Sorrell: 'Radical evolution isn’t enough for agencies'

Agencies are “too worried about incumbency” and must change their models immediately to survive, according to S4 Capital executive chairman Martin Sorrell.

Speaking to reporters at the Innovfest Unbound conference in Singapore yesterday, Sorrell excoriated the holding companies for not reacting to client demands quickly enough due to their “huge overhead structures that are not fit for purpose”.

“It’s adapt or die,” he said. “Radical evolution, I’m not sure that’s sufficient.”

He said clients want to “take back control” of their marketing resources, which have been under significant pressure since the financial crisis of 2008.

“The walls in the walled gardens in the last couple of years have gotten bigger,” he said. “Our clients thought that when the web came along they would have direct access to consumers. But the new e-tailers, Amazon, Alibaba, Tencent, have assumed that position and rocked them. Now [clients are] saying, rather like the Brexit voter, they want to take back control over the process.”

The holding companies, Sorrell continued, are not responding to this shift in attitude quickly enough. He said S4C and its units MediaMonks and MightyHive took around 100 meetings at the Cannes Lions festival last week and “in all of them without exception, the focus was on the propensity to experiment”.

Citing S4C’s recent work for L’Oreal in which its units produced 1.7 second ads for Facebook, he said “the Pavlovian reaction of any agency is to do a TV commercial.”

“When you start with a purely digital operation you have a massive advantage. We’re not worried about incumbency,” he said. “At S4, our concern is to do the best job, even if it means we’re disenfranchised” by clients taking some processes in-house or choosing a different agency of record. He said S4’s direct costs were lower than the traditional agencies, and that it does not have large structural overheads to price in.

Sorell was particularly scathing of what he called “the complete failure” of Publicis and WPP at Cannes this year, and highlighted Nick Law’s departure for Apple and WPP agency David Miami’s loss of its two creative heads—who won 67 Lions in eight years—as a bad sign for the two networks.

Morever, Sorrell attacked Dentsu Aegis Network over its “anti-Gaijin” management stance, saying during an onstage interview earlier in the day that Dentsu’s Japanese executives had “a concern about control” over DAN, and that for the business “frankly—and I’ll say this publicly—it isn’t working”.

But Sorrell did concede that DAN “have the best model. They have a media-driven model with digital and data, with first-class assets. I just don’t know what they’re doing.”

Echoing the words of S4C APAC CEO Michel de Rijk earlier this week, Sorrell also poured scorn on Publicis’ US$4.4 billion acquisition of Epsilon, which he said “looks like the tired asset” among the recent data company acquisitions in the industry. Pressed on whether S4 is looking to acquire a data business, Sorrell said there were “interesting assets around but they’re expensive”.

He said in a little over a year S4C had grown into a US$750 million business, with 1,400 staff across 18 markets and revenues this year of around US$225 million.