Sorrell on media

Martin Sorrell, WPP’s legendary financier and dealmaker, lets Caroline Marshall in on his vision for the future of agency media operations

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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