarters is in silicon valley in the US. They will try this
technology in a shuttle bus that takes employees to work. That is a
risk! It is slightly different to testing and iPhone! Good to see you.
Thank you James. Good -- thank you for all your comments.
Really interesting when you talk about how much the fitness industry
is worth. 83 billion dollars a year. It is all the gear, everything.
There will be more business news throughout the day
on the BBC Live web page, and on World Business Report.
Good morning. It has been a pretty wet night across Northern Ireland
and Scotland. I am hopeful of the weather improving from any today as
the rain band clears, you can see the front which is draped across