Sir Martin Sorrell, the boss of WPP, believes there is still a lot of work to be done before social catches up to the power of search.
Speaking at the Festival of Marketing today (5 October), he admitted that five years ago analysts saw Facebook and Google as “enemies” of WPP, yet fast-forward to now and Sorrell described them more as frenemies. This year, Google was WPP’s biggest media investment and he said by 2018 he expects Google and Facebook to be its biggest two. However he doesn’t expect Facebook to overtake Google any time soon.
“Search is more powerful than social. It is no accident that Google outperforms Facebook four to one.”
Sir Martin Sorrell, CEO, WPP
One of the issues is that Facebook is still being both player and referee and that the industry needs to improve measurement.
“Facebook can’t really claim that a three-second view when 50% of the time the sound is off is the same as a 15-second, a 30-second, a 60-second TV ad or someone reading a The Times for 40 minutes,” he said.
“And we have to address this by having better measurement.”
He said Facebook’s recent error in viewability stats is actually a “good” because it focuses clients’, media buyers’ and the media’s attention on the issue.
“Sunlight is the best disinfectant,” he said. “This is opening up areas that need opening up.”
The rise of short-termism
Sorrell believes brands are becoming increasingly cautious and that a focus on costs is driving short-termism. He explained how the the declining length of tenure of CEOs, CFOs and CMOs is a result of short-term thinking brought about by factors including tech disruption, zero-based budgeters and activist investors.
“The world is growing at 3.5%. There is low growth, no inflation, no pricing power and a focus on cost. That is not good for the industry. I’m not saying it is wrong or I can’t understand the reasons why but it is not healthy,” he said.
He cited the example of the top 10 brands in the annual Millward Brown BrandZ survey. These he said are the best brands focused on innovation and investing. And if investors had put their money into them rather than the S&P stock market they would have got returns of 120%, instead of 50%.
“The way you win is through innovation and branding.”
Sir Martin Sorrell, CEO, WPP
“That sounds trite but it is fundamental. There is too much focus on cost, the [brands] that break out will be the ones with the confidence to take risks,” he explained.
The future of advertising
Sorrell admitted he expects 100% of WPP’s media spend to be ‘digital’, saying this is because brands need to stop differentiating between digital and analogue, calling it an “artificial distinction”. At the moment it is around 37%.
He also thinks virtual reality is one of the most exciting areas, but not because of the technology because of the content.
He expects consolidation in the business to continue apace. While the Publicis/Omnicom deal may not have gone through, he does not expect there to be six holding companies in three or four years’ time.
“It is inevitable you will see further consolidation among clients, media owners and agencies. The industry is oversupplied. There will be more consolidation,” he said. “And the marketplace becoming more fragmented puts more pressure on agencies to consolidate.”