If you love what you do and you build it, margins eventually come. Everything is about geography and technology. Geography is easier to figure out but technology is not. It is very difficult to put your money on something because it is possible that what looks good one day, may not look as good the next day. That said, a company such as WPP is in a very interesting position because the more complex this ecosystem becomes, the more important our role becomes.
Amongst various other things, Sir Martin Sorrell can be credited for highlighting the role that holding companies can play in shaping up the communication business on the whole. Sorrell, CEO of the largest holding company WPP, a role he donned in 1986, has over the years demonstrated an acute sense of what lies ahead for the industry, what future growth drivers for the business are and the right approach that would create value for all stakeholders of the business.
In a conversation with Noor Fathima Warsia, Sorrell speaks about the digital acquisition spree of holding companies, the role that digital is playing across the media landscape, the challenges this brings for marketers, the importance of India in the WPP scheme of things and more…
Q. Holding companies such as WPP are on a digital acquisition spree once again. Only this time, other agencies, media and creative that is, have also developed their digital capabilities. In such a scenario, what is the role that digital independents continue to play to make them important for a holding company?
There always will be a healthy Darwinian process, where people would want to start their own operations. We saw this in media, in the classical creative area and now digital is added to it. What we are starting to see right now is more consolidation in digital, which has clearly become an area of focus for everyone. We have seen enough instances, where we have been able to develop a relationship with clients on the back of the digital offer. It is on similar lines of what we saw with the media discipline. There has been a big debate on whether the medium is more important or the message. At the core of it, traditionally agencies went through the message and then they started to develop relationships through the medium to get to the message. Now they are going through digital, and you could argue to get to the medium or to the message or both.
There are some interesting entry points today but everyone including clients finds digital sexy and hence, it is a strong entry point. From our point of view, it is better to having capabilities that come from the likes of AKQA as part of our armoury rather than have them as competitors. Their partners have been historically private equity firms. We are more strategic partners to them. We can add value from that point because we get good financial results by doing things strategically and not the other way around.
Q. As holding companies evolve, will technology-led media owners become a part of the ecosystem?
I think they will but the focus will be the application of technology, not the creation of technology. We are not ego-inflated to believe we can do that. We are very keen on applying technology effectively as that is critical. And we already have investments in that direction whether it is our investment in Buddy Media, Omniture, Joule, VideoEgg or Visible Technologies. We have done quite a lot on this, much of which none of our competitors are doing at the moment. That’s part of the reason behind the creation of WPP Ventures with Tom Bedecarré as its President. WPP Ventures would further invest in these areas. It is a very powerful position to have. We don’t have the resources of Google or Facebook and certainly not of an Amazon or Apple but we have got some resources. We have a market capital of about 15 billion US dollars and about 10 billion pounds. We have cash flow of about 1.3 billion pounds. We have some financial capacity to do things with companies such as AKQA and Wunderman.
Q. A few global marketing heads have commented that there is so much conversation on the lines of technology and what it can achieve that there is a fear of basic tenets of marketing being lost...
That’s a fair comment. It’s a very sexy area and it becomes overpowering at times. We saw that a bit with the Facebook IPO and the tremendous pressure on them to generate revenue. It is not a channel that can be easily monetised but that doesn’t mean it can’t be monetised. Mark Zuckerberg’s S-1 letter to potential shareholders said this was a social phenomenon. Some may wonder if he was even interested in the IPO when they read the letter. But you can see he is really interested in building Facebook, which I think is the right way to go about it. If you love what you do and you build it, the margins come. Everything eventually is about geography and technology – geography is easier to figure out but technology is not. It is very difficult to put your money on something because it is possible it may not look as good the next day. That said, we are in a very interesting position because the more complex it becomes, the more important we become. At one point, people thought we would lose out to technology-led companies, which may still happen but by and large we have manage to fend off the G word (read Google) and then came the R word, R being recession. Let’s see what comes next.
Q. Technology is impacting all media and the traditional definitions of TV, print, radio and outdoor have changed. What are the challenges this brings to marketers?
Integration – how do you take the two and combine the strengths. For instance, how do you take a big live event such as Olympics and translate that to the new screens and to the new technologies; how do you also merchandise, sponsor or leverage it. People do become over-enamoured with the technology bit but that does not diminish the power of these things. The interesting thing to me is that post Lehmann, I am amazed at the strength of TV in the classic sense, the couch potato type. It could be for negative reasons but it is a fact that people are watching more TV and it continues to be a very powerful medium.
Q. What are some of the areas that holding companies should focus on for future growth?
It still would be the four pillars that our growth strategy is based on – new markets, new media, consumer insight and strengthening horizontality, that is, getting everybody to play together. Integration is part of it but it essentially is getting people to leverage knowledge. Our top 30 clients are a third of our revenue and there are host of our agencies servicing them. The challenge is how we get our operating units to kiss and punch or compete and co-operate at the same time, how can we best leverage the relationship that operating units have across the Network effectively, and what would make the sum of the parts greater. And this also applies at a country level. How does Ranjan Kapur in India or a Ranjana Singh in Indonesia and Vietnam gets the country operations to work together more effectively. I can’t have 108 people reporting to me in each country, so there has to be somebody on ground who knows the best people, the potential clients and the worthiest acquisitions. If we can get the constituents to work together, the growth path for the future would be clear and strong.