Like last year, 2016 will be another challenging year for clients and agencies alike, according to WPP CEO Martin Sorrell, who spoke at a Citi investor conference in Las Vegas this week.
Sorrell said that given the slow-growth global economy and low inflation, marketers will continue to focus on cost efficiencies. That could mean another year of higher-than-normal media agency review activity, as media remains a huge expense item for companies that want to be sure they are optimizing expenditures in an increasingly complex landscape.
Sorrell also told those attending the conference to expect more consolidation among marketers, media companies and the agency sector. He believes that within the next five years the number of big agency holding companies will be reduced from six (WPP, Omnicom, Publicis Groupe, Interpublic, Havas and Dentsu) to four.
“There’s a lot of uncertainty and that doesn’t play well with clients,” he said. With limited top-line opportunities for marketers, he predicted that “new business activity will continue at similar levels.” And 2015 was a record year for media reviews by most accounts. Estimates are that $25 billion to $30 billion worth of expenditures were put into review.
Sorrell said that given the myriad pressures on clients, it is difficult for many of them to focus on the long term. At the same time, it is harder for media agencies to differentiate themselves from competitors.
Traditional differentiators were price and talent, said Sorrell. Now, in addition, agencies must shine in the data, tech and content arenas. “Scale is more important,” he said. He noted that WPP’s largest business relationship is with Google — the company spent nearly $4 billion with the on-line Behemoth in 2014.
Asked about Europe, Sorrell said that Germany has the strongest economy on the continent. “If I could double our billings in Germany I’d do it,” he said. But the European recovery has been uneven. “The UK remains strong but there are concerns,” he said, while “France remains a problem.”
Sorrell noted that linear TV is under pressure, but stressed he doesn’t believe the medium will suffer anything like the declines that print has over the last few years. The challenge for TV, he added, is to map out a viable online strategy.