Legacy agency heads are not focusing much on digital in India, says Martin Sorrell

As the business landscape changes, legacy advertising agencies have come under a lot of pressure because of their slow transformation strategy, said Sir Martin Sorrell, Executive Chairman of S4 Capital.

Sorrell, who is in India to announce business collaborations of S4 Capital, said the age of the 30-second commercial was over.

S4 on Wednesday announced the acquisition of Delhi production house White Balance. S4 merged White Balance with its content practice agency MediaMonks and renamed it MediaMonks India.

Sorrell said MediaMonks will focus on devising digital advertising, which has duration of content as short as two seconds.

“Big ideas still dominate but not at a static tempo with 30-second TV commercials. Things are moving really fast. With the attention span decreasing up to 1.7 seconds at a stretch, our content arm MediaMonks will devise digital advertising of two seconds. We wouldn’t create a 30-second TV commercial,” Sorrell said. He said the format of advertising should fit the purpose otherwise it would be like running an election campaign with data.

Saying that S4 and its companies remain faster and cheaper in India, Sorrell said first-party data, digital content and programmatic will drive the growth in India.

“Faster and cheaper is about the agility, which is the key. Every CEO of a legacy company complains of the failure of their organisation to adapt quickly in the times of digital transformation,” he said.

Sorrell said the success of S4 will be in the fact that it has a unitary structure. He said marketing, sales and IT need to work more closely.  “The problem with the holding companies is that they are built in fragmented sizes. If you ask me what’s the biggest issue for any CEO, it is getting everybody face in the same direction at the same time. One has to genuinely get one P&L in the organisation. In my view, marketing, sales and IT have to work much more closely together. Bringing these functions together over time is going to become increasingly important,” Sorrell added. 

Sorrell said first-party data is going to be very important. Most companies, however, do not have the skill to handle that. “As of today, data is mostly controlled by the platforms. The only way to go around it is to go direct to consumers. The rise of the internet will help brands go direct. From data, one can create content which can be personalised and targeted at scale. The marketing approach that is specific is much more effective than the mass one,” he added.

Talking about the growth potential of the India market, he said it could be categorised into two buckets; the geographical bucket (population wise) and the technology bucket.

Sorrell, who was critical of Google and Facebook during his days at WPP, now says they’ve become partners for S4, given its focus on digital. He said these companies are not getting into the advertising services business. 

“Earlier the relationship was called ‘Frenemies’. But now it is like a partnership, particularly after I left WPP. S4 is the junior partner for the platforms like Amazon, Facebook and Google and tech companies like Microsoft. Google is huge. S4 is tiny. We do work together. These platforms are not getting into the advertising services businesses. In the last two years, I have seen situations in which I have seen Google, Amazon and Facebook going directly to the clients, but that does not mean they want to build a service layer in the competition,” he said.

“It’s not a conflicting relationship. It is only conflicting in the minds of the people in traditional agencies. The agencies get frenetic about that. People working in agencies are very insecure. They don’t like anybody going to their clients because they think it undermines their relationships. The fear of losing business generates subjective concerns,” he added. 

Sorrell had earlier criticised the social media giants on issues such as brand safety and data privacy.

He said companies such as Google, Facebook, Amazon and S4 Capital are successful because of their structure and are the only ones that take a long-term view. The uncontrolled listed companies last five years on average, he said. “If you are in the business in the long-term, then you won’t do anything that can offend your stakeholders and impact long-term profitability,” Sorrell said.

Talking about the merger and acquisition model S4 has been following globally to grow, he said, “It is a difficult structure to sell to people unless they really believe in the future of their business. We always tell people we will value your business on the basis of what it is doing currently and what it might do in the immediate future.”

“The consideration is half shares and half cash. The companies that merge with us, we say buy into our concept and that means you realise a part of your investment. This model is near to long-term private equity model. All the mergers that have happened with us— IMA, MediaMonks, MightyHive and Firewood except Caramel Studios—have capitalised on half of the value of the company or the half of the investment. The other half is going to be carried into equity around S4. Like this, we have a unitary structure. This is a non-proven model which no one else has done it,” he added.

After exiting WPP in 2018, Sorrell had announced his new venture S4 Capital.

S4 Capital reported revenue growth of nearly 54% year on year to £56.6 million for the third quarter, with gross profit up 50% to reach £42.1 million. The company now aims at organically doubling the size of the business by 2021. It is present in 26 countries with a strength of 2,000 people. S4 Capital has on-boarded several blue-chip clients like Apple, Google, P&G, Coca-Cola, Adidas, Johnson & Johnson, Netflix, Starbucks and Nestle among others.

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