If the pressures on WPP’s chief executive - a figurehead for more than 100,000 staff across 2,000 offices in 106 countries - are high, Sir Martin Sorrell doesn’t show it. An accountant by training, Sorrell has made a career out of defying expectations, making a slew of audacious acquisitions that have placed him at the top of the global ad industry.
For 27 years, the Cambridge University graduate has dedicated himself to expanding his global empire. He has a gift for combining the big picture with total mastery of detail - a rare combination even among chief executives of empires like WPP. His thirst for knowledge is unparalleled, as is his seemingly effortless ability to recite pertinent facts and figures.
Today, with much of the world’s attention on Asia, Sorrell is in a particularly jovial mood over tea and toast in Beijing. But then he has good reason to be. WPP’s media agency MindShare has just celebrated its 10th anniversary and there’s a strong note of optimism amongst his senior executives. Ogilvy is fighting fiercely for greater control of Motorola and sister agency JWT is working to bed the Nokia business.
Even Batey is beginning to show signs of life post-Singapore Airlines, on the back of two wins, Audi and Qatar, and a new creative leader on board. As Sorrell notes: “It has to fight its way out of the paper bag. Alan Fairington is very determined to see what he can do.” With WPP one of two in the final shoot-out for the global Dell business, the rest of the year continues to hold more promise.
What is most remarkable in talking to Sorrell is his commitment to Asia and just how comfortable he appears to be in this part of the world. “You just have to compare his visits with those of his holding company peers,” says Miles Young, regional chairman at Ogilvy. “Martin understands that Asia is all about relationships and has been prepared to put in the miles and the long hours.”
Indeed, this particular trip to Beijing is one of numerous to the region this year and, judging by WPP’s profile in Asia and its overall performance, the air miles are fast converting to figures on the bottomline. The group recently announced an increase of nearly three per cent in its first half profits (the sixth straight profit increase), boosted by acquisitions in mainland China and India, as well as growth in the US.
Within Asia, one of the fastest-growing regions for the holding company, revenues were up almost 11 per cent, with first-half like-for-like revenues in China and India up almost 29 per cent and 22 per cent respectively. Sorrell says that while acquisitions will continue to play a role in helping WPP expand in markets like China, organic growth will be more important there and in other emerging markets, including India, Brazil, Russia, Indonesia and Vietnam. In China alone, he expects the firm to see organic revenue growth of about US$100 million this year, bringing revenues to around $600 million.
And post-Olympics? It’s inevitable that the industry’s expansion will eventually slow in China, particularly in 2009, but that will not mean WPP will be putting less investment there, he explains. In China, WPP, he argues, is well prepared to tackle the expected “bump”. “The growth will carry on for a number of years. I wouldn’t mind there being a bump - maybe other people will disappear, get scared off and it will give us more scope. But the Shanghai Expo will take place in 2010 and there’s the Asian Games and other events coming up. So, by and large, we see them as opportunities, not a problem.”
Sorrell’s buying binge in Asia has seen WPP take control of mainland marketing services firm Star Echo, Indian brand identity company Quadra and Blue Interactive (just to name three) with interest also expressed in 10am Communications and, of course, Madison in India.
What one competitor dismisses as a “blocking off” strategy - suggesting that Sorrell’s interest in these companies may be fuelled as much by a desire to complicate growth for rivals as much as finding strategic fits for WPP - the approach has seen the holding company gain scale in key markets. Sorrell admits, “I don’t like to lose deals - not to anybody”, and in the mainland, WPP is known to have identified 800 potential acquisitions, according to one source close to the company. The list narrowed to 20 earlier this year and currently sits at 10.
“The reason some of the other holding companies such as Omnicom haven’t been as successful is that they’re not local enough to do acquisitions. China is highly localised and you need local experts. There has to be individual contact, local understanding and visits,” explains the source.
But with much of the attention focused on the deal, how are the acquisitions assessed in the future, other than in numbers? Importantly, how are these relatively smaller companies integrated into the WPP fold? All Sorrell will say is, “(Journalists) like to write headlines not about organic growth…we assess performance by what you, clients, competitors, analysts and new business rankings say. We don’t merge agencies - usually, the law in the industry is if you merge agencies, it doesn’t work. We may bring an agency into the network, but it tends to retain its identity,” he says.
Today, the thorn in WPP’s side in China isn’t Publicis or Omnicom, but Focus Media, which cemented its position as the mainland’s largest operator of flat-screen LCD advertising networks when it acquired Target Media. Cash-laden and hungry, Focus Media has a ruthless reputation, able to both outbid and undo acquisitions. In a recent incident, Omnicom is rumoured to have been interested in acquiring Chinese online ad agency Wonder Ad for $20 million, but lost the deal when Focus Media stepped in.
“Focus Media is a pain because it is so aggressive, although there’s a question mark over how real it is and how long it will last,” says Sorrell. “It is a problem because it can get things done quicker - being Chinese - and it dangles a big carrot. It is not a long-term threat; these things usually explode in time. It can’t keep going forever.”
Instead, Sorrell points to Google, as well as the likes of Sina and Baidu in China, as short-term friends and long-term enemies. In recent months, WPP and its rivals have all invested in digital companies, although the amounts of money spent and deal structures have varied. WPP has been particularly active through investments in mobile and online advertising. But, unlike Publicis, the figures have been somewhat controlled and Sorrell is outspoken about the valuations of digital companies.
“The challenge of buying digital is that scale is not enormous. Expectations are raised to extreme heights, both in terms of people and selling and buying the businesses. There is a get-rich-quick culture or idea that’s being developed that doesn’t help and, in the long run, those things never work. They are blips or short-term phenomenon and we are interested in building a long-term brand. China is not different. Valuations being put on the digital agencies in the West are unsustainable or unsustainably high.”
As for WPP’s $649 million 24/7 Real Media buy, Sorrell notes: “It’s early days. The media business in the UK is tough.”
