Martin Sorrell Says Companies Will Continue to Keep Their Costs Down
6/18/2014 | The Wall Street Journal
CANNES, France— WPP PLC chief executive Martin Sorrell on Wednesday said consolidation in the advertising industry will continue as companies continue to keep their costs down.
Ad companies are facing intensifying cost pressures from their clients—including big marketers—some of whom have squeezed ad agencies by delaying payments, among other tactics, ad executives have said.
“Clients continue to put a pressure on costs to get to their numbers. It’s difficult,” said Mr. Sorrell in an interview during the Cannes Lions ad festival. “The result of that pressure is what is driving more consolidation.”
The recent collapse of the planned merger of WPP’s rivals Publicis Groupe SA and Omnicom Group Inc. has left many people in the ad industry wondering what sort of deals may be next as ad companies continue to seek scale and boost their presence in digital.
The tie-up between Publicis and Omnicom—announced with much fanfare in July but then called off last month—was designed to give the companies more heft in competing with deep-pocketed Silicon Valley firms such as Google Inc., GOOGL which have gotten a leg up on mining data about consumer habits.
Mr. Sorrell said scale is important, especially in media buying. But, for WPP, the quest for scale doesn’t necessarily mean doing a big deal, he said.
“We have done 50-60 deals last year and already 30 this year,” said Mr. Sorrell. “They are small, but they aggregate into around 2%-3% of revenues per year; that is substantial.” He said WPP will continue to pursue its strategy of making small to medium-size acquisitions with an annual budget of around £300 million to £400 million.
The founder of the world’s largest ad group, which houses firms ranging from Ogilvy & Mather to Grey Group, had been critical of the Omnicom-Publicis marriage and he took another opportunity to poke at the companies during Wednesday’s interview.
The collapse of the merger “was actually a bit humiliating for the industry,” he said. “It makes us look a bit ‘Don Draperish’ and amateurish.”
http://online.wsj.com/articles/wpp-ceo-martin-sorrell-predicts-more-consolidation-in-the-advertising-industry-1403113338