LAS VEGAS — He created and, for years, ran the world’s largest ad agency holding group, WPP.
After he left in 2018 and formed his own, much smaller vehicle, S4 Capital, how does Sir Martin Sorrell read the prospects for the Big Six groups? In this video interview with Beet.TV, Sorrell says:
- The big groups are like “cadavers.”
- They cannot transform as necessary whilst publicly traded.
- The threat from consulting groups has been there since the 1980s.
- Accenture should buy GroupM, the media agency within Sorrell’s former WPP.
Challenges
Large ad agency groups stand accused of operating sprawling, labyrinthine structures of constituent companies spanning multiple functions in an era when brands are seeking simplified, integrated campaigns.
“The holding companies are really challenged,” Sorrell says. “They have the problems of all uncontrolled listed companies – companies that are not controlled by management and there’s separation between ownership and control.
“Companies that are controlled – a Google, a Facebook an Amazon, whatever – are much more long-term in their thinking because the management is not worried about being kicked out if they make a short-term mistake.”
“To make the changes they have to make, you cannot do it with the microscope of being a public company … the focus and attention you get from analysts, from journalists, trade journalists, whatever it happens to be looking, every twitch of the body – or the cadaver, maybe, is more the appropriate analogy.”
Solutions
Likening ad agency holding groups to corpses will ruffle feathers. But Sorrell also proffers some solutions, including around using the consulting groups whose entry in to advertising has been seen as a competitive threat to ad agencies.
“It can’t work” he says. “The only way out is you dismember them. That’s one route – you break them up, Accenture comes along and pays $15 billion for Group M, which I think they should do; I really do think that.
“It seems to me that it’s a no brainer for them. They’re capped at now, what, $125 billion? It wouldn’t be a flea bite (to pay), but it’s certainly capable and it will give them such an entry point to their ‘diamond club’, the top 200 clients that are all over $100 million. It would be a real shake-up. (As options), there’s (either) dismemberment or go private.”
S4’s growth
After its initial capitalization in 2018, S4 Capital was kick-started by a pair of key acquisitions – content studio MediaMonks and programmatic firm MightyHive. Since then, MediaMonks and MightyHive have respectively acquired or merged with Caramel Pictures, Datalicious of Korea and ProgMedia.
This month, it announced more M&A, a merger with Circus Marketing, a Latin America digital marketing agency.
Perhaps ironically, S4 Capital is fuelling its growth partly through being publicly traded on stock markets, just like the big companies Sorrell is critiquing. Listed in London, his current outfit has the equivalent of a $1 billion market cap.
