WPP plc (WPP) Earnings Call Transcript & Summary

Hi, everyone. I hope you had a great day. I've heard it's been high energy. We're going to try and keep it that way, aren't we? So I think the topic of all topics, particularly for anyone at Google, but anyone across all of our fields is around AI. And I have been at Google for shy of 2 years now really because of AI and its impact. I've worked with marketeers in the advertising industry for over 20 years. And I think this is a seismic moment, and I wanted to be in the center of it and Google really is at the heart of that. So I asked to speak a little bit about AI's impact on advertising. And I think it goes without saying that AI is, and can impact advertising significantly and there's huge potential. If we kind of contextualize that, I'm always wowed by Sundar, CEOs statement around the profound impact of AI on humanity being bigger than electricity or fire. So I think it can't not affecting everything in our world. I think for us, what we're really trying to understand is how we use AI to be more effective to personalize, to bring on magic, I think, as well. And so a lot of what we'll be talking about today is around centering around that. So I'm looking forward to this discussion.

Wonderful. Very nice to be here, Vanessa. So hi, everyone. I'm Stephan Pretorius, I'm the Global CTO for WPP. My job has become a sort of move from being Head of Technology to being the AI guy at WPP, which is some sort of saved my career. But I think the -- in all seriousness, like all knowledge work, whether it's accounting or, law or consulting, AI is having an absolutely profound impact on the advertising market and the practice of marketing services in general. And so look at WPP at AI is really affecting our work in 3 ways. It affects how we work, our day-to-day productivity and how we get has done. It affects how we make work, how we produce work. And lastly, it affects how consumers experience the work. So there are new forms of personalization and creative that can only be done with AI. I mean controversly, I think a lot of you would have seen recently, CEO of another large digital media company saying that AI will replace all marketers and all agencies in the future. Not an uncontroversial statement. And I think in fairness, the segment was really aimed at small businesses and how AI would empower small businesses. But I think the point in seriousness is very much true also, transformationally true for large companies and agencies and marketing service providers. I mean we really look, and the reason why we here together, WPP and Google is because we have a very close partnership. We invest billions of our clients' marketing dollars on the Google marketing platforms. We use Google's Cloud platform to build our products. We use their AI models, Gemini, Imagen, VO to make content. The film you saw just in the beginning was the launch form of when we introduced VO2 into our open platform in March. Already now, there's VO3 which can generate sound and music, and the state-of-the-art already moved on. And so we very much see a partnership between brands, marketing agencies and Google as being something very symbiotic and actually very productive.

But Vanessa, maybe just to focus a bit more on Google again, how do you see AI more broadly impacting Google's products?

Well, I mean, the interesting thing for us is that Google has been an AI-focused company since 2016. I just didn't want to speak about it too much. And now it kind of seems to be all we speak about because it's so important. And I almost have found in the pivot in my career, if I'm going from sort of the creative side to tech that talking about AI, sometimes like talking about air, it's sort of in everything that we do now. So we recently had IO at Google, which is our sort of Rockstar conference for all of our new announcements. The pace of change or over 100 announcements across our products in terms of updates or newness. So -- and all of those were AI-powered, right? And so as consumer human behavior and consumer behavior changes, so do all of our products whether it be search or YouTube translates, it's many, many more languages and every single touch point. But of course, what that means is that we have our consumer-related products and also our ad-related products for marketers. They both have to meet this changing behavior. I think one of the things that's really interesting in terms of our product is, of course, the anchor of Google is Google Search. And what we're seeing now is the shift in behavior, meaning that we're creating so many more touch points full search using AI. So one of the things that we're really focused on is this shift in away from singularity to people sort of symbiotically searching, scrolling, shopping and streaming sort of all at the same time. So how do we make sure that we're showing up for our audience in the correct ways all of the time, which is why we have the development in sort of Google Lens, Circle to Search, so much going on with AI overviews, which we're looking at kind of how we monetize going forward and so on. So almost every single touch point is changing. What that means for marketers, which is what I'm focused on, my partnerships with our CMOs and C-suites is that -- for a very long time, our ad products over a decade have been powered by AI in the background. Now it's much more in the forefront, really driving performance of ads and campaigns, so making them much more effective. But also, I think the relevance to consumers in terms of where campaigns show up and how brands are surfaced. So personalization is huge. And I think that that's good for everyone. That's good for brands and marketeers. They're able to ensure that their investments work much harder. They're able to drive much more growth. But it's also good for our consumers because people have less time and they want more relevance in what they served. And what we've seen on the marketing side of the business, we had BCG to a bit of research for us is that the marketeers who are deeply adopted with AI ad products are seeing 60% higher revenue increases than their peers who don't adopt in AI. So for us, that's all the motivation we need to keep investing heavily in these products and how they can surface more relevant content. And I think for us, the other area is around creativity. And I think that's one of the areas that we can speak to in a bit that I think is one of these areas that I think has huge potential, but it's also an area of nervousness, I would say. I would love for you to speak to that a little bit from kind of WPP's approach and how you're seeing sort of creativity and marketing evolves.

