Martin Sorrell, WPP’s legendary financier and dealmaker, lets Caroline
Marshall in on his vision for the future of agency media operations
When he is in London, Martin Sorrell likes to begin his 13-hour working
day over a cup of citron chaud in the oak-panelled dining room of the
Connaught Hotel. It is here that the chief executive of WPP has hatched
the deals that have turned his company from a supplier of shopfitting
equipment into the world’s largest advertising and marketing services
group.
We meet in Sorrell’s office at WPP’s Mayfair HQ. Copies of Wired and a
dispenser full of coloured jelly beans from his Italian promotions
company sit on the table. An IBM Think Pad lurks in a corner of the room
and Sorrell, energetic as ever, plunges straight into his views on
agency media-buying operations - to unbundle or not to unbundle?
‘One of the paradoxes about what’s happening in the industry is that
some clients are splitting media from the creative process. To my mind,
as media fragments, they should get closer together. Split creative from
media and you get more discontinuity, not less. Somehow we need to
preserve our advantage while getting the focus and clout that comes from
our media expertise,’ he says.
Elsewhere in the industry, the full-service proposition is already
evolving. Abbott Mead Vickers BBDO is in talks with its fellow Omnicom
shop, BMP DDB Needham, about merging the two agencies’ media operations.
What does Sorrell make of that, and what will it mean for the Media
Partnership, the media buying club that pools the resources of AMV and
BMP, together with J. Walter Thompson and Ogilvy and Mather?
‘As I understand it, they’ll be merging AMV and BMP’s media departments
in the UK, then they’ll use the Media Partnership in other parts of
Europe as a buying vehicle. It’s a clever deal that will bring Omnicom
buying clout and economies of scale at the same time.’ Coming from the
financial brain behind some of the Saatchi brothers’ better and most
daring deals, that is praise indeed.
Will WPP respond, as many predict, by pooling the buying resources of
JWT and O&M? Qualifying his statement with a characteristic, if
implausible, ‘I have no clout in this organisation’ kind of shrug,
Sorrell seems to be saying yes: ‘Without a doubt, it is the way to go.
But pooling can mean a variety of things.
Media power is the key thing. The new media conglomerates that are
forming around the world - News Corporation, United and MAI, Disney/ABC
and NBC/Microsoft - will bring a slew of changes in control that will
merely reinforce the need for agencies to form powerful media
functions.’
If JWT and O&M merge their media buying functions, what will happen to
the implementation and strategic planners? Sorrell replies: ‘Those
decisions would be made by the agencies themselves, but, in my view,
we’re talking about buying. Planning would stay in the two agencies.’
Does Sorrell already employ a visionary media expert who could head such
an operation, a sort of ‘best of breed’ to rival Zenith’s Christine
Walker? He seems to be saying no: ‘The issue is whether agency people
are as good at ‘walking with’ media owners as they are at walking with
clients. Media is a key operating function in any agency, but this is a
relatively new phenomenon.
‘O&M in New York recently hired Peter Chrisanthopoulos as its president
of US broadcast and programming from ABC and I expect to see more of
those sort of appointments in media. It’s not that there aren’t talented
people within WPP, it has more to do with the way these people are
regarded and their ability to command resources.’
Other observers want to hear Sorrell’s view on media price inflation,
which is currently running way ahead of RPI in most of the countries WPP
operates in. What effect will this have on his group’s stellar
performance?
A half smile signals that he is about to indulge in the practised
interviewee’s art of the understatement. Sorrell says: ‘It doesn’t have
a significant effect on WPP’s agencies because so much of our media
income is fee-based.’
For clients it is another story. ‘For them, the first half of 1995 -
when media price inflation was about 10 per cent and RPI 2 to 3 per cent
- brought tremendous pressure. Quite rightly, none of our clients likes
to pay more for less.’ In Sorrell’s view, is it the agency’s job to
fight media price inflation, or should cyclical market forces determine
where his agencies will get most bang for their clients’ buck? ‘Fight is
the wrong word. The relationship between our clients and the media
owners should not be antagonistic. But, taking last year as an example -
an environment where every other input was not inflating at 10 per cent
per annum - it is unreasonable that that kind of inflation could be
allowed to continue. And in the UK, for whatever reason, in the second
half of last year, it didn’t. It fell dramatically.’
From media inflation, to media ownership, which is high on WPP’s agenda
at a time when the group is generating more than enough cash to finance
a purchase or two. Sorrell has further ambitions in the area of new-
media ownership - purchases that will complement the token 5 per cent
stake of the definitive online magazine, HotWired, which WPP secured for
an undisclosed sum last year. He promises: ‘We’ll be making several
investments similar to HotWired. They’ll be minority participation,
probably US-based, probably West Coast.’
