The global media industry is expecting to grow at an annual rate of 5%, reaching the $1.3 trillion mark by 2017. With improvements in the global economy in 2013, the industry continues to encounter growth in emerging markets. Specifically, the digital media segment has shown solid growth in the last five years and is expected to rise by 15.1% in 2013, up from $103 billion in 2012. A media company’s growth mainly depends on their customer relationships; companies with the aim of building strong relationships with their customers are looking to enhance their global presence by making acquisitions, entering into joint ventures, and focusing on digitization.
I have analyzed three companies from the media industry that are making strategic moves to benefit the most in the growing market.
Company aiming for inorganic growth
WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY), with the aim of expanding its presence in fast-growing emerging markets and for strengthening its digital capabilities, acquired Okam Ltd., the holding company of Salmon Group. Okam will continue to operate as a standalone brand within WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY). It is the leading multinational, e-commerce, digital agency operating from the UK, China, and Australia. It provides digital consulting, design, delivery, and support services to retailers, wholesalers, and manufacturing brand units. Salmon is ranked seventh in “The Drum’s Top 100 Digital” list and second in the “Design and Build” list. This acquisition indicates the importance of e-commerce to retailers, manufacturers, and brand owners. E-commerce sales are growing at 10% per annum in the UK market, which will in turn help WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) get benefits from this growing segment. Also, it will widen the company’s offerings in the digital segment and will expand its business internationally.
WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) also acquired 20% stake in Argentina-based Globant for $70 million in January 2013 to increase its digital capabilities in Latin America, the U.S., and the UK. Globant is an advanced technology service provider targeting to supply innovative software solutions on a digital marketing platform. Globant is more in the emerging technology market, which is growing at a rate of 25% annually, compared to the traditional IT service, which grows at 4.5% annually. The company is generating 90% of sales from Latin America, the U.S., and the UK. Globant also has expertise in providing infrastructural and technical support via digital market promotional activities in a combination of creativity and design skills.
WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) is likely to enhance its revenue from these acquisitions, and they will also increase its digital footprints in Latin America. The company believes that this decade belongs to Latin America, particularly due to the 2014 FIFA World cup in Brazil and the 2016 Olympics in Rio. It is expecting overall revenue of more than $1.6 billion from these events in Latin America. Also, WPP plc – American Depositary Shares each representing five Ordinary Shares (NASDAQ:WPPGY) and its associates are anticipating the digital revenue to exceed $6 billion in 2013, which represents over 33% of the group’s total revenue (which was $15.55 billion in 2012). The company has set a target of around 40% of its revenue from the digital segment in the next five years.