Sir Martin

Diane Francis column for Friday post july 14:




Sir Martin Sorrell is founder and CEO of global powerhouse WPP Group PLC which owns some of the biggest brand names in the business.
WPP, a publicly-listed holding company headquartered in Britain, owns companies like JWT (formerly J. Walter Thompson); Ogilvy & Mather; Grey Worldwide; Y & R (formerly Young & Rubicam); Hill & Knowlton; Burson-Marsteller, among others.
WPP's 70 companies compete as independent operations (he calls them "tribes") but are expected to meet tough financial targets and to cooperate if it makes sense.
Sir Martin began gobbling up agencies in 1986, and was a pioneer in the consolidation of the advertising world into six gigantic holding companies in order to better serve multinational companies. Like the others, WPP functions as a global full-service agency. Clients include more than 300 of the Fortune Global 500 and over half of the Nasdaq 100.
Before founding WPP, Martin Sorrell led the international expansion of famed UK advertising agency Saatchi & Saatchi (now part of rival French holding company The Publicis Groupe) as their group finance director from 1977 until 1984. He is an economics graduate of Cambridge University with an MBA from Harvard University.
Today, Sir Martin travels constantly as an unofficial ambassador for Britain's business community as well as in his capacity as CEO of an enterprise with 72,000 employees and 2,000 offices in 100 countries.
He spoke of a number of other issues in a recent interview in his New York City offices:

Q: What's the state of advertising these days?

A: "Pretty good. And growth is three speeds. The fastest is Asia, Latin America, Middle East and Eastern Europe. Canada's pretty fast too because of the commodity prices.
The US is in the middle and the lowest is Western Europe. It's been tough in Germany, France and the UK, not Italy however. We can see a flip up in Germany these days."

Q: Does Advertising keep up with economic growth?

A: "It's been growing a little faster than economic growth, but in 2007 and 2008 we expect it to exceed growth. Last year, advertising grew by 3 to 4% and worldwide economic growth slightly less."
"But 2007 and 2008 will be higher than economic growth because of the Beijing Olympics and the U.S. presidential election. Hillary Clinton alone is talking about spending US$100 million. McCain will probably spend the same amount plus all the others running for election that year."
"This year, the mid-term congressional election campaigns alone will spend US$1.5 billion on advertising."
"We reckon the Olympics and U.S. elections will add another 1 to 2% to growth in advertising revenues for the industry."
(That 1 or 2% would represent US$12 billion or US$24 billion more on advertising globally. In 2005, advertisers around the world spent about US$1.2 trillion promoting their products and services by putting their messages in print or broadcast media or on the web, billboards, movie theatres, elevators, cell phones and various quirky venues.)

Q. How is technology changing the future? What about online advertising which is growing rapidly but still only represents about 5% of the total spent?

A. "What do traditional media and networks do about the web? That's the question. Companies are diversifying their budgets into other media in search of new, or to retain old, audiences. Microsoft is spending US$200 million to US$450 million online for advertising."
"The problem [re technology] is more difficult for media than for agencies. We don't bet on technologies. Media companies must."
The media choices around now make agencies more valuable to advertisers, he added.
"Media planning and media buying are growing rapidly because of the pricing issues and the new technology issue. They must do more research than ever to find out how to reach many audiences."

Q. What about Google which is devouring ad revenues?

A: "The question is Google a friend or a foe? Google's market capitalization is US$130 billion and its revenue is US$5 billion. We [at WPP] have a market cap of US$15 billion and revenues of US$10 billion. Google has 3,000 employees, we have 72,000 employees. Google has 25 offices and we have 2,000 offices."
"In other words, they are not stupid. They have firepower."
"But Google is our friend too. We're their third biggest customer. They want us to buy more. At the same time, they are threatening to set up electronic media platforms to buy and sell media."
Currently about US$1.5 billion of WPP's US$10 billion in revenues derive from on-line outlets, he said.

Q. What about China's potential? Ad spending there already is second only to the U.S. in terms of its proportion to GDP?

A. "We're devoting many resources there, and in Asia as a whole, because of the potential. We will grow organically there and that growth will outpace other regions."
"If I were graduating college today I'd learn Mandarin and move to Shanghai."