Sir Martin Sorrell, CEO of ad holding company WPP, weighed in on the digital media landscape today at the IAB MIXX conference in New York. One of his main arguments: That tech companies are also in the media business.
That may seem pretty obvious, since companies like Facebook and Google make most of their money from ads. However, Sorrell recalled being at an industry event where he asked representatives from big tech companies whether they considered themselves to be a media company or a tech company. (Tech executives seem to hate this question.) They all went with tech, but Sorrell said, “Of course that’s not true. … In our view, they are all, to some extent or not, media owners.”
That’s important for WPP’s business, Sorrell said, because “you wouldn’t entrust your media plan to a legacy media owner,” so why would you trust Facebook or Google? “Google sells Google, Facebook sells Facebook, Twitter sells Twitter. They are not agnostic. We are agnostic.” In other words, as technology creates new ad platforms, businesses will still need to work with agencies: “The more complicated it becomes, the more important we become.”
He returned to this point later, when interviewer Randall Rothenberg asked about Facebook or Google adding “agency-like services.” Sorrell countered, “Where we are is a very small business for them. They have bigger fish to fry and a lot of pressure on their sales organization.”
Oh, and even though I’m writing about ad holding companies and ad agencies, Sorrell said he dislikes the term “advertising”. His objection? That it makes people think of the world of Don Draper and Mad Men, when, in fact, “We’ve moved on from that.” In fact, he suggested that of WPP’s revenue, “Don Draper would recognize” the business model behind about $4 billion, while the remaining $14 billion comes from new areas.
Sorrell added that WPP and its competitors need to find new sources of revenue because the consumer goods companies who pay for ads are taking a closer look at their spending (as result of relatively little price inflation at the point of purchase for consumers compared to the price of commodities).
“That has put tremendous pressure on us as part of the supply chain,” he said.
As for what’s next, Sorrell said “the trite answer is mobile and data,” so instead he pointed to the success of Chinese companies like Alibaba, Baidu, Tencent, and Xiaomi.
“If you said to me, ‘What’s the next big thing?’ I would say it’s Chinese business models,” he said. “We in the West think we have a monopoly on this wisdom, but we don’t.”