WPP hauls in £2bn from Web advertising

WPP, the world's second largest advertising agency, raked in more than £2bn last year from advising companies about advertising on the internet.

The figure was one of several topping estimates in the group's annual results yesterday, as the WPP chief executive Sir Martin Sorrell revealed a 15 per cent rise in profits.

And Sir Martin predicted more clients would switch their ad spending from broadcasters and newspapers to the burgeoning internet, where the growing availability of high-quality video is encouraging people to spend more time surfing the Web.

"Traditional media are under considerable and constant pressure, as advertisers are rebalancing towards new media," he said.

"Consumers spend about 20 per cent of their time online, so it is reasonable to assume that the proportion of advertising spending directed to the internet will trend towards that. In the UK, it is already 14 per cent and we are predicting 18 per cent this year. I think it is reasonable to expect up to a third."

The strong economy and technological change were encouraging clients to "experiment" in new media and non-traditional advertising, Sir Martin said. Advertisers are using WPP's market research businesses to plan strategies, its direct marketing businesses to contact potential customers over the Web, and its ad agencies to design online advertising campaigns.

He predicted WPP would make further acquisitions of small ad firms specialising in new media, while it was also encouraging its existing businesses to become more "tech savvy".

At £754.8m, WPP's profits for 2006 were up 14 per cent, on revenues which rose 10 per cent to £5.9bn. The annual results were the 21st since Sir Martin turned a tiny company making shopping trolleys into an ad agency and began a string of acquisitions that would turn it into a global giant.

"When companies start out, investors and financial commentators often express concern about their lack of scale," Sir Martin said yesterday. "Twenty years or so later, when those same companies have prospered, commentators often express concern about their size, about their ability to respond to new challenges, but WPP is no single monolithic entity. It has some 100 different companies each with its own specialist skills."

The company's shares rose 12.5p to 779.5p yesterday as analysts welcomed results that came in firmly ahead of expectations. They cheered in particular a strong rebound in the UK and western Continental Europe, which had had a sluggish start to the year but where robust economic performance eventually translated into improved confidence among managers.

Sir Martin also predicted a strong 2007 and fatter profit margins, thanks to the early starting gun on the US presidential race and the build-up to the Beijing Olympics next year.