Martin Sorrell: Brexit Is a Perfect Metaphor for What's Happening Between Brands and Agencies

Sir Martin Sorrell closed out the IAB Annual Leadership Meeting in Phoenix, Ariz., today with a sprawling conversation that touched on his feelings about retirement, the broken agency model, what Brexit could mean for GDPR and a prediction for Amazon's growth potential. At the heart of the discussion, though, were his plans for his nascent company S4 Capital, which has been gaining momentum in recent months—first acquiring the digital content agency Media Monks for $350 million in July and then programmatic media buying company MightyHive for $150 million in December. MightyHive CEO and former Google executive Pete Kim joined Sorrell onstage to talk about their vision for a new kind of advertising firm, fueled by digital disruption and dissatisfaction with the old agency model—one that Sorrell arguably helped build before stepping down as WPP's CEO last year following a personal conduct investigation. While studying the $22 billion portfolio of WPP, Sorrell said he saw three areas of growth to capitalize on with S4: digital content, data, and media planning and buying. "We're focused on what I call the holy trinity—first-party data driving content and programmatic," he added. "We're focused on the mantra of faster, better, cheaper. You might think that's a superficial thing to say, but I have to tell you never in my 40-odd years of experience has there been so much willingness to embrace that concept." During negotiations for both companies he's acquired, Sorrel said his first sentence was, "I'm not interested if you want to sell out; I'm interested if you want to buy into those three things." Kim sees digital, data and media as the keys to closing the gap between the ad experiences consumers want, and the ones they so often get. "Never before in history have we seen such amazing content come through—it’s perfect. You can watch anything you want, listen to anything you want, read anything you want, perfectly synchronized across every connected device," Kim said. "Unfortunately for advertisers, that expectation for perfection, for quality, for personalization also applies to the ads, and the marketers are not really in a great place to try to respond." Here are eight more insights and opinions Sorrell shared during the conversation: On life after WPP Sorrell briefly touched on his exit from WPP, but didn't linger on it. Retirement wasn't an option, he said: "Whatever the circumstances were of my departure/resignation from WPP last May, again I find myself in a position where, was I going to go retire and sit on a beach and play golf or whatever? At the risk of offending golfers, golf is for old men." Brexit as a metaphor for the ad industry "I was watching a film on the unfortunate Brexit vote—I remain a remainer—and [Benedict] Cumberbatch, the actor who played Dominic Cummings, is the guy who ran the Brexit ad campaign, and his headline was 'Take back control.' This is remarkably similar to what I see going on in our industry. Clients feel they need to take back control." Why brands feel insecure Sorrell talked about what he calls "the law of unintended consequences"—how agencies set out to serve clients but ultimately contributed to their insecurity: "I at WPP and John Wren [at Omnicom] and Maurice Lévy [at Publicis] tried to build these agencies around clients. And as you surrounded clients, I think the clients felt even more insecure ... they saw the walled gardens going up and they saw the agencies unintentionally surrounding them, so they felt insecure, and a lot of the reviews we've seen are based on that insecurity—the desire to take back control over the process." GDPR's effect on tech companies "I think [regulation] is inevitable. Facebook doesn’t call itself a media company; it just shies away from that. But they in fact have become a media company. ... The irony of this is post Brexit, if the U.K. does come out, the U.K. should become the sort of Singaporean, low-tax, light-regulation [place]. It should be the place where Amazon, Facebook and Google go, not where they don't go. "It's about power, and with power comes responsibility, so there will be regulation." Who owns the data? "There are one or two clients—I won't name them—that have clean data sets, but the bulk of them have masses of data which are incoherent. ... So cleaning those data sets is going to be critically important in building them, and whether S4 owns those data sets—because they're expensive and few and far between—or they have access to them is a question. The best model that we've seen is the Netflix model, with first-party data driving the content and driving the programming." The value of direct-to-consumer companies "Unilever did not buy Dollar Shave Club because it wanted to compete with Procter and Gamble—it wanted access to the data." Amazon's dominance "Jeff Bezos is the John D. Rockefeller of the 21st Century. ... I think he will build the Amazon business into a $100 billion business." Who's responsible for fixing the client-agency relationship? Sorrell noted the stock market's negative reaction to Omnicom's and Publicis' fourth-quarter earnings reports (a 14 percent correction for Publicis). But, he said, agencies can't fix their problems alone. "It's understandable that the agencies should take the heat—the six holding companies," he said. "It's fine to put the pressure on the agencies, but the clients have to change themselves. Their structures must change too, because there's no point in us having coalesced all the content points, and then we're just feeding it with the same fragmented client as well."