Maja Pawinska Sims 04 Nov 2020 // 2:11PM GMT
LONDON — PR agency leaders within the marketing holding companies should “fight their corner better” now the fallout from Covid-19 was showing the strength of the discipline when compared to their sister advertising agencies, according to Sir Martin Sorrell.
Speaking to PRovoke chairman and founder Paul Holmes in a keynote session at the ICCO Global Summit this week, Sorrell said: “Apart from the technology and healthcare parts of the holding companies, PR has done best, when PR agencies were regarded a few years ago as one of the weakest parts.”
He said the Q3 results season had shown that PR agencies within the big groups – including Omnicom, WPP and IPG – had had “less revenue compression. Instead of being down 5-10%, they are down by 2-4%. Maybe their leaders can fight their corner better and be less interfered with by accountants at the centre because they have relatively better performance.”
However, Sorrell's views on the value of PR have not entirely softened since he left WPP in 2018: “The phrase public relations is not great. In an online, 24/7, real-time world, it connotes old fashioned and analogue as opposed to where the industry is rightly trying to go. Embracing tech and understanding digital is where the future is.”
As a result, he said it was a mistake for network agency leaders to position themselves as more like their advertising or digital sister agencies: “The leaders of the big PR companies are trying to position their firms post-Covid as more like advertising agencies or media agencies, and I think that’s a terrible problem. It becomes even more messy, as there’s even more competition internally.
And nodding to the increasing pressure on holding groups to offer value to clients through a cross-disciplinary integrated service, and the challenge of having several brands within the same sector, he said: “For the holding companies, combining assets effectively is the critical issue.”
Sorrell also gave his views on the US election, the morning after voting closed when the next president was not yet clear and the race for the White House was tighter than most polls suggested. “It’s amazingly close and for the polling industry it’s a complete disaster,” he said. “Total, abject failure for the third time in the row, after we’ve seen the Brexit mis-forecast and the first Trump victory mis-forecast.”
He put the strength of the Trump campaign down to its focus on targeting specific groups: “The campaign may have looked in disarray but far from it: they were highly focused on the 90m people who don’t vote. It’s fascinating stuff. What it means for stability, I don’t know. Think what you will, it’s amazing what Trump has managed to do from a popular vote point of view.”
And he said the campaign’s focus on data was a lesson for marketers: “It has real implications for what we do as an industry: a targeted, data-driven approach on which you build creative is the way to go.”
Sorrell also mooted other aspects of how life, work and business will change as a result of the pandemic. On flexible working and employee engagement, Sorrell said Covid had accelerated changes that were already afoot: “Cities are going to change, post-Covid. For those who can do dispersed working, the general drift is they want more flexibility. This has been in the hopper all the time.”
As a result of remote working becoming the norm, he suggested businesses will in the future be regarded as “a collection of individuals rather than one firm” and this would mean employee programmes would need to become more targeted “in parallel to what we’re doing on the marketing side.”
On changing consumption and media trends, Sorrell said: “Consumers are changing and our clients are much more willing to change – because how do you reach those consumers? – but change is painful. When analogue companies start to digitise and transform more aggressively, that causes tremendous ripples.”
He added:“Clients have come away from Covid thinking traditional media spend is far too inflexible and not adaptable enough. On the flipside, all the new media is lower cost and more flexible.”
Asked about technology and social media platform regulation, Sorrell said he had noted a shift in tactics by the industry giants: “Facebook, Amazon, Alibaba and Google are positioning themselves as the engines of small business. It’s a very smart move by the tech platforms. When the regulators go after them, be careful what you wish for: they are the salvation for SMEs under immediate and severe pressure in lockdown.”
Referring specifically to change at holding companies, and WPP in particular, Sorrell said: “I tried to run a holding company for 33 years, but an analogue business is an albatross round your neck.”
He added: “Two and half years ago, I wanted to go for growth and we were pushing on an open door. Even at WPP where our portfolio was flat there were three areas of growth – first party data, digital advertising content and digital media. Simple. If you’re a holding company, that creates tremendous problems as PR agencies become more commodified.”
At S4 Capital, Sorrell said the business low point of the pandemic had been, as for many others, the last two weeks of March: “We bottomed at only 3% growth. The teams were brilliant – we pivoted to virtual events, robotic production, and animation, which went vertical. The lesson is not looking at your boots, but adapting revenue streams.”
A former founder of one of the world’s biggest marketing holding companies and a believer in the model, from his new viewpoint running a digital firm with around 3,000 employees, Sorrell observed that “independent agencies are dramatically outperforming the holdcos.”
And he said the big consulting firms who had been moving into creative and communications sectors, such as Accenture, were starting to run into the same intrinsic problems with the model: “When you buy creative companies and leave them on their own, it becomes an incoherent collection of brands. And both consulting firms and holding companies suffer from the law of big numbers.”
Always a lover of a shape analogy when referring to the economy – he famously described the 2001 dot com recession as being “bath shaped with a corrugated bottom” – Sorrell said he was seeing several different categories of how businesses in different sectors had been affected by Covid.
He said “V-shaped”, for instance – a brief dip and then recovery – applies to online shopping, healthcare, technology and online events, while there also were “U-shapes and flatter U-shapes, depending on how varied a company’s product portfolio is”. Travel and hospitality are “L-shaped” – a big drop in business and still flat – and then, on a grimmer note, there are “chair-shaped” small businesses where the huge pressure of the pandemic had put them out of business altogether.
Finally, asked about improving diversity in the marketing industry, Sorrell said there was no choice but to move forward: “We competed in a big review recently that we won against the biggest digital agencies, and 40% of the evaluation grade was on the diversity of the team. In that particular pitch, if we didn’t have a highly diverse group, we wouldn’t get to first base, let alone hit a home run. We’re all talking about hiring practices and education, but procurement is really important. Things are changing, and there is no debate.”
Sorrell said his own firm was 40% people of colour: “In America our Hispanic and Asian populations in the firm more than reflect the communities in which we operate. We’re up to 6-7% Black employees and growing, as we’ve changed our hiring policies, but the US is around 13% and New York is 25%, so we have more to do.”