Mergers by WPP not thought through, will affect business and lead to job losses, says Martin Sorrell

The former head of advertising giant WPP, Martin Sorrell, has openly criticised the large-scale mergers of the agencies within WPP where the senior management is oblivious to the workings at the lower level. Sorrell, who floated ad-tech focused company S4 Capital soon after exiting WPP earlier this year, was speaking at an event in Mumbai organised by Zee Entertainment.

“I do believe in the strength of the brands like JWT and Wunderman but I think the problem is with the manager. I think it is important to travel to other countries if you are making multinational business. The senior management of WPP has not visited Latin America and Asia in the last six months, China is the exception. If you are going to make structural changes that results in losing 7,500 jobs out of the 135,000 jobs you have, there is a responsibility to visit those places and explain the decision. Somebody wrote to me that JWT in Argentina is going down by 60%. I would have taken it to my heart because it is my responsibility,” he said.

Sorrell also stated that he believes in the strength of the brand and its value, which gets affected after the merger of established agencies with digital agencies. On the merger of JWT with Wunderman and VML with Y&R, he said, “JWT is more well-known in India than Wunderman. Now if people call it Wunderman, there could be a problem. I do believe in the strength of the brands and they have value.”

S4 Capital is looking at acquiring India-based independent agencies in content, data and media planning space. Sorrell said the new company is his 3.0 version and will mostly be focusing on three sectors — content, data and media planning.

Sorrell said he will be interested in pure independent digital agencies, and those that have broken away from networks and large agencies. He believes the industry is heading toward disruption. “In India, there isn’t much of disruption but globally the industry is heading towards disruption. However, there will be movement and that may be an actual new area for us. We will be the new kid on the block with the new strategy,” he said.

S4 Capital has already started its acquisition spree in the global markets. The company recently bought San Francisco-based ad tech company MightyHive. It is Sorrell’s second acquisition since leaving WPP. Sorrell established his new company with a private equity of 51 million pounds. He made his first acquisition in July with a €300m deal to buy Dutch company MediaMonks.

Elaborating his plans about his new company and what he draws from his previous experiences, Sorrell said, “While Saatchi & Saatchi was about globalisation, WPP revolved around globalisation and technology, S4 Capital will be all about technology.”

Talking about the relevance that his new venture would bring to the industry, Sorrell said, “There are 10 companies that are currently important — Google, Facebook, Amazon, Tencent, Alibaba, Apple, Microsoft, and the three software companies Oracle, Salesforce, and Adobe.”

“According to me, these are the 10 key companies and I would like S4 to be a royalty of the growth of all those companies. I am a clean sheet right now, which is a good thing. It is a start, which we describe as a peanut, but the company is growing very fast, the company is growing by 45-50%. It has a very small basis but very strong growth,” he added.

Apart from his plans for S4, Sorrell also gave an overview of the media agencies and the challenges faced by the agencies. Talking about the agencies facing huge pressure from clients, Sorrell said, “The agency is suffering because of pressure from clients as they want it faster, better and cheaper. They are not only facing competition because of ‘frenemies’ like Google and Facebook, but the competition is also coming from consulting companies and in housing. The pressure on the client is a key factor, here.”

On the digital front, Sorrell feels that Google, Facebook, Amazon, Tencent and Alibaba are five companies to watch out for. “I think people underestimate Amazon, they don’t know how powerful it is. The reason I say is that I have seen how well they operate, especially on the sales side. In the Chinese context, Tencent and Alibaba are obviously dominant. What is interesting is that the Chinese government has the exact same issue with Tencent and Alibaba that others face in terms of regulation. So, I think the parallel is really interesting. Right now, I think regulation is an issue,” he said.

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