Ad holding company WPP closes two agencies in its Wunderman Thompson network as the ad industry faces major headwinds
Reuters
- Ad holding company WPP is closing its digital agency iStrategyLabs and specialty division JWT Inside, laying off nearly all of their roughly 60 employees.
- The announcements followed news that the company's Wunderman Thompson network would absorb several smaller agencies in North America.
- The move is in keeping with WPP CEO Mark Read's plan to streamline and simplify the company's offering.
- JWT Inside was a 70-year-old agency that created recruitment campaigns and internal communications for clients like the US State Department. WPP acquired iStrategyLabs in 2016 as it sought to build its digital capabilities.
- Click here for more BI Prime stories.
WPP is shutting down two agencies within its Wunderman Thompson network, iStrategyLabs and J. Walter Thompson (JWT) Inside, Business Insider has learned.
The move comes as the ad industry faces significant headwinds, with clients cutting budgets, assigning work on a shorter-term basis, and bypassing agencies to work with production companies or consulting firms.
It also reflects WPP CEO Mark Read's ongoing attempt to streamline the world's largest ad agency holding company by folding, absorbing, or selling off non-core units. Business Insider first reported last month that WPP would combine some of its agencies. In the largest such shift, WPP just sold 60% of market analytics firm Kantar Media to Bain Capital for $4 billion.
Read's strategy sharply contrasts with that of his predecessor Martin Sorrell. "Martin would never sell anything, ever," said a senior-level executive who recently left WPP. "He took loyalty to a new level."
WPP plans to fold some smaller divisions in order to strengthen its North American business
The news also confirms Business Insider's earlier reports on pending layoffs at companies affected by the consolidation. Leadership told employees and clients that JWT Inside would close on November 21, and iStrategyLabs staff received the news early this week.
Combined, the two agencies employed around 60 people, including contract workers. All are expected to lose their jobs.
Wunderman Thompson spokespeople positioned the closures as "part of our ongoing initiative to simplify and strengthen our best-in-class offering under a single brand."
JWT Inside was a 70-year-old organization that created recruitment campaigns and internal communications for clients such as the US State Department, T-Mobile, and several major hospitals.
WPP acquired Washington, DC-based iStrategyLabs in 2016 as advertisers shifted spending from TV and holding companies raced to bolster their digital capabilities. Founded in 2007, iStrategyLabs specialized in creating branded content and digitally oriented events for clients such as Capital One, Sam Adams, Volkswagen, and New York Presbyterian Hospital.
Both businesses struggled to attract talent and new clients in recent years
Two sources with knowledge of Wunderman Thompson said both impacted agencies underperformed in recent years as clients cut spending, younger employees left, and WPP diverted its resources elsewhere.
IStrategyLabs founder Peter Corbett, who retired in 2018, told Business Insider that WPP told him this week of the pending closure and that he felt for the impacted employees.
At the time of its acquisition, iStrategyLabs listed annual revenues of $12.4 million, a fraction of Wunderman Thompson's earnings. One person familiar with company finances estimated that iStrategyLabs and JWT Inside each brought in considerably less than that last year.
Both sources said the Wunderman-JWT mega-merger made these closings all but inevitable, especially as WPP's growth dropped sharply in North America in the first half of 2019 before a slight uptick last quarter.
All holding companies have faced the same challenges as WPP, which has responded by aggressively restructuring all aspects of its business, including the massive ad-buying network GroupM.
The former WPP executive said Wunderman Thompson would announce more consolidation moves in the coming months.
