In Martin Sorrell’s Absence, an Uncertain Future Looms for WPP

Will we recognize the holding company in 10 years?

Analysts hesitate to make predictions about the future of the company.
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Martin Sorrell spent much of his career successfully working to satisfy WPP investors until the margins stopped growing. Now, the longtime CEO’s departure brings a seemingly endless series of questions about what, exactly, the future holds for the world’s largest advertising business.

Will the company currently led by executive chairman Roberto Quarta sell assets Sorrell was adamant about retaining? What will happen to the holding company model Sorrell shaped? And is anyone truly qualified to fill his shoes?

The company’s stock price dropped this week as executives rushed to reassure clients and shareholders around the world and analysts offered their own cautious predictions.

“WPP’s not going to disappear; it’s not going to be broken into bits and sold off,” said Tom Denford, co-founder and chief strategy officer of agency consultancy ID Comms.

That said, things are going to change.

A company built over 33 years is in limbo

Denford did note that WPP’s research division, which includes the massive Kantar Group, could be “carved up into smaller, more manageable bits.” But he still thinks the company will stay together in Sorrell’s absence, adding, “WPP is so big and almost intentionally complex … it’s been crafted by an individual and only he knows the secret codes and pathways.”

In this morning’s earnings call, Omnicom CEO John Wren clarified that his company is definitely not in the market to acquire any of Sorrell’s former assets. But others are not so sure everything will stay under the WPP umbrella.

“[There’s] a very strong possibility that there will be businesses within WPP that are sold off, because they’re certainly large enough to be and they’re attractive to other players in the market, whether they’re consultancy firms or technology businesses,” said Mary Keane-Dawson, who sold her own in-flight entertainment company Spafax to WPP in 2000.

Dawson predicted that “the Accentures and Deloittes of this world” will take advantage of the power vacuum before joking, “Maybe Martin Sorrell will put in a bid for WPP. He can probably afford it.”

"There’s a lot of resistance internally to change everywhere at WPP."
Mary Keane-Dawson, co-founder and CEO, Truth Media Agency

Denford thinks WPP may follow Publicis Groupe in focusing on a unified “one WPP” approach rather than keeping its individual creative, media and research entities isolated. Sorrell often encouraged this very sort of “horizontality” strategy, but multiple sources say such a shift has proven difficult.

“There’s a lot of resistance internally to change everywhere at WPP,” Dawson said. “That has been a real problem and I think it will continue to be so now that [Sorrell] is gone. He wasn’t responsible for that.”

But challenge brings opportunity. “WPP now creates the next blueprint of the holding company model,” Denford said. “They’re very siloed, and that has to change.”

The consultant, who formerly led media planning at WPP agencies including JWT New York and Mindshare, proposes reconciling the split between the network’s retainer services (creative, PR, design) and more easily commoditized, commission-based work like media buying and data by moving planning and strategy work into creative shops like Ogilvy.

“[Media and creative] have always existed quite uncomfortably in these holding groups,” he said. “I don’t know what real equity there is in media agency brands, sadly … they’ve been very much overshadowed by GroupM.”

Analysts proceed cautiously

Morningstar equity analyst Ali Mogharabi said that he does not foresee Sorrell’s resignation having a long-term impact on WPP’s stock or client relationships. On Monday, the research firm maintained an earlier estimate that WPP’s organic growth would be stagnant this year followed by a 1 percent boost in 2019.

“Outside of Sorrell,” Mogharabi told Adweek, “I think the changes that Ford may be going through may be creating some difficulty, but that’s probably due to Ford’s possible strategic changes rather than services provided by WPP. I think relationships with CPGs will be fine. The main issue has been pricing which comes from those companies trying to control costs and widen margins a bit. Whether WPP may be more willing to price its services lower and participate in a price war remains to be seen.”

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