Sorrell reveals that S4 Capital is set to start operations in India soon, starting with content. He also hinted at acquiring 'small, successful' agencies as a strategy.
'The New Reality', is what Sir Martin Sorrell's new agency network, S4 Capital is about. Claims are, it is what differentiates S4 Capital from Sorrell's previous ad stable - WPP. In a one-on-one conversation with journalist Anant Rangaswami at the World Congress event of the International Advertising Association (IAA) in Kochi, Sorrell reveals that WPP's portfolio had been flat for around a year, in terms of organic growth, but then there were three major areas where the network grew - digital content, data and digital media planning and buying.
"Digital grew with VML, Ogilvy One and the likes, driven by first-party data with agencies like Kantar and then media planning and buying with the likes of Essence and Xaxis. We irreverently call these, the holy trinity," Sorrell says.
He believes that control of first-party data is critically important today. "That is where the battle will be won or lost. While the internet came with a promise of building a connect between manufacturers and consumers, it was soon taken over by e-tailers such as Google, Facebook, Alibaba, Tencent, and Amazon," he explains.
Sorrell refers to Netflix's content model as one of the most appropriate, saying, "We'd develop the content and then feed that content into programmatic media buying, depending on the behaviour of the consumer (discerned from data). S4 Capital is totally about digital. We are very focussed on that (digital) 40 per cent of the client's advertising budget," he says.
ALSO READ: Sir Martin Sorrell steps down as WPP CEO
Sorrell explains that the digital ad industry is about $200 bn. "....Of that, Google takes away $125bn, Facebook takes $52bn with Amazon and Microsoft taking $10bn each. With that, we are totally focused on the 'holy trinity'," he states.
He mentions the Publicis and WPP models as 'consolidators' where the ad networks consolidate their agency brands under their names for simplification. He also believes that there are networks like Omnicom and IPG which invest in building individual brands and not together.
"The networks investing in individual brands are doing slightly better than the consolidators because in consolidator models, the strategy takes time to implement. When Publicis puts its name with a Sapient, agencies like Burnett, BBH etc. lose traction. It is an interesting strategic issue," he says.
Sorrell considers Dentsu an interesting model. "It is the closest to the S4 Capital model. Dentsu is still basically a media planning and buying organisation which has developed its digital capabilities to a sophisticated degree. It has first-party data which, in the context of S4 Capital, is really important," he explains.
Speaking about the increasing demand for transparency in digital advertising in India, he believes that the market is set to change, saying, "Clients are increasingly becoming concerned about transparency, not only on the content side but also on the media side. Transparency of content is clear, but we still have to work on the media side."
Sorrell attributes the demand for transparency to the clients' stressed resources owing to overall economic factors like GDP and inflation and their increasing dependence on agencies. "As their (client's) resources were put under pressure, they put us under pressure. On the one hand, Google and Facebook understandably are denying access to data, causing clients to be concerned about the relationship with the consumer and making them insecure," he stresses.
There has been a lack of trust, with clients opting for in-housing. When we create studios co-located with clients or even as part of the client's structure, clients genuinely feel that the agency's interest is their interest too.
When asked about smaller agencies opening shop and posing a challenge to the bigger ad houses, Sorrell shares, "We are launching our operations in India very shortly, starting in the content area and have looked at it from the acquisition point of view. There are a number of small successful agencies. We are at the foothills of it and you're going to see greater consolidation."
Historically, WPP built its network through aggressive acquisitions over the decades. Sorrell's S4 seems to be on a similar track. As per reports, the network recently bought a San Francisco ad-tech company, MightyHive, in a $150m deal, Sorrell's second acquisition since leaving WPP.
He maintains that the talent and technical capabilities in India are good, matching some really good areas of the world. He also hinted at launching operations from Bangalore and Mumbai.
About the concern for data privacy and a few platforms being responsible for the huge number of brands, Sorrell has this to say, "What we have to do is explain to the consumer in simple terms what he/she is getting into by accepting the terms. We complicate what is actually simple. The consumer wishes to be informed and not to be surprised."