S4 Capital had a solid second quarter earnings report on Wednesday, with revenue up 41.6% to $108.5 million in the first half of 2019.
But that didn’t stop CEO Martin Sorrell from spending a significant portion of the earnings call throwing shade at his competitors, especially his former empire WPP.
When asked whether S4 needs to buy a large data company like Dentsu, IPG and Publicis, which bought Merkle, Acxiom and Epsilon respectively, Sorrell disputed the logic behind those deals.
“I’m not sure people who are making those decisions really know what they’re buying,” he said. “I don’t think that’s first-party data assets, cutting to the quick.”
Sorrell then went on to grade the acquisitions his competitors have made, giving Dentsu-Merkle an “A” and calling it “by far the best deal, maybe not on price, but on value.” IPG-Acxiom was a “B,” because “they left LiveRamp behind and that was probably the best part of it.” And Publicis’ acquisition of Epsilon received a “C,” with no further explanation.
Sorrell has been public about S4’s desire to buy a first-party data company, but he claims that these types of businesses, which include data brokers, are not what he has in mind. S4’s two main businesses, MightyHive and MediaMonks, combine programmatic with quick content production to build personalized creative at scale.
“We’re trying to build relationships with platforms and tech companies,” Sorrell said. “Our first-party is from clients, Google, Facebook and Amazon.”
Sorrell also criticized WPP’s decision to sell a majority stake in market research firm Kantar for $4 billion, a move that he had long opposed when he was CEO. He noted that GroupM’s new CEO, Christian Juhl, talks about the need to rent data to maintain neutrality for clients, but that GroupM is already sitting on a ton of first-party data housed at Xaxis and Wunderman-owned KBM.
“He has to look at his own assets,” Sorrell said of Juhl. “If he doesn’t want it, maybe we can buy it, because it is extremely valuable.”
Sorrell also took issue with the way holding companies have been reporting out their earnings, which obfuscates how much revenue their creative and media agencies are each driving. He criticized WPP for combining J. Walter Thompson with Wunderman and VML with Young & Rubicam, which lumps 73% of the holding company’s business in one bucket.
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“If I were an analyst, I would castigate WPP,” he said. “It makes no sense.”
Sorrell suggested that WPP is combining its revenue streams because it doesn’t want to reveal the negative growth rate in its declining traditional creative agency business.
“You don’t know what has happened to the pro forma performance of the traditional creative agencies,” he said.
When asked by an investor if the media agency business is next in line to suffer after the creative agencies, Sorrell thought through the question by listing which assets are performing best underneath GroupM. (First MediaCom and Essence, followed by Mindshare and then Wavemaker, he said) He estimated that GroupM’s revenue is likely $6 billion with $1 billion to $1.5 billion in profit.
He also said that other media agency groups are still performing well, such as IPG Mediabrands, although “people in the industry can’t seem to figure out why.”
S4, still small compared to its competitors, has grown to 1500 people in 22 countries around the globe since it launched in May 2018. The company is on track to hit its goal of doubling in size organically by 2021.
