• by Joe Mandese , December 7, 2005

The mass media world is diverging into two distinct marketplaces - slow-growing established markets, and rapidly growing emerging markets - the head of the world's largest media buying organization said Tuesday during an influential Wall Street media conference in New York. The established markets include traditional media like broadcast TV, and geographic markets in the developed world, while the emerging markets include digital media and developing geographic regions, said Martin Sorrell, chairman-CEO of WPP Group during a presentation at UBS' Media Week conference.

"If I had to sum this presentation up in four words, it would be, 'China and the Internet,'" quipped Sorrell, saying that the focus of WPP and its operating units, including media buying shops like MindShare, Mediaedge:cia and MediaCom, would be the faster growing media and regions of the advertising world. "You have to attune yourself to what we call a two speed world," he recommended.

Predicting that traditional media markets will be mired in a period of low advertising rate inflation, Sorrell said marketers have shifted from generating advertising cost savings from consolidating agencies and cutting compensation fees to negotiating better advertising rates with the media. He said the "tipping point" was the 2003-04 upfront, when marketers paid 15 percent to 22 percent more for network TV ad time than the previous year, a level that far outstripped their expectations of moderate single digit increases, and said it took until the 2005 marketplace to bring network TV advertising costs in line with the overall rate of inflation.

While traditional TV is not "dead," Sorrell said it would undergo radical change as marketers and agencies shift greater shares of ad budgets to newer and emerging media, especially the Internet, but also out-of-home, and "out-of-work" media such as outdoor and in-store.

Despite the rapid shift, Sorrell implied that the amount of money that has shifted online and into areas such as search has been greatly exaggerated. "They are overstated," he said, "and they are overstated because it is fashionable."

However, unlike traditional media, he said clients are not as concerned about paying agencies high margins for working on online and digital media, noting "those areas are very sexy," and have relatively low out-of-pocket advertising costs. He said his agencies margins were much higher for online media, and indicated that media planning and buying continue to be WPP's fastest growing businesses.