Sorrell Downplays Talk of Recession

NEW YORK WPP Group CEO Martin Sorrell today downplayed talk of a possible recession next year, indicating that he’s expecting the industry and his company to grow due in part to ad spending around the Summer Olympics and U.S. presidential election.

Sorrell also cited as positive signs recent WPP wins such as global marketing services duties on Dell, with estimated revenue of more than $100 million, and AT&T’s consolidation of U.S. media duties at Mediaedge:cia. (AT&T, whose annual domestic spend is around $2.3 billion, previously split the business among five shops, including MEC.)

What’s more, even if a recession does occur—which Sorrell stressed that he’s not expecting—WPP appears more insulated than it was during the 2001-02 downturn because 54 percent of its revenue comes from marketing services like public relations, which are generally less prone to fluctuations during a recession. In 2000, marketing services generated about 45 percent of WPP’s revenue, Sorrell said.

Also, burgeoning growth outside the U.S. in markets such as China and India will likely cushion the blow from any downturn in the U.S., according to Sorrell. “If America sneezes, we don’t catch influenza anymore. We catch a cold,” he said.

Sorrell, speaking on the third day of UBS’ Global Media & Communications Conference in New York, repeated his assertion that 2009 will be a more challenging year economically than 2008, particularly in the U.S., where a new president will face issues such as government spending, taxes and trade deficits.

“The real issue is what happens in 2009,” said Sorrell. “Do I think there’s going to be a recession? No. [But] I do think things are going to get more difficult.”

The $10.9 billion company is projecting a half-percent improvement in its operating margin next year, to 15.5 percent. This year’s topline growth will be around 5 percent and the margin will end up around 15 percent, up from 14.5 percent last year, Sorrell said.

In response to an analyst’s question about Google, Sorrell described the company as an “incredible phenomenon,” given its $216 billion market capitalization and the prospect of that figure nearly doubling in four years. “It’s the law of very big numbers. Google now has a very big platform on which to build,” he said.

Opinions differ on whether Google is seeking to disintermediate the ad industry, but Sorrell, who previously and again today described the company as a “frienemy,” said it was unrealistic not to perceive Google as a “threat.” That said, WPP is a big customer of Google’s that will spend $600 million with the company this year, up from about $450 million last year, and about $800 million next year, Sorrell said.