The abrupt news of Martin Sorrell’s resignation as the head of his advertising company raises many concerns for both his 200,000+ employees and for the entire advertising industry. Anyone who has worked with Sorrell, including myself, will have no doubt about his fierce grip on numbers and his ability to quickly read and retain larger pictures that emerge from them.
Over 33 years, he built, developed, and profited the largest marketing services conglomerate in the world. Sorrell is, without a doubt, a titan in the industry. It is a rapidly changing industry, like so many others. It could be that he has jumped ship just before the ship sinks.
WPP was a simple construct. It aggressively bought other advertising agencies. It then expanded its range of services to include media, research and digital, design, events, sponsorship, and more. The company also acquired more clients, bringing the total to PS15 billion today. Each agency had to work hard to increase revenue and profits while reporting requirements became more stringent.
During the 1990s, clients began to worry about resources being duplicated across multiple agencies. Sorrell responded with multidisciplinary multi-agency client-centric teams. Ford was assigned a bespoke WPP cross-agency team named Blue Hive, and HSBC had its own “team HSBC”, led by JWT with people from other agencies. They offered clients an international one-stop shop that combined talent from multiple agencies, while generating substantial fees.
Kiss and punch
Sorrell’s mantra when agencies were unable to work together was “kiss and punch”. Each company had to fight their corner. WPP was the winner, no matter who won.
WPP added digital and social agencies as the digital economy grew. They were clearly keeping up with the times. It was beginning to creak.
WPP firms with which I was working in the late 2000s discussed other industries that were facing disruption and fought over “ownership” of consumers for their clients. They were trying to establish their identity within multi-agency client-facing structures and jostling with clients for supremacy.
The agencies began to work with the new digital giants, like Google and Facebook. They did not realize that they were transferring more knowledge than they received in return. These giants quietly woven themselves into the online media fabric.
Millennials have also emerged. They are less loyal to brands, consume less traditional media, and want instant gratification without paying for it. Budgets of marketing-heavy companies are being squeezed.
Marketing to millennials is different. shutterstock.com
We suddenly realize that Google and Facebook are the biggest recipients of advertising dollars. Google and Facebook are the two largest providers of data and many other services, technologies, channels, and techniques (unknowingly aided and abetted by online users). Direct dealing is available for clients, which allows them to avoid costly, outdated agency groups. The company that was talking about disruption itself got disrupted.
P&G, Unilever, and other large advertising spenders are now questioning traditional agency roles. Activist investors are stifling marketing spending. WPP’s shares have fallen by a third in the past year as a result of these disruptions. This is a warning that turbulent waters are ahead. The allegations against Sorrell could be the straw that broke the camel’s back.
What is the best way to write on a wall?
Sorrell, like many ambitious and smart people, had an autocratic streak. He was not keen to let others get too close. WPP’s absence of succession planning has been widely discussed and is as damaging as it is telling. The ex-CEO, a shrewd businessman, may have read the writing on the wall and left before the behemoth collapsed further.
Some observers, including Sorrel, point out the highly qualified people working at WPP. They also mention that creatively talented and capable leaders lead its divisions. The big global consulting firms are also buying agencies, so the return on investment has to be good. Since the Mad Men days, agencies have been evolving rapidly. They can do it again.
Many others, however, believe that the model of holding companies is on its way out. WPP’s competitors, Omnicom Publicis Interpublic Dentsu, are also worried. Some argue that it is even more behind the brand-new advertising. WPP is likely to break up. Its operating companies will be sold, and the model will be in tatters.
Google, Facebook, and Alibaba will be the new tech giants that clean up. In the process, they are likely to eliminate many traditional creative, media, and digital agencies. I wish WPP’s people well, but the corporate rot and slow evolution of WPP are not suitable for the age of disruption.