Sorrell: Next Year Will Be Better
The “net net” outlook for Adland is that 2014 will be better than 2013. That’s according to WPP CEO Martin Sorrell, who spoke at the UBS media conference in New York Monday.
The improved performance projected for next year will be largely due to big quadrennial events including the Winter Olympics, World Cup and mid-term U.S. elections. But the incremental gain won’t huge, said Sorrell, adding that the special events might add one-half of a percentage point to next year’s ad spending growth.
Sorrell said he was troubled by what he termed the “exceptionally cautious” approach to marketing that clients have taken of late. He cited client pre-occupation with extended payments and demands from some clients for complete indemnity against any liability emerging from claims over so-called patent troll law suits.
Asked about recent indications from Unilever—WPP’s second biggest client after Ford—that it will be cutting media spending and agency fees, Sorrell replied, “It’s a tough world,” where clients and agencies alike engage in “hand to hand to combat to get growth.”
And just as clients are focused on costs, so agencies must be, he said. One area where WPP is redoubling efforts, he said, is properly aligning staff count to revenue growth. He also said the company will work to shave 1% off back-office expenses in the next several years.
He cited New York as an example where back office functions could be trimmed, noting that the company has 20,000 people and 3 million square feet of office space there. “From a bird’s eye view we have multiple financial and administrative offices and we have not consolidated businesses fast enough,” he said.
On the M&A front, Sorrell said the company would continue its current strategy of buying smaller firms in new markets, new media and data management, rather than doing bigger deals such as absorbing a major holding company. He said the company has made more than 60 acquisitions this year and will do several more before the year is finished.
But more major consolidation is also likely, Sorrell said. And his bet is on Dentsu buying Interpublic as opposed to Havas.
Sorrell also criticized the POG merger again as strategically illogical for the two players involved, Publicis Groupe and Omnicom Group. “They have not articulated what the client or employee benefits are,” he said. He added that since the merger was announced WPP has benefited on the senior talent front: for every one defection from WPP to POG, there have been seven defections in the opposite direction.