The global advertising business is undergoing some serious transformation with consolidation becoming critical across agency networks. Martin Sorrell, founder and executive chairman of S4 Capital, talks to Christina Moniz about the need for agencies to re-examine their business models and the challenges facing WPP, the advertising holding company that he founded. Excerpts
As AI takes centre stage, is it time for legacy agencies to look at completely new business models?
AI is particularly affecting creative agencies since it operates in areas like visualising and copyrighting, bringing down the cost and time. We charge our clients by the hour, but we should charge for output. Media planning and buying will never be the same again, since these functions will be eventually done algorithmically. Clients are shifting budgets towards output and performance and our business needs to adapt accordingly.
In the global $1.2-trillion advertising market, $900 billion is digital across platforms like Google, Meta, Amazon, TikTok and Alibaba. Agencies need to focus on where the growth is — which is not the remaining $300 billion, which is linear TV, traditional media and live sports. Holding companies are still over-indexing on traditional media.
What are the big challenges before advertisers with the global economy facing a period of ‘polycrisis’?
The biggest impact is on the larger companies like Unilever and Procter & Gamble that are being hit by smaller, nimbler players using social media and influencers. In a way, this also mirrors what we saw in the last US elections. Kamala Harris wouldn’t make an appearance on the Joe Rogan show, while Trump did. If you don’t use the new methods, you get taken apart. Large advertisers need to start fighting the small competition using their methods and media strategy, whether it means enlisting influencers or strengthening social presence.
How do you see the advertising market in India growing, compared with global markets?
India’s economy grew the fastest last year and advertising will grow at a similar pace. Worldwide, digital media commands 75% of the ad market, while in India that number may be around 60%. In the media landscape, it will be interesting to see how JioHotstar competes with platforms like YouTube in India. This is a big economy and the growth prospects are bright. You have some great talent, although it is sad that the industry lost a creative giant in Piyush Pandey. India is going through rapid industrial development, and PM Modi has been good for brand India.
WPP saw its revenue decline last year. As someone who built the company, what do you think needs to be changed?
It’s very disappointing to see how it has been performing over the past year. The company has untested leadership. We will have to see how Cindy Rose (current CEO) handles WPP’s future. Mark Read (previous CEO) didn’t do very well. The leadership doesn’t seem to have a strong strategy at the moment. Across the industry, we see leaders come in and talk about their love for the agency and their job. I do not believe that the people who come in as leaders really have the deep affection they profess for the job. It is an exaggeration and it is BS. You can quote me on that!
The company is also reportedly revamping its creative structure, bringing Ogilvy, VML and AKQA under WPP Creative. Could this potentially affect the creative product of these agency brands?
They’re trying to strengthen the ‘one WPP’ model but I think they’re doing this the wrong way. They’re making it discipline first, then client, and then geography. If you do it discipline first, it just fractures the organisation. The Omnicom-IPG merger was also done on the same basis. Publicis, however, has done it the right way. When you consolidate geographically first, you get a much more integrated offering. The clients want as much integration as possible. The merger we’ve seen with IPG and Omnicom doesn’t create additional value from the client’s perspective; it is more of a capacity contraction.