WPP’s stock is down. And the company’s longstanding chief, Martin Sorrell, isn’t sure if the holding company can do anything about the factors putting pressure on its business.
“I don’t know whether anything is within our control or not,” Sorrell said. “Some people say it’s the rise of the digital giants. No. Some people say it’s the rise of the digital consultancies. No. Some people say it’s the rise of short-term thinking. Yes.”
Sorrell shoots down theories that Facebook and Google will eat WPP’s lunch, or that consultancies are scooping up its clients. Instead, he puts the blame squarely on its clients’ activist investors and zero-based budgeting practices. Three of its top five clients – Unilever, P&G and Nestlé – are being affected by this trend, he said, pulling results downward.
“One serious issue we have to grapple is that clients look at us – at marketing – as a cost, not an investment,” he said.
If Google and Facebook have receded as foes – “they’re certainly frenemies, but today they’re much friendlier frenemies than they were before” – Sorrell also discounts consultancies as being able to compete with WPP.
In some cases, such as with McKinsey, WPP agencies will work side by side with the “strategic” consultancy. Other consultancies, he said, are simply buying culture and piecemeal assets.
“They are buying small creative shops all over the place, of dubious quality, second- and third-rate quality, and putting people in to run them who failed in well-known digital operations,” Sorrell said. “I’m not sure that necessarily hits the target.”
Sorrell sees packaged goods companies not only cutting marketing spend they should be investing in their brands, but under attack by Amazon. By creating its own house brands, which it in turn distributes, it threatens to disintermediate WPP’s packaged-goods clients.
Sorrell talked to AdExchanger at the Dmexco conference in Cologne, Germany.
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