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

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." [kickout id="1"] 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.” [kickout id="3"] To Mogharabi’s point on client relationships, a former WPP executive who spoke under condition of anonymity said Sorrell was not universally close to brand leaders. However, "There were certain clients who had really, really close relationships with Martin like Nestle," the executive noted, adding that such businesses might be less secure after Sorrell's exit. “[Clients] are always trying to get better deals, and WPP is vulnerable right now,” the person said. Another party suggested that the absence of micro-manager Sorrell, who famously appeared in a video with a personalized "Sir Martin" Coca-Cola can during that company's 2015 global media review, might affect current and future pitches. Adweek reached out to several of WPP's largest clients including P&G, Unilever, Kimberly-Clark, American Express and Target. All either declined to comment or did not respond. Who will succeed Sorrell? Brian Wieser, senior analyst at Pivotal, said it’s too early to make any predictions until new leadership is named. Spokespeople for Wunderman CEO Mark Read and WPP Europe COO Andrew Scott, who now share the COO title, declined to comment for this story. While early speculation held that Read and Scott might become co-CEOs in the wake of Sorrell’s departure, WPP is searching both internally and externally for his successor. Wieser said that, if Read takes the helm, WPP might invest more heavily in digital, software development and tech companies like Globant, in which it currently owns a 20 percent stake. Wieser then threw out a possible Kantar CEO Eric Salama takeover which could lead WPP to integrate Kantar across the network rather than divesting it as many have suggested. [kickout id="2"] Wieser offered up another scenario in which WPP might bring in a temporary CEO "from the outside." Dawson argued that such a move would benefit the company, because an outsider could bring in his or her own team to take an objective look at the challenges facing WPP. Denford went further, stating that the future leader must be an external candidate with "the character of Martin Sorrell: a Fortune 100 CEO with the skills and capabilities to manage a conglomerate business." "You don't have to be an advertising guy to run a business like WPP," Denford added. "Martin isn't creative. He didn't actually build an agency; he just merged them together." In contrast, Mogharabi said Sorrell's successor "has to be someone from within the firm." “While different agencies within WPP are overseen by their own management teams, promoting one from within can demonstrate confidence by the board in all of those agencies,” he explained. “Also, the risks of different cultures, teams, etc., are more likely to accommodate someone from outside of the firm. I’d say those risks could be too big especially for a holding company that has been in the process of integrating the components or agencies, and trying to operate more efficiently.” The only certainty in the wake of Sorrell's abrupt departure is that nothing is certain.

General

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

Will we recognize the holding company in 10 years?

Erik Oster

Patrick Coffee

Lindsay Rittenhouse

About

Subscriptions

Events

Publications

WORK SMARTER - LEARN, GROW AND BE INSPIRED.

Subscribe today!