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LONDON, April 23 (Reuters) - WPP (WPP.L), the world’s biggest advertising group, is keen to buy more agencies that specialise in digital marketing but considers current prices high, its chief executive said on Monday.
WPP has spent $1.1 billion on digital acquisitions in the past five years, including $649 million for 24/7 Real Media in 2007, and aims to boost digital revenues to one-third from 27 percent last year as consumers spend more time and money online.
“The appetite is there,” Martin Sorrell told analysts at a presentation. “We continue to look but I think valuation is an issue,” he added. “You’ve got to temper the enthusiasm.”
Sorrell said Publicis’ (PUBP.PA) $530 million buy of digital agency Razorfish last year had already looked expensive, and said an aggressive push into the United States by Japanese agencies hard-pressed at home was driving prices up further.
Sorrell estimated WPP could easily add 1 percentage point per year to the proportion of its revenues coming from digital campaigns through organic expansion. With acquisitions, he said WPP could reach its target in three to four years.
The group of more than 200 companies that comprises WPP was built by Sorrell almost from scratch over 25 years, largely through acquisitions.
“The most difficult issue here is to get everybody to play together,” Sorrell said on Friday when asked about the challenges of such a strategy. “The fundamental issue is about control,” he added.
WPP will report first-quarter results next Friday. It said last month it believed the worst of the advertising recession was over and it expected fast-growing markets such as China, and digital sales, to help it record flat revenues in 2010.
Sorrell reiterated on Friday he had been surprised by the strength of the U.S. economy since the start of the year. “The biggest change that has happened in the last 90 days is America,” he said. “America sort of has bitten back.”
He added that Europe, with the possible exception of Germany, continued to be difficult. “Western Europe prospects are tough and it is a slog.” (Reporting by Georgina Prodhan; Editing by Richard Chang)