Sorrell explains how the advertising industry has changed since Don Draper’s day
The modern ad industry is a very different world from the days of Mad Men, when Don Draper’s main concern was mixing the next cocktail and retaining creative talent at the fictional Sterling Cooper.
Sir Martin Sorrell, the chief executive of advertising giant WPP, took to the ITV Stage at Advertising Week Europe to describe how times have changed since Draper’s day as he outlined the challenges facing the ad industry in 2016. He also offered an upbeat analysis of how WPP has navigated through our current era of low inflation, digital disruption and a reticence by global corporations to make big investments.
He told the conference that there is “a strong ray of hope” for the ad industry despite low growth globally.
“That doesn’t mean there aren’t opportunities. GDP growth is 3.5% but there are sectors growing at 6% and others growing at 0%. The real issue for us is picking the countries and functions where we see growth,” he said, adding, “We have done very well in an environment that is very difficult; that is because we have managed to find the growth countries.” These include China, but he also mentioned plans to start operations in Cuba and possibly Iran.
Sorrell argued that the biggest determinant of shareholder growth for any business lies in boosting top-line sales, something that advertising can deliver. Analysis of WPP’s BrandZ brand valuation tables shows that the companies that own the top ten brands have outperformed global share prices. “Brands that invest in advertising will win,” he said.
Interviewed by Sky News business presenter Ian King, Sorrell ranged across many of his favourite topics, becoming especially animated when discussing the “Brexit,” the coming referendum on whether the UK should stay or leave the European Union. Sorrell is a passionate member of the “remain” camp. He expects that Britain will vote to remain in the EU but thinks it will be close.
He said the path to a successful future for WPP is to invest in three areas – technology, data and content. All the businesses in the group have been pushed to rapidly boost their digital performance. What he calls the “legacy” businesses – Ogilvy, JWT, Y&R and Grey – are encouraged to move into digital, while the digital businesses, such as AKQA, Mirum and VML, are tasked with globalising faster.
“What we have to do is to invest in areas of operation that will disintermediate us, that will disrupt us,” he said. Hence, WPP has invested in content with Vice Media, Media Rights Capital, and Full Screen, which runs YouTube channels. On the data and technology side, WPP invests in Xaxis, now the largest programmatic platform which goes head-to-head with Facebook Atlas and DoubleClick at Google. Meanwhile, on the measurement side, ComScore and Rentrak are working together to provide an alternative to Nielsen.
“The business has moved on from Draper,” he said. Draper was about managing talent and price, which still hold true, but today, he says, “Clients are starting to understand that technology, data and content are important.”
He quoted research from US researcher Mary Meeker comparing consumer time spent by consumers on different media, versus the investment the industry makes in those media. In 2014, traditional print took 4% of consumer time in the US, while the industry spent 18% of its budgets on print. Linear TV took 37% of time spent and 41% of investment, the first time there was a discontinuity in TV. Meanwhile mobile accounted for 24% of time spent, but 8% of marketing investment. “Everybody in this room knows that we haven’t contextualised mobile as much as we should and that the small screen is not a screen that agencies have become comfortable with,” he said, adding, “We don’t do the targeting as well as we should and we don’t do the creative as well as we should – although we are getting towards it,” he said.
Sorrell passionately defended his controversial £63m remuneration package, saying it was “philosophically” right that he should get such rewards. Having taken the risk of launching WPP, borrowing to fund it and sticking with it over the past 31 years, he believes this is just rewards. Is Sir Martin Sorrell worth it? He certainly proved to be a good value at Advertising Week Europe.