And yet the lure of media ownership is patently not money - the HotWired
investment is minuscule in the context of the group. It is because media
ownership brings with it an opportunity to develop editorial content.
To date, WPP has pockets of new-media excellence - at JWT San Francisco,
Cole and Weber in Seattle and O&M in London, for example - but these
have grown out of media departments. The thinking has not permeated
through to the creative heart of his agencies. Many question, therefore,
how Sorrell will involve his companies in new-media vehicles.
To address this, WPP has hired a consultant, whom Sorrell will not name,
to help the group share new-media knowledge. His template is the WPP
healthcare network, CommonHealth, a virtual network created in 1992 to
take advantage of the soaring healthcare costs and regulations that
allow drugs to be sold across borders. CommonHealth covers a number of
WPP interests - including JWT, O&M, the Henley Centre, and Hill and
Knowlton.
What are Sorrell’s views on the 500-channel universe? ‘From a consumer-
choice point of view, it’s a wonderful thing, nor is it as frightening
as some of the network-TV providers seem to think, because network TV
will still be the quickest and cheapest way of reaching the largest
number of people. But I have to admit that I find even newspaper and
trade magazine reading quite daunting. I should be reading more.’
Media, it is clear, is not the only thing on Sorrell’s agenda. Another
issue that is occupying a good many of his thinking hours at the moment
is the way his agencies are organised. Historically, agencies have been
organised by geography first, function second and client third. Sorrell
thinks they should be planned on what he calls a ‘fox-hole’ basis -
client first, geography second and function third: ‘I just don’t believe
vertical silos in agencies make sense. We need to organise ourselves
increasingly and primarily by client as well as geography and function.’
In some parts of the group, such as O&M in South Africa, this has
happened already. Even so, the creative function remains separate
‘because creatives need to spark off each other’.
In an attempt to establish the thinking for a new structure in the
group, Sorrell has asked his main companies - including O&M, JWT and the
PR companies, Ogilvy Adams and Rinehart, and Hill and Knowlton - to
allocate two offices as test sites for flatter, client-led structures.
‘We’ll have 14 case studies to look at by the end of this year,’ he
promises.
Some observers look at WPP’s structure - the trio of agencies; O&M, JWT
and Lansdown Conquest, plus PR, design, market research and sales
promotion interests - and question whether there is one thing missing: a
hotshop. WPP’s rival, Omnicom, bought the US hotshop, Goodby
Silverstein, in 1989. So how about it?
‘I wouldn’t rule out a purchase of that type, I find the thought quite
seductive,’ Sorrell replies. ‘I think what Omnicom has done makes sense
in the context of the overall operation. And it is interesting to see
how the smaller and mid-sized agencies who once vowed they would never
sell - Chiat Day, TBWA, Ammirati and Puris, for example - have realised
that they inevitably hit a glass ceiling that prevents them from getting
opportunities with international clients.’
WPP’s recent results prove that Sorrell’s ten-year-old holding company,
which was once within a whisker of extinction when debts threatened to
engulf it, has really put its house in order. Pre-tax profits for 1995
hit a record pounds 113.7 million, margins are up 1.1 per cent to 9 per
cent, debt is tumbling and earnings-per-share are up 40 per cent.
But Sorrell wants more. The acid test, he says, is whether WPP can
emulate its top-ten clients, whose companies have re-engineered:
‘Crudely, their sales increase has averaged 16 per cent and their head
count has gone down by 10 per cent. I’m not saying that agencies should
cut head counts, merely that they should do better work faster. I worry
that if agencies behave like dinosaurs, they’ll become dinosaurs.’
And so to the delicate topic of that pounds 25 million, Sorrell’s
personal pot of gold at the end of the rainbow. After a drubbing last
year from the group’s institutional shareholders, WPP moved the goal
posts - marginally - on its chief executive’s controversial pay package.
The deal includes basic pay and stock bonuses, triggered by the group’s
financial performance and share price. If Sorrell hits the maximum
targets and WPP’s share price triples to pounds 3.40 (it is now pounds
1.90) by 1999, he could pocket pounds 25 million. It is a figure that
few doubt he will achieve. After that, what will he do for an encore?
‘We have not succeeded yet. If a financial objective was my key
motivator, there are other ways of making money. I just want to build a
very successful business - that’s a never-ending process unless you have
100 per cent market share.’
Dismissing impudent suggestions that he might get a kick out of spending
his pounds 25 million in Hollywood, or even aspire to be the next Rupert
Murdoch, Sorrell fixes me with one of his remarkably penetrating stares
and repeats ‘100 per cent market share’ three times.
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