WPP's upcoming capital markets day is seen as a pivotal moment for bolstering confidence among stakeholders, according to former WPP exec and principal analyst at Madison and Wall, Brian Wieser.

In an investor note, Wieser said the coming days were "particularly significant" given WPP's organic growth rate has been one of the two weakest among the four global marketing services giants [WPP, Omnicom, Publicis, Havas] in each quarter since the beginning of 2022.

Wieser said: "For WPP the upcoming capital markets day on Tuesday is a relatively important one, at least for the sake of improving confidence among stakeholders, as the company’s organic growth rate has been one of the two weakest (among the four global giants) in each quarter since the beginning of 2022."

In 2021, Wieser said WPP's growth outpaced expectations due to a boom in ad spending, and 2022 was in line with initial projections. However, 2023 is expected to fall well short of expectations with a growth rate of 0.5%-1.0%, despite an industry that is likely to fall in line with the aforementioned 3-4% range. Margins for WPP for 2023 are also now expected by management to come in below the company’s initial guidance.

"In efforts that should ease some of these challenges (and in contrast to WPP’s approach, which has supported multiple agency brands even after much internal consolidation in recent years), centralisation has become the norm at Publicis, Dentsu and Havas over the past decade," Wieser said.

"From the time I was an analyst covering the sector in the 2010s, I have argued that such an approach is for the purposes of offering agency services at a global scale, especially in a business driven by efficient operations, applications of technology and the aforementioned benefits of strong people management rather than negotiating 'clout'. Lower costs per dollar of revenue are a benefit, to be sure, but less bureaucracy, fewer constraints on action because of political considerations and a greater capacity to invest in the research to support superior business choices or client services are other key advantages to centralisation as well."

Wieser said although centralisation has worked well for Publicis – and more recently for Havas, too – Dentsu’s challenges show that "centralisation alone is not a sufficient strategy for success, although it probably helps relative to any alternatives that might have been considered".

Wieser said the industry had seen a significant shift towards centralisation over the past decade, with Publicis, Dentsu and Havas leading the charge.

"Agency groups were too focused on shorter-term returns of capital to shareholders much of the 2010s, which may have made it appear harder to support longer-term investments," Wieser noted. "The bigger challenge is making sure an agency (including its board of directors) is willing to make sufficient capital investments and resource allocations to correctly anticipate and match relevant opportunities."