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LISBON—Marketers can expect a bumpy ride for at least the next year, as global political turmoil and a potential recession squeezes ad budgets and depresses the advertising economy, according to Martin Sorrell.
At Web Summit in Lisbon, Portugal, Sorrell took the Centre Stage alongside Fox Business business correspondent Susan Li and The Lego Group’s global chief product and marketing officer Julia Goldin to share his 2023 marketing outlook.
Sorrell, who perhaps made the greatest impact on shaping the modern ad industry, remains committed to digital advertising investments, noting that the digital platforms are still growing. This is despite Facebook’s lackluster third quarter performance and its dismal fourth quarter forecast. The leader regards digital investments as smart moves in a recessed economy, maintaining a relatively rosy outlook on platforms like Alphabet, Amazon and TikTok and eyeing Apple’s growth. “Rumors of the demise of the platforms are exaggerated,” he told Li.
In this global environment characterized by uncertainty, marketers can stay afloat by focusing their investments in geographies that Sorrell believes will hold up compared to the rest of the world.
“You have to be, in my view, much more selective about where you’re going to be,” Sorrell told a Web Summit audience during an audience Q&A session. “I’d be very bullish on North America. I’d be very bullish on South America,” he said.
Sorrell is wary of China
Sorrell last year predicted digital marketing would boom in 2022. This was before the war in Ukraine accelerated inflation and exacerbated supply chain issues worldwide. Political volatility in the U.K. and the U.S., including the breakdown of the U.S.’s relationship with China and China’s conflict with Taiwan, are other factors contributing to economic downturn.
“You’ve got the Russia question about will happen after the war, which is probably going to be a long war,” he told Adweek. The S4 Capital leader admitted the market is on a downward spiral ahead of the new year that he believes will continue through 2024.
“The defining factor in ’24 will be the U.S. presidential election,” he told Adweek. “And I don’t think things in the real world are going to get much better until then.”
To contend with this turmoil, marketers must be choosy when deciding which geographic locations, and which technological and digital abilities, to invest in. Concentrating investments in China, in Sorrell’s view, is risky.
“Clients are now starting to look very carefully, if they have big Chinese positions, at whether they extend those positions,” he told Adweek.
Earlier this year, amidst Russia’s aggression toward Ukraine, holding company executives halted operations in Russia. It remains to be seen, as tension builds between China and Taiwan, if executives will take similar action in China. Media.Monks, which is owned by S4 Capital, has a Shanghai office.
On Centre Stage, Goldin challenged Sorrell’s position on China, noting that the market remains very important to Lego.
“This is a Marxist, Leninist doctrine, which is counter to what we’re trying to achieve, which is very different.” Sorrell responded. “We misinterpreted—either deliberately or accidentally—Putin’s objectives in relation to Ukraine and building the old Russia. We shouldn’t make the same mistakes in relation to China.”
Lower-funnel investments to dominate during a recession
While global conflict poses a challenge for marketers, Sorrell thinks digital investments should hold up. Marketers will strive to push up revenues during the recession, leaning into performance marketing to see desired results.
“You can build the argument—and this is self serving—that in tough economic conditions clients are going to examine their relationships more intensively,” he told Adweek. S4 Capital will release third quarter results later this month and Sorrell hinted at good news, telling Adweek he’s not seen any weakness in the market yet.
“The market is going to become much more performance orientated, much more activation orientated, more about media mix, measurement, ROI—those are going to be the critical issues,” he said. Sorrell’s S4 Capital, which owns Media.Monks, touts its digital expertise. Sorrell has heard that CFOs and chief procurement officers are putting pressure on CMOs to deliver on performance and activation.
Musk-Twitter drama is overblown
This week, news of Elon Musk’s Twitter takeover gripped the marketing space as holding companies like IPG advised clients to halt spending on Twitter for the time being. Marketers’ attention is in the “wrong areas,” Sorrell said during the Q&A. Since the platform’s ad revenue now dominates so little of the digital ecosystem, marketers can always turn elsewhere.
The critical issue for Twitter is its still-murky new moderation policy. “He [Musk] has to straighten out the moderation policy…[clients] want something that is stable, not controversial,” he said.
