Sir Martin Sorrell: Digital uncertainties have failed to check Facebook and Google’s growth

The boss of WPP says that while there is increasing scrutiny around the effectiveness of digital, this has not pegged back the growth of Google and Facebook.

The digital ad industry has had a difficult start to the year following a wider brand safety scandal and concerns around fake news, viewability, verification, transparency and measurement. However, that has not stopped advertisers upping their spend on the two main players.

While WPP says it’s seen a “marked pause” in advertising on YouTube over the first half of the year, it is still “pureplay internet” that is providing nearly all the growth in the UK market. While the TV ad market is holding its market share, other traditional channels are losing out. And boss Sir Martin Sorrell said WPP will continue to up media investment in Google and Facebook.

“There is increasing scrutiny from clients around the effectiveness of digital,” he said, speaking on a call this morning (23 August) following WPP’s half-year results. “But YouTube’s travails over brand safety, fake news, value, viewability, verification, transparency and the Google and Facebook measurement questions, these issues have not stopped or pegged growth of Google and Facebook in our media investment.

“Despite the uncertainties, this hasn’t checked the growth or importance of the duopoly in digital media.”

Google remains WPP’s biggest single media investment, with Sorrell saying he expects the company to spend more than $6bn on the platform this year. And he predicts Facebook will move up from third to second position, with WPP’s spend rising to more than $2bn.

Despite the uncertainties, this hasn’t checked the growth or importance of the duopoly in digital media.

Sir Martin Sorrell, WPP

Sorrell also once again brought up the spectre of Amazon, which is having an impact on most clients’ businesses and therefore on WPP. Amazon is also going up against Snapchat and Oath in an attempt to be the “third force” in the digital ad space.

Sorrell estimates Amazon’s ad revenues are around $2.5bn annually, making it a growing player but still well behind Facebook and Google, which he estimates account for 75% of digital and 30% of total ad spend. But he expects Amazon to grow this figure markedly over the coming years.

READ MORE: Can Amazon put an end to Google and Facebook’s digital duopoly?

FMCG cuts ad spend

WPP saw revenues rise to £7.4bn for the six months to June, up from £6.5bn a year ago. But the company admitted the industry has been “much tougher” in the first half of the year, fuelled by the rise of populism in the UK and US and difficult conditions in Brazil, China and Russia. WPP now expects sales growth of between 0% and 1% this year, compared to a previous forecast of 2%.

WPP in particular has struggled due to its reliance on FMCG clients. Both Procter and Gamble and Unilever have been vocal about their plans to cut agency fees and reduce media investments in a bid to improve efficiency and effectiveness.

READ MORE: Unilever’s Keith Weed on how cutting agencies will improve its advertising

Across its top 30 clients, which contribute 30% of revenues, 14 cut spend while 16 increased it. But overall, those 30 clients’ spend was down. Across the top 50, half were up and half down, which Sorrell said pointed to the “volatility” in the ad market.

While FMCG and autos are cutting spend, technology and healthcare in particular are upping it.

“Uncertainty and short-termism is reducing investment among clients,” explained Sorrell. “The overwhelming thing that hits you in the eye when you look at our top 30 clients is the preponderance of FMCG reducing spend quite significantly at this time.”

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Comments
  • Lucy Whitmore 30 Aug 2017 at 9:51 am

    Although I do agree that the digital advertising industry did suffer near the beginning of the year due to fake news and durability, I believe it has undone its past mistakes and has come back fighting.

    Advertising is now more widely seen on social media as it is an influencer to its users and to say that Facebook and Google’s growth has been affected due to the advertising market would be incorrect.

    Facebook and Google offer a wider market of attraction for users whereas digital advertising is specific to a certain market meaning its market is considerably smaller than the one of social media.

    In turn, this means that the digital advertising world within social media will be larger and more successful than elsewhere as it attracts a larger and broader market.

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