Date: 11.1.1999
IS MARTIN SORRELL, GROUP CHIEF EXECUTIVE OF THE London-based advertising giant WPP Group Plc., the more formal, distancing Martin or the casual, approachable Marty? "It's Martin," he responds with British coolness as we sit in the bar-like atmosphere of Manhattan's 21 Club. "I like to think I'm egalitarian. People probably think I'm authoritarian."
Or worse. After WPP completed its unsolicited takeover of Ogilvy & Mather in 1979, David Ogilvy, the advertising legend, called Sorrell an "odious little jerk." As Sorrell tells it, the Financial Times, in publishing that phrase, considerably toned down Ogilvy's last word.
That's all history now. WPP's billings are up $1.6 billion to $13 billion through the first six months of this year, helped by new business from Diageo and Kimberly-Clark (both at J. Walter Thompson) as well as Northwest Airlines (Ogilvy). Its Nasdaq-traded ADRs, at $94, have doubled in the same period. Value Line projects net income of $210 million this year (using conservative U.S. accounting) on revenue of $3.5 billion.
WPP is the third-biggest ad agency group behind Omnicom and Interpublic. The fact that WPP is no longer the biggest (as it was between 1977 and 1989) seems to annoy Sorrell. However, he claims, it's not important. "Being the best, that's what's important."
Martin is a man back on top after the company came close to going under earlier in the decade His balance sheet is strong, his client list is growing and his company is focused on the vast changes the Internet will bring to advertising.
The hyperkinetic and voluble Sorrell enumerates things constantly. And when he enumerates, he leans. "There are three things the clients need to know," he says. "One, they are being disintermediated. Two, they are being disintermediated by a low-profit business model. Three, it is hard to recruit and retain people with Internet companies offering them fortunes." Clients, he argues, must confront these truths before they can build an advertising strategy.
Sorrell is nothing if not full of contradictions.
For example: He wants WPP to be a collection of boutiques that draw clients to highly specialized, personal offerings. These include Smith & Jones, a U.K.-based firm specializing in technology advertising, and the Prism Group, a public relations and sports marketing unit. He has more than 60 of these separate shops--some large, like J. Walter Thompson and Ogilvy, some tiny like the Clever Group, a media technology consultant. "I want a Pavlovian reaction to not one but to each branch. It's specializing that counts, really. Some clients think the bigger you are the less creative you are."
Yet he also wants to dominate the world--to offer his behemoth clients every conceivable marketing and communication service, under one roof. He already has as clients 300 of the largest companies in the world. "It is politically incorrect to say so, but our big clients are becoming more coordinated," he says. So he must be coordinated, or centralized, too. That is full service. WPP has 33,000 employees, not exactly a boutique. "I want 150% of market share," he jokes.
But Sorrell cannot have it both ways, can he?
He sure is trying. When an Ogilvy client needs international market data, Ogilvy reaches into WPP's Kantar Group for help. Is the client worried about Wall Street? Ogilvy steers the company to an investor relations firm, the International Presentations Group.
Sorrell swears WPP's strategy is distinct from that of its competitors. Interpublic (McCann-Erickson, Ammirati Puris, et al.) and Omnicom (BBDO, DDB) run their subsidiaries separately, and Omnicom works hard to install entrepreneurship among its various entities. Synergy isn't what they are after.
We note that for the first time last year, WPP had higher revenues in its nontraditional, nonadvertising businesses like public relations and market research than it did in its traditional advertising business. Is this the future? Yes and no is the answer.
Sorrell clasps his hands together and leans even more to his left. Future growth is going to be in nontraditional areas, where margins are now lower but "coming up rapidly," he says. Kantar Group, the market research business, had a 32% increase in sales in 1998, 13% from existing rather than acquired clients. Unlike advertising, market research data can be resold as a steady source of income.
To make his point, Sorrell says that just 15% to 17% of his business is now the typical TV ads, once the breadbasket for Madison Avenue. While he calculates Web-based advertising is just $4 billion worldwide, or less than 1% of all advertising, that's the wrong number to focus on. It's more important, he says, to consider that there are now $350 billion in Web-based transactions a year. "That's big! Our strategy is to encourage traditional channels aggressively but to find direct channels."
Sorrell claims he's the largest buyer of Web advertising (mainly through Ogilvy's relationship with IBM), and that his revenues from e-businesses will be $100 million this year, up from $60 million. He had also directly invested in a handful of new media companies with snappy names like BroadVision, Hyper Parallel, NewsEdge Corp., Peapod and Syzygy, all of which develop software designed to reach consumers groups over the Web.
Sorrell continues to lean, and enumerate. He counts ten high-growth areas he could see adding: media planning and buying, research, health care, new technologies, emerging markets, privatization, retailing, financial services, entertainment and media, high technology and telecommunications.
What about the rumors that WPP is contemplating an acquisition of the now public Young & Rubicam? "I think there's a very very natural fit between the two businesses. Yet is it possible?" Sorrell asks rhetorically. "You can't eat strategy."
This is a reference to WPP's near-death experience when the $864 million Ogilvy purchase almost crushed it. "I got the financial structure wrong," he explains. WPP's coverage ratio (EBITDA to interest expense) was at a meagre 1 time in 1991. More recently it was 7.5 times.
All things being equal, Sorrell would rather buy a private firm than a public one because it will cost him 10 or 12 times earnings rather than 15 times. "Caution is a virtue," says the new Sorrell.
He is listing so far to port, I suggest we change the subject. Since he likes to count, we ask him his five biggest mistakes. He starts out thoughtfully. Ogilvy--not the purchase, but the financial structure--that he didn't have ten children (he has three), that he admits he has five mistakes in the first place, not playing enough cricket and, with a big smile, giving this interview.
Ask Dyan | Curriculum Vitae | Forbes Articles | Graphic Novel | Jokes | Machan Auction | Nice Things Said About Dyan
Pictures of Dyan | Quotes | Screen Treatment | The First Article I Published | What is a Machan? | Home