‘Adapt or die’ – Martin Sorrell’s message to ‘Pavlovian’ ad industry holding companies

Outdated advertising industry holding companies are now at the point where they must “adapt or die” due to pressure on marketing budgets that started back in 2008 – with the global financial crisis – and is now reaching a tipping point, S4 Capital executive chairman Sir Martin Sorrell told Mumbrella today.

Speaking on the sidelines of the Innovfest Unbound conference in Singapore, the former WPP chief executive insisted that the big ad networks were “locked into huge overheads” and were too “worried about being the incumbent agency” to be able to deliver for clients in an agile way.

“The Pavlovian action of any agency is to do a TV commercial,” he said. “Our concern at S4 Capital is to do the best job [for the client] even if it means we are disenfranchised. We have to optimise the distribution of [client] budgets.

“The model is shifting rapidly. Last week, we did 100 meetings at Cannes and in all of them the focus from clients was on the propensity to experiment. There has been pressure on marketing resources since 2008.”

Sorrell claimed that S4 Capital’s low overheads and a cheaper wage bill due to the average employee age being 25 at Mightyhive – the programmatic firm – and 33 at MediaMonks, the production house, meant it could deliver greater bang for the buck than the networks.

“It’s adapt or die, the holding companies have big structures built in,” he said. “We negotiate fees in a totally different way. They are locked into huge overheads that are not fit for purpose. And agencies are worried about incumbency.

“For the big six, it’s very difficult and you can see that in their financial results. You saw them on the beach at Cannes last week and that lack of performance in the awards from WPP and Publicis.”

Earlier in the day, Sorrell spoke onstage to an audience of more than 1,000 delegates. While he criticised his former company WPP, and fellow network Publicis, for “complete failure” at Cannes he also attacked Dentsu for taking an “ant-Gaijin stance”. The company recently restructured its management, with critics suggesting it was the Japanese headquarters taking greater control and ridding the agency of foreigners at the very top of the hierarchy. 

He also claimed that the departure of Publicis chief creative officer Nick Law to Apple and the exit of creatives Ricardo Casal and Juan Javier Peña Plaza from the WPP agency Miami David showed that the networks were in real trouble – no longer being the most attractive place to work for the brightest talents.

“The days of tentpole campaigns are numbered,” added Sorrell. “It’s difficult for them [the networks] to move quickly, particularly if its a listed company, as it’s tough to take the long-term view.

“We recently produced a 1.7-second Facebook ad for L’Oréal in France because that’s the optimal viewing time on Facebook. Our people are half-nerd, they are not agency people.”

Sorrell started S4 Capital just a year ago and in that time has grown it – via acquisitions like MightyHive and MediaMonks – into a US$750 million dollar business with 1,400 staff in 18 markets. Among the clients are Procter & Gamble, Nestlé, Bayer, Google, Facebook, Amazon and Starbucks.

Asked why he felt the need to start again at the age of 73 after 33 years with WPP, he admitted to having a bad case of “founder’s disease”. He also acknowledged that “wanting to impress my father” had been a driving force throughout his career.


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