The almost unthinkable has happened - markets have fallen out of love with advertising holding companies. For so long a darling of investors, WPP's share price has fallen by 30% over the past year and its valuation has de-rated in a similar fashion. What a stark contrast the last 12 months have been then to 2016 when the company's annual report boasted of a ten-year total shareholder return of 250%, compared to just 65% for the FTSE 100.
WPP is not alone - the shares of other major listed advertising players (Omnicom, IPG, Publicis and Dentsu) have all experienced a similar decline.
The question is: why? A string of profit warnings since Q1 2017 for WPP and a 30% drop in its share price don't suggest a 'blip in the road'; it's clear that investors have structural concerns over the industry and the ad agency's place within it.
The answer lies with agencies' clients. This morning, yet another large FMCG business has said it is continuing to reform its advertising and marketing strategy, and once again WPP shares are faltering. Procter & Gamble, the world's biggest advertiser, has stated that it has more than halved the number of agencies it uses globally and that it might seek to half that number again.
P&G isn't alone. Global FMCG titans like Unilever and Nestle have also sought not just to cut advertising spend, but also to transform how they are interacting with customers by bringing more marketing functionality in-house before dealing directly with growing digital channels such as Google and Facebook in the West, and Alibaba, Baidu and Tencent in the Far East.
The goal? Improving both efficiency and effectiveness of communications to customers.
The middle-men are being cut out. And they are mad.
What do we think is going to happen?
Firstly, we expect a wave of consolidation within the portfolios of the holding companies themselves - integration and streamlining of operations, reducing headcount and potentially disposals of lower-margin, commoditised operations. This will be an attempt to simplify the agency's role in the client's interaction with its customer.
Secondly, we expect demand for data-driven digital assets, especially those that give more insight into RoI, to remain high as major advertisers strive for efficiency.
Thirdly, we expect to see a continuation of consultancies acquiring digital assets as marketing strategy transitions from being a "bolt on" service to an integral part of corporate strategy consulting projects.
Finally, we don't think it's inconceivable to see larger brands owning agencies, as indeed a number already do, with the likes of Tata Motors owning Spark 44 and Samsung still owning a legacy stake in Cheil.
Don't write the mad men off just yet though. Granted, the way we consume advertising is changing. However, the need for it to be impactful is more important than ever before. Data from Facebook suggest that a video has a maximum of 1.7 seconds to make an impact on its viewer, and to do that it has to be relevant and engaging. To be relevant and engaging, it has to be creative and that is now, and always will be, where the real-life Don Drapers come into their own.
Watch this space - it's going to be an interesting year on Madison Avenue.
“We’re annoying people with too much frequency, serving ads to people who don’t want to be reached, and doing so too many times” Marc Pritchard, P&G chief brand officer