WPP’s announcement of Open Pro — a #SaaS platform for small and medium-sized enterprises (SMEs) — is a heck of a move for an agency business. And having spent nearly all of my career in agencies and much of the last seven years in SaaS I have some scars and I have some views!
The attraction to WPPs board is clear. SME marketing revenues are a huge new opportunity for WPP. Meta and Google owe much of their value to the collective budgets of millions of small businesses rather than the global brands that WPP agencies serve.
The financial logic is incredibly strong. WPP’s enterprise value stands at around US $12.5 billion on US $18.5 billion of revenue — a valuation multiple of roughly 0.7× revenue. A #martech SaaS business such as Canva, valued at US $42 billion on US $3.3 billion annual recurring revenue, trades at 12.7× revenue.
That gap matters. Conceptually at least, every dollar of SaaS-type revenue could be worth about 18 times more to shareholders than a dollar of agency income.
So if WPP Open Pro were to generate US $1 billion in genuine incremental revenue within a few years, the effect could be striking. A conservative 3× multiple would add about US $3 billion to WPP’s enterprise value; a mid-range 5× roughly US $5 billion; and an optimistic 10× close to US $10 billion — up to an 80 percent uplift in enterprise value. If you are a new CEO and an ‘in the spotlight board’, it’s clear to see the attraction of this strategy.
But valuation will depend on substance. The market will look closely at whether WPP Open Pro generates new revenue or merely re-labels existing agency work. Only the former deserves a SaaS re-rating.
WPP Open Pro is also intriguing because of the new competitive set WPP will face. While WPP has incredible strength in communications, media and creative ideation, it has more limited experience in SME revenue-generation technology — an area dominated by platforms like HubSpot, Meta and of course WPP’s new partner in this, Google. This last move has to be WPP recognition that SME revenue-generation is an area they needed help with, so kudos to them for getting Google on board.
And when it comes to creation tools, the big guns and established players like Adobe, Canva and now Sephora’s content engines are getting better by the day at translating a brief into output. Not Cannes Gold Lion output, but more than ‘slop’ and often effective enough for lean, pragmatic SME marketing teams. And then there are the host of smaller but focussed SaaS products in this area like Shuttlerock (*) for content, Engine Y for ideas and Tracksuit for insights and tracking to name but a very few.
WPP’s expertise has always been enterprise-focused. SME is a new market — smaller budgets, faster cycles, higher churn — and WPP will be competing against companies with deep pockets, laser-focused propositions, and teams who live and breathe SME marketing. Their leaders, many former SME marketers themselves, understand the mindset and pressures of that customer far more intimately than most agency networks ever have. Our Stickybeak business only really took off when we went from agency thinking about SMEs to marketing thinking about SMEs. This is a bigger transition than it might seem.
Adobe’s shift to SaaS is often cited as precedent for this kind of move, but Adobe was always a software company. WPP’s transition is larger — not just from enterprise to SME but from human-service economics to product economics. Running a self-serve platform requires engineers, data scientists and growth marketers, not account directors, media buyers and planners. A quick check on Linkedin shows WPP is indeed hiring for these roles, but whether it can attract and retain the best will depend on culture and incentives.
That’s where the next challenge lies. Agency pay is built on cost-plus fees; SaaS pay much more on equity and upside. SaaS start-up employees often accept lower salaries for a chance at a future windfall. Agency employment packages have much higher fixed compensation and lower variable or equity components. Unless WPP rethinks its compensation model for WPP Open Pro employees, it will struggle to recruit and keep the people that can make it scale.
I haven’t yet tested the tools, but with WPP’s resources and data assets such as BAV, they should be strong. The question is whether they are distinct enough — better, simpler or cheaper — to stand out in a market already filled with capable competitors and incumbents often with larger budgets. And do SMEs want a one-stop-shop for all this or are they happier searching for best in class for individual products?
To their credit, WPP are investing about $317 million in AI and innovation and whilst it’s not clear how much of that goes to enhance its ‘legacy’ agencies versus WPP Open Pro, even half of that would equate to a decently funded ‘start-up’. As I know very well, SaaS start ups burn a lot of cash before they break even and make profit.
Usually that cash is raised from experienced investors, VCs and private equity, but WPP appears to be funding it from profits (even if they raise efficient debt, profits pay the interest on that).
So in essence, agencies and staff are ‘subsidising’ or ‘investing’ in WPP Open Pro with their profits and bonuses; they are being asked to finance the creation of a system that, if successful, could ultimately reduce the holding company’s reliance on their human-driven, service-based model.
WPP’s bet is that the market reward for a successful SaaS pivot will be big enough that it justifies this internal friction and subsidisation. However, for agency staff, the immediate future looks like one of bearing the cost without a clear, direct share in the potential reward.
The biggest gamble for WPP isn’t just making Open Pro succeed commercially, but that the morale and performance of its core agency business erodes while funding it. The board is playing a high-stakes game, and the agency staff—the engine of today’s profits—are the ones buying the chips.
(*) I am investor in Shuttlerock
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