As the advertising industry dissects the Publicis-Omnicon merger, Sir Martin Sorrell, chief executive, WPP, termed it a 'highly competitive deal' but was quick to add, "My own view is that the structure won't last, and will be changed soon."
Sorrell explained, "The tensions are already peeping about in both the organisations. Who is going to be the CEO, where is the CEO going to be based, etc etc. Strategically, yes, it gives us the advantage since the clients and people have not been given the articulation of benefits yet. But it is going to be interesting to see how the mess gets sorted."
Sorrell was speaking at a media conclave in New Delhi organised by exchange4media Group.
Currently, according to him, Omnicom brings 60 per cent and Publicis 40 per cent to the table of the merged entity.
He substantiated, "WPP's response to Publicis-Omnicom merger is to do what we are doing, but doing it fast." He explained that WPP is investing heavily in digital through organic growth and acquisition of small and medium enterprises. Without divulging specific, Sorrell hinted at an announcement to add headcount in India soon. Currently, the WPP group employs 14,000 people in India and generates Rs 3,000 crores in revenue, he said.
Sorrell shared a 10-point business strategy including: shift in power from the West, overcapacity of human workforce, rise of web, growth of retail power, using Facebook as a branding medium, importance of internal communication, globalisation and centralisation, cost of procurement, government being the largest client, CSR and WPP’s growth plans.
Centre of power is shifting
Sorrell said that the centre of power was shifting from the West, even as the belief remained that the West is paramount. The shift in power from traditional economies is moving south, towards regions like Latin America, Africa and the Middle East, he said.
The WPP chief executive went on to say that the paradox that would the world would be facing was the availability of excess physical capacity and constraints on human capital. “What we have lost in the West in main industrial centres, we have gained in the centres mentioned above,” he said.
He also pointed out that in contrast to old age wisdom of sticking to one job for life, the value of approach in the working population today is to flit from opportunity to opportunity, which adds to the paradox.
Rise of the web
“US consumers spend a third of their time on digital but marketers spend about 20 per cent on the digital medium,” said Sorrell. He added that digital would contribute 40 per cent of revenues in the next few years at WPP. Terming Google and Amazon effective new digital media companies, the WPP chief executive said, “Google has a five-legged business operation that makes it a success: traditional capability, long-term objective, powerful search engine, video, mobile and mobile search. Of these, search, mobile search, and video are growing at an unprecedented pace.”
“Last year we invested two billion in Google for our clients,” he informed, and added that Google would surpass Newscorp as WPP's biggest media outlet by dollars spent by 2014.
Sorrell said that proximity retail was going to take on the big box retailers. Rise in congestion, two-in-a-family earning are some of the reasons that will boost retail, according to him. Sharing the more significant shift, he highlighted that his second preferred web business - Amazon- had become a direct channel to reach consumers, bypassing retailers. Hence, retail conglomerates needed to take advantage of providing a retail experience to consumers over the web or closer, he explained.
While most marketers treat Facebook as an advertising medium, Sorrell cautioned that it was just a branding medium and not an advertising medium. He said, “Search is more contextual in term of sales.”
Importance of communication and centralisation
Sorrell informed that internal corporate communication and execution has been of tremendous strategic value to WPP. “Especially in a multi-brand organisation like ours, it takes a simple but different strategy to keep it going,” he said. The chief executive of WPP noted that internal corporate communication would become critical as local companies become national companies and national companies become global companies.
Sorrell articulated that as brands and offices become globalised, centralisation was also becoming equally important for global control.
On the relative power of finance and (cost of) procurement, he said, “Many of our clients have topline pressure. And to meet this, they usually axe communication costs. They need to understand that investment in communication services in not a cost, especially in a weak economic situation.”
He said that WPP not only provides quarterly results on its communication services to clients but is also in process of building standardised platforms.
While adding that the Government remains a big client for advertising and communication agencies, given that it has the authority to pass regulations, he surmised, “Social responsibility is fundamental for the growth of the companies.”
'You cannot give away stuff free-of-cost'
“It took newspapers a while to figure out subscription models and to understand that you cannot give away the stuff for free. The legacy media needs to have a subscription base in addition to advertising,” he said, talking about traditional media’s presence on web and their digital revenues.
Sharing WPP’s vision for growth, Sorrell surmised, “We are bullish on Russia, Germany, Poland and China. India in the BRICS is the toughest market. Though we remain bullish in this market in the long-term.”