GO
Loading...

WPP CEO: Facebook's huge WhatsApp acquisition 'potty'

The CEO of the world's biggest advertising firm WPP on Thursday described Facebook's acquisition of WhatsApp as "potty" but added the chief execuitve Mark Zuckerberg knows "what he is doing"

The social media giant bought messaging startup WhatsApp last week for a staggering $16 billion, plus another $3 billion in restricted stock options.

When asked on CNBC's SquawkBox whether the messaging service was worth up to $19 billion. Sorrell said: "Not to me, and probably not to you. But it is Mark Zuckerberg and Sheryl Sandberg and they are no dummies."

(Read more: Facebook buysWhatsApp: A desperate move?)

Facebook CEO Zuckerberg and COO Sandberg said WhatsApp would complement Facebook's existing chat and messaging services.

"On the surface it looks a little bit potty, but they are not potty and they know what they are doing. They have built a company in a very small period of time into a giant and I am pretty confident it will continue," Sorrell said.

WPP increased its share buyback program after reporting record profit margins and strong results in 2013.

(Read More: Zuckerberg says WhatsApp is worth more than $19 billion)

Martin Sorrell, chief executive officer of WPP, pauses during a session on the opening day of the World Economic Forum in Davos, Jan. 22, 2014.
Chris Ratcliffe | Bloomberg | Getty Images
Martin Sorrell, chief executive officer of WPP, pauses during a session on the opening day of the World Economic Forum in Davos, Jan. 22, 2014.

The group upped its final dividend by 20 percent after headline profits for the full year before tax were up almost 11 percent and like-for-like revenue growth was up 3.5 percent, with the second half up 4.6 percent.

Sorrell told CNBC the group had seen a good start to 2014, with revenue up almost 6 percent in January and net sales up 4 percent. "So we are very pleased with the results. Our cash position is strengthened considerably."

The chief executive did say emerging market (EM) currencies, especially in the fourth quarter of last year, were an issue for the firm and could impact business this year.

(Read more: I'm very bullish on Russia: WPP CEO)

"The foreign exchange issues in the emerging markets are the issue for us. We saw a severe deterioration in those currencies, up to 20 percent in the fourth quarter and the impact of all that is the issue for 2014," he said.

Despite foreign exchange volatility in EM, Sorrell said the region was the firm's most profitable market and if he could "double up" in China, Brazil or Russia or India "at a stroke" he would do so.

"We have the strongest positions in the BRIC markets in the industry and we would like to see that intensify. If there is one thing I regret in the last 10 years, it is that we didn't go faster. We have the strongest position in the BRIC markets in the industry," he added.

(Read more: Publicis CEO: Comcast-Time Warner deal a 'necessity for the newworld')

The advertising group's latest results outstrip French competitor Publicis's results, announced earlier this year, which missed analysts' expectations with full-year organic growth at 2.6 percent.

Sorrell said he intends to boost investment in Facebook and internet giant Google.

Last year the group invested $2.5 billion in Google, up from $2 billion the year before. This year we are targeting $3 billion.

"Whilst we invested $2.5 billion in Google last year, we are invested around $439 million in Facebook but it will grow significantly this year. We are targeting $650- $750 million in Facebook," he said.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

Contact Europe News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Europe Video

  • Andy Newland, managing director at Tony Fresko, explains how the use of new technology is helping move this ice cream truck company from a "paper-based business" to a "21st century" business.

  • Jonny Forsyth, global drinks analyst at Mintel, comments on Heineken and Carlsberg's earnings, and says Carlsberg is now suffering from its heavy exposure to Russia.

  • DeAnne Julius, chairman at Chatham House and Karen Ward, senior global economist at HSBC, discuss the dissent within the Bank of England regarding the timing of an interest rate hike.