On his 20th visit to India, Sir Martin Sorrell, CEO, WPP Group, addressed a volley of questions from the Indian media fraternity. Topics ranged from the problem of recession, to WPP's growth plans, digital media, and his expectations from WPP outfits in India. Excerpts:
Q. What is the chief purpose of your visit?
I'm seeing clients, our people at WPP, the media (grins) and some government officials. Just checking up on things…not being here physically doesn't mean I'm not in touch with what happens here.
Q. You were big on digital acquisitions two years ago when you visited India, but since, you have made just one significant acquisition: Quasar Media. So, what happened?
Sir Martin: Forty per cent of our business is outside traditional media. The good news about digital in India is mobile penetration. Mobile content, mobile advertising, mobile messaging is just a matter of time….perhaps next year. The bad news is: internet penetration here isn't high.
Coming to your question, Wunderman, G2, RMG's digital capabilities, and now Quasar, are more than enough to handle our digital requirements. Worldwide, digital forms 25 per cent of our businesses; in India, my guess is 10-15 per cent.
In China and India, the biggest form of growth is organic growth, and it's going to be that way. Furthermore, one needs to understand that digital acquisitions in India tend not to be enormous; they tend to be bigger if they are part of a global setup. I mean, we acquired TNS (the research firm) which, in India, is three to four times bigger in terms of revenue for us, as compared to Quasar.
In India, we'll grow by 3-4 per cent this year, which is less than what we achieve usually. But we're still better off than many…we have a $400 million business here. We haven't been slouches.
Q. Are clients eyeing the internet seriously in tough times?
Sir Martin: Globally, 12-13 per cent are the spends on the internet, while consumers spend about 20 per cent of their time there. When internet budgets expand to 20 per cent in about five years, the paradox is, we'll be spending a third of our time on the Web, which will only push the gap between the two further.
But truly, the internet is one of the only areas that are growing. So yes, one would be wise to invest more in digital. You don't have to be Einstein to figure out digital is important. We're hiring more software engineers around the world, and people who are tech-savvy. All my leaders don't come from advertising alone, we have leaders from Wunderman, GroupM, Quasar, and so on.
Q. What are the chief categories looking at spending on digital media?
Sir Martin: Telecom and technology spend 12-13 per cent on digital globally, while it is 4-5 per cent in India. Other categories include media and entertainment, travel, leisure, hotels and airlines, and sports -- areas where people use data in a sophisticated way.
Even conservative businesses like FMCG spend about 12 per cent on digital these days. Another sector is automobiles: in the Western markets, there are cases of car launches done only online.
Q. What has been the dip in worldwide advertising and how has this affected media inventory?
Sir Martin: Worldwide, the ad industry is down by 10 per cent. This has led to a reduction in the price of all media, there's reduced demand and an oversupply of inventory; some media have even shut shop. In the UK, I heard TV advertising is at its lowest price in 10 years, and that's probably right.
I think the second half of the year should be better for everyone.
Q. Is there greater pressure to perform on WPP's Indian operations, as it isn't as badly hit as your foreign counterparts?
Sir Martin: I'll say there's a greater opportunity here, not greater pressure. Growth is in markets like India, Vietnam, Bangladesh, Turkey -- in other words, Asia, Latin America and Eastern Europe.
The market is more worried about relative growth than absolute growth. But pressure would be the wrong word here. I'd rather see it as an opportunity.
The world hasn't fallen off a cliff; I'm sure 2010 in theory, for now, looks good. There are the Winter Olympics in Vancouver, the Asian Games in China, the World Cup in South Africa, the World Expo in Shanghai and the mid-term elections for US President Obama in November 2010. The kind of audiences these fetch…I think these events should easily add around 1 per cent to worldwide spending.
Q. What are your views on the global recession and India?
Sir Martin: The sub-prime crisis happened in 2007, and the Lehman collapse happened almost a year ago. Roughly, it has been two years of bad times for economies globally. Till the beginning of this year, people thought India was resistant or immune to a global recession, as it isn't export dependent, like, say, China. But you really can't decouple India from the rest of the world. The country has been impacted, undoubtedly.
But having said that, since the elections (and the stability a government brings), people are more confident here. Unlike the rest of the world where that wouldn't translate into increased spending, here there are signs of that. Are the 'Green-shoots' here in India? Yes. Across WPP offices in India too, people feel a bit better about our business, be it advertising, media, consumer insights, public relations and public affairs, branding and identity specialists (Landor, Fitch, Ray+Keshavan), and healthcare.
I spent some time with Ray+Keshavan in Bangalore. Their businesses are picking up, which is interesting as branding and identity involves project work, which tends to be one of the last areas to pick up. But fortunately, it has for us.