(Bloomberg) -- Less than a month after his abrupt departure from WPP Plc, Martin Sorrell is planning his next act. “I am not going into voluntary or involuntary retirement,” the deposed 73-year-old ads czar said at a New York conference this week. “I’m going to start again.”
So if Sorrell were to try to build an advertising giant anew, how might he avoid some of his former creation’s latter-day missteps?
WPP is a holding company, with more than 400 largely discrete units spanning advertising, public relations, brand consulting and data management. That model has had its day.
French rival Publicis SA has been faster to centralize the running of its businesses, not least by moving them into the same office buildings. That helps profitability. It also cuts out stuff like your own agencies bidding against each other for the same contract. Sorrell might want to do similar.
There’s also no need for a data management and research unit such as WPP's Kantar. Growth has been pretty flat for almost a decade, and a lot of consumer insights are provided better by others — not least Facebook and Google. Smaller in-house teams can parse that data. Public relations is eminently skippable as well, with pricing squeezed by market saturation.
Media consultant Alex DeGroote says WPP moving away from the conglomerate model might play into Sorrell's hands too — does WPP really need to own both the Ogilvy and JWT ad agencies, for instance? “You take a brand like Ogilvy, still probably one of the iconic brands in advertising,” says DeGroote. “I think he would have enormous sponsorship both from the financial markets and the industry.”
Sorrell could consider a private equity-backed Ogilvy buyout. Such a deal might cheer WPP’s shareholders, who have complained about the ad giant’s acquisition spending. WPP’s total debt is 3.1 times Ebitda, according to Bloomberg data, the highest multiple among its peers.
A strong digital and creative business could serve as the backbone for a new company. Mirum, formed from the consolidation of JWT’s digital businesses three years ago, is an interesting model.
A leaner approach would also please clients, if Procter & Gamble Co.’s brand chief Marc Pritchard is to be believed. He said in March that account managers get in the way of efficiency. “It’s time to disrupt the archaic ‘Mad Men’ model, eliminating the silos between creatives, clients and consumers, and stripping away anything that doesn’t add to creative output,” he was quoted as saying by Marketing Week.
For every $100 spent on an ad campaign, perhaps only $5 to $10 goes on creative. Tying the creatives more closely to the digital team would enable more smartly targeted ads and could double that share. It would help agencies offer better salaries to college graduates too, handy when fighting for talent with Silicon Valley.
Sorrell himself is crucial to all this. While the days of the Mad Men may be over, his contact book is enviable. With clients such as Ford Motor Co. putting their WPP accounts up for review, there’s an opportunity to poach some blue chip brands.
Nevertheless, he’ll no doubt need private equity backing and the mystery surrounding his departure may prove a hurdle. The results of the probe into his alleged personal misconduct and misuse of company assets are yet to be revealed. If serious, they might stop a buyout firm from getting involved.
It took Sorrell 30 years to build WPP into the 200,000-employee behemoth he left in April. It would be hard to replicate that scale. But with modern advertising so thoroughly disrupted by the tech giants, why would you want to?
©2018 Bloomberg L.P.