Sorrell: clients think of Europe for its costs, not its revenues

Sorrell: clients think of Europe for its costs, not its revenues
Sorrell at Dmexco on 20 September (Credit: Koelnmesse)

“I shouldn’t say this, but I will say this: every client I talk to thinks about Europe not from a revenue point of view, but from costs point of view. France, Germany, Italy, Spain and the UK are all in the same boat.”

Sir Martin Sorrell, speaking at Dmexco 2023 in Cologne yesterday, implored advertisers and marketers to “pick your geographical battles” as they look toward future-proofing their business strategies in a time of relative market uncertainty.

‘India is on fire at the moment’

The point came as part of a fireside chat with Ralph Simon, CEO of mobile strategic advisory Mobilium. In the discussion, Sorrell waxed about where he sees strength in the global economy through the rest of the century, especially given increased media and geopolitical fragmentation.

He described how the “Global South” is expanding its power, such as through Brics member states (Brazil, Russia, India, China and South Africa) which have large populations and land masses. Last month, the group invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates to join the bloc beginning next year.

In contrast, Sorrell pointed out that just one member of the United Nations Security Council (the US) was in New York City this week for the UN Sustainable Development Goals summit. “Even the major powers, the so-called hegemonic powers that have dominated the world stage, are thinking about this fragmentation,” said Sorrell, who believes the US in particular will “withdraw into its own boundaries” regardless of who wins the next presidential election in November 2024.

He noted that projections currently suggest that three of the top five global economies will be in Asia by 2050 (China, India, Indonesia), and said the region will develop into the “Premier League” of economies. He specifically referred to India as “on fire at the moment under Modi’s leadership,” but pointed to strong growth throughout the entirety of the region that will help boost global businesses in the years to come.

He qualified, however, that China is a “risk” particularly given a potential invasion of Taiwan “once the semiconductor issue has been dealt with, maybe in five, six, seven years’ time.” As such, companies should look to deleverage themselves if they are over-reliant on the Chinese economy, Sorrell suggested.

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On the other hand, whereas growth in African economies is projected as numerous countries undergo industrial development, Sorrell said the region is likely still “too volatile for many people’s tastes.” Instead, he is bullish on what he regards as more stable economic growth in Latin America, and believes North and South America will thus become a “powerful media bloc.”

“I would argue in Buenos Aires, for example, you have as good technical and creative talent as you will find anywhere in the world,” he said.

‘We had a tough week this week’

Closer to home for Sorrell, S4Capital, which he founded in May 2018 after resigning from global media holding company WPP amid allegations of personal misconduct, has itself struggled financially this year. Just days before speaking at Cologne, the media company revised its revenues forecasts downward and announced it was cutting 500 jobs amid a plunge in clients’ adspend.

“Tough week” Sorrell on S4Capital (Credit: Koelnmesse)

Shares of S4 dropped 21% to a low of 67.9 pence on Monday, and are down over 61% year-to-date. At the time of publishing this story (Thursday midday), the price was 74.6 pence.

When prompted by Simon to discuss the challenging market conditions, which he downplayed as “a little bit of a dip right now”, Sorrell admitted, “We had a tough week this week with our first-half results,” but reaffirmed that his digital-first model is still as relevant in 2023 as it was when he founded the company five years ago.

‘You can reduce all media planning and buying to an algorithmic analysis’

Apart from geographical developments, AI is another key pillar Sorrell described at Dmexco as driving transformation across the media industry.

While he told the crowd “the jury’s still out” on AI, he speculated the new technology will help make more efficient the visualisation of copywriting and the ability to hyper-personalise media experiences. He also explained his belief that AI will drastically reduce the number of positions needed for media planning and buying practices.

“My view is that the media planning and buying organisations that we see in the six agency holding companies probably employ about 200,000-250,000 people. They will not [all] be employed there in five years’ time, or even in two years’ time.

“You can reduce all media planning and buying, particularly in the digital area, to an algorithmic analysis, which will enable your media planners and buyers to be much more effective. You have all the data, simulations and input to come up with much better decisions but with fewer people. Media planning and buying networks are not automated; a lot of what they do is manually generated. That is going to change.”

Within the context of rapid AI development, Sorrell (while admitting his pro-digital bias) further argued against breaking up Big Tech, stating, “For a strong national economy, you need strong tech companies… The vital strength of a nation depends on the strength of its technological capability.” He referred to Ukraine and the US’ reliance on Elon Musk for defence initiatives related to Starlink as a reason to encourage, rather than discourage, the growth of tech, rather than its breaking apart.

Sir Martin Sorrell will be speaking with The Media Leader editor Omar Oakes next month at the Future of Media 2023 in London. The duo are slated to explore whether media agencies are sufficiently investing in technology and talent to meet demand for high-growth areas like AI and retail media, and to what extent agency holding groups are able to deliver value across multiple fragmented channels and platforms.

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