Yes. No, it's a key issue for us. And as you alluded to, I mean, a lot of the application in AI in marketing has been focused in the last 2 years on efficiency. So automating processes that were laborious before, difficult to access data, et cetera. And all of those things are great. But ultimately, it still has to be good work at the end of the day. And if you take away all the technology, it still has to be a great idea. And so we think a lot about this, and we work a lot with our teams in terms of how do we build tools and how do we train our people in order to see AI as augmenting their creativity, not replacing it. Because, I mean, simplistically, AI replaces task or AI eliminates tasks, it doesn't eliminate jobs. And I think there's a big distinction between the two. The degree to which a company can make the transition from being an analog business or kind of a pre-AI to an AI-enabled business is the degree to which people can actually adopt AI to augment them, and to improve what they output. So I think ultimately, creativity in its purest form, stays a human skill and a kind of a human purview. I think a lot of what happens in marketing services can be done with AI. I mean I have researchers to tell me that most of marketing is just the vector embedding. I mean that's a bit of a nerdy comment. But it really is kind of true to some degree. But ultimately, creativity is about judgment, it's about experience, it's about cultural relevance. It's about emotional connection with people. And ultimately, it's about taste. And taste, I have one of my creative director partners has us saying taste is evidence of a life well lived. And that's something that's very difficult to train a machine on. So I do think that there's going to be an incredibly important role for creative people or people with taste in the age of AI, but it certainly changes the unit economics of what we do as agencies. So we are not going to be paid to manually adapt 100,000 ad units in Photoshop anymore, right? That's simply not, no offense to Adobe, it's a wonderful product. But doing that work manually is simply dead, right? It does. AI can now adapt 100,000 ad units from a master in less than a minute at virtually no incremental cost to me. So a lot of what we used to get paid for is not getting automated. And therefore, our commercial models have to change. Our team structures are changing the way that we incentivize by our clients is changing, but that's a transition.

I think that one of the things that's interesting about that is that there's sort of more to do. So it's not only the creative landscape and what does this mean for creatives that -- but it's also around one of the questions I get asked about a lot by the C-suite is, what's the future of marketing as these tools become much more effective at targeting at -- and I think that there's still this huge need for human sort of creativity in all of these roles within the marketing function, within a creative function. But how almost the way that we are looking at these products is how do we turbocharge these concepts, these ideas, the work that's done in targeting and make sure that they're hyper effective, and so that the work goes further and is more powerful. We look at something like Imagen 3, for example, you're able to put in a text prompt and then generate images of people for the first time. And you think about what that does for a B2B business who may not have product. Yes, they're able to save a lot of money, and they might not be spending as much on quick. But they probably would not have done that in the past anyway. So it's just giving them an extra layer in order to engage. So for our large-scale marketers, this is huge. It's meaning that they have many more types of copy to test and put out into the world. And for some of the smaller brands in the world that's meaning they can engage in a way that they wouldn't have been able to before. So I think it's really powerful.

And I think -- I mean that's a really important point. I mean if you think about your VO video models, for instance, what that's going to do to video supply and demand on YouTube, right? Or the larger advertising kind of platforms channels to take video. You're going to have thousands of millions of new advertisers to video, which you previously didn't have. I mean that search was popular initially because it was really low entry point and anyone could do it. Now you can create a decent video as a small business owner by yourself. I think the interesting thing about Google's position and the ecosystem is that you not only manage the consumer platforms and the advertising platforms, but for enterprises looking to build enterprise-grade AI systems, intelligent operating systems for your business. You offer the entire suite from cloud to the machine learning platform Vertex and the models. And that's where every business here has the opportunity to combine their data, their domain knowledge, and their methodologies with these powerful AI systems to build a new kind of intelligent enterprise. And I think that sort of the unique relationship between our organizations and that we don't have the resources or the know-how to build state-of-the-art large language video and image models, but we know how to apply them to marketing. And I think that's the case ready for everyone in this room, if you apply your domain knowledge of whatever you do, whether it's law or telecoms or media, combined with these tools and platforms, you can really transform how you run your business.

Yes, definitely. I think with -- what is clear is that marketing is becoming more complex because there is so much more, there's bigger breadth of opportunity. There are more tools, there are more ways to go. And so it's -- our partnership is super helpful to our partners because you help them disseminate what's right and good for them.

Absolutely.

That's amazing. I think we have to wrap soon. Very fast. So for us, I think the world of AI, and I know there's been lots of conversation around this throughout the day, is a huge opportunity. It's constant learning. There is -- the #1 scale, I think that will help us navigate through this moment is really agility. I know that's talked about a lot. And what does that mean? It means, I think, working with the right partners shifting partners, but also on an individual and personal level, being willing to learn, reskill, rethink and dial up your own creativity in how you apply yourself to work, but it's a really exciting time. It's not without it's scary bits, but definitely for me, I think it's incredibly fascinating. Thank you for being here.