Sir Martin Sorrell has warned that agencies need to stop putting clients into "straitjacketed" relationships if they are to succeed in the faster and nimbler 21st century market.
He was speaking at Friday's International Advertising Association lunch in London.
The S4 Capital executive chairman, who stood down as chief executive of WPP in 2018 after 33 years in charge, also predicted that the winner of this year’s huge Disney media review is likely to overpromise on pricing.
"It’s much easier to beat up on agencies groups than it is to beat up on a media owner," Sorrell said.
"Agencies are their own worst enemies. What do agencies do? What’s going to happen in the Fox/Disney review?" he asked rhetorically. "The contestants will promise Fox/Disney better pricing. They will even go to the extent of saying: ‘We’ll guarantee that pricing against our fees.'"
A member of the audience then interjected, saying that agencies were only doing that because they were being directed to make those kinds of promises by holding company bosses such as Sorrell.
"There was no direction," Sorrell insisted, remarking on his time at WPP. "In fact, there was great fear of people doing that.
"And then it went one step further. That not only were people guaranteeing against the fee, but will guarantee in excess of the fee. And so there was this internecine strife. As you well know, we’re all keen to get that headline in Campaign, but the fact is that’s the problem… it overcomes the bottom line and it’s dangerous."
Sorrell admitted that, through "the law of unintended consequences", clients were feeling "straitjacketed" in their relationships with traditional agencies as they tried to offer more services over time with the growth of digital media.
However, the rise of walled garden ecosystems such as Google and Facebook, which now dominate the global digital ad market, stymied agencies’ ability to add value through data. At the same time, brands have been under pressure to lower marketing spend with agencies for the past decade as Western economies failed to bounce back strongly following the financial crisis.
Moreover, because of "considerable pressure" from shareholders, the world’s six major advertising companies – like many of the world's leading brands – are finding it difficult to operate with a long-term view.
Sorrell returned to Disney as the exception to this rule: "Disney is very interesting. [Disney CEO Bob] Iger, who I think is the most amazing media executive, has managed to convince [Wall] Street that the switch from free-to-air to streaming and competing against Netflix at half the price may cause some short-term turbulence, but long term it’s the right idea."
S4 is also different, Sorrell said, because it has an "iterative mindset instead of a tentpole model" that allows the company to deliver on his mantra of being "faster, better and cheaper". He added that the company, which owns digital production shop MediaMonks and programmatic digital marketing specialist MightyHive, is "agnostic" about advising on which tech brands should use and is therefore more agile.
The IAA event also paid tribute to its departing executive director, Angus Grieve, who is stepping down this year and being replaced by former CNN account director Kirsty Giordani.