What comes to mind when you think of Sir Martin Sorrell? Fallen Ad Chief? The excoriation of adland? You'll be hard pressed to find anyone in our industry without an opinion of the Executive Chairman of S4 Capital. So we set out to get the goods from the horse's mouth. Delving into his childhood, his regrets, the key to good client-agency relationships in 2023 and what's next.
LONDON - Everyone has an opinion of Sir Martin Sorrell. And regardless of which side of the fence you sit on, there is something we can all agree on - his impact on the industry is inescapable. Love or loathe him, few names carry more weight in the brand marketing space than that of Sir Martin Sorrell; Brand leaders listen when he speaks and reference him as their strategy compass.
To say David Ogilvy didn’t like him is an understatement. And from the hostile takeover of J. Walter Thompson in 1987 and Ogilvy and Mather in 1989; Sorrell’s prolific appetite for acquiring agencies during his WPP days has not wained. It’s now more strategic than ever. After being abruptly ousted from WPP, Sorrell formed S4 Capital, merged two agencies to create .Monks and in January 2022, created S4S Ventures. This Web 3.0-focused group venture capital firm finds and funds companies pushing the next wave of digital transformation, particularly as it pertains to marketing and advertising.
In July 2022, S4 Capital snapped up another marketing agency as it continues to grow rapidly through acquisitions. The group said its .Monks business bought social media agency XX Artists, in a deal that would expand its capabilities and client base in its core US market. Headquartered in Los Angeles with a 'majority-female, majority-diverse team of 125 globally', XX Artists works with clients such as Google, YouTube, Logitech, and Ancestry.com.
Of the merger, Sorrell said, “We are delighted to welcome Kyle and his colleagues to the family. Their exciting growth, diverse talent base and prestigious clients will help fuel the development of our best-in-class social media capabilities in the United States and internationally.” It’s rare to see a month go by without reading of boxfresh mergers in trade news. We sat down with Sorrell, twice, to discuss everything from his childhood to his thoughts on the ongoing digital revolution. We begin by discussing the looming threat of a digital advertising bubble or, in Sorrell's opinion, the lack thereof. "Well, look at the last five years, ten years, then look at the next five to 10 years," Sorrell suggests. "It's completely the reverse. Traditional advertising GDP has gone down from 2% to 1%. Now it's forecast to go up to 1.75%. Why is that? That's because of digital growth. So, perhaps the real question is 'Is there a traditional advertising bubble?'"
It's not a surprising point of view considering Sorrell's history. He's always endeavoured a push towards new, more interactive media. Though traditional advertising is unlikely to go away entirely, the mission is clear - “Create a new-age marketing services model and disrupt the old.” And according to Sorrell, S4 Captial is building that model atop four fundamental pillars: "The first is 'digital-only,' because that's where the growth is." He says, "It's 55% of the market now. It will be 70% by 2024 or so. The total global media market last year was about $750 billion; digital was about $450 billion.
So, there's no bubble. It's just a continuation of a trend, and the pandemic accelerated it at the consumer, media, and enterprise levels.”
In terms of that $450 billion digital media spend last year, Sorrell predicts spend this year will rise to $40 billion for Amazon, $235-240 billion for Google, and Facebook despite all their pressures, will spend about $130 billion. He adds, “Looking at marketing services spend last year - it was about $500 million; digital amounted to 60%. Trade budgets were at $800 billion, which is what Amazon attacks. And then digital transformation of about another $400 billion.”
Getting Clients to Spend Through
But, away from cold statistics, what does this all mean? “We are talking about huge transformations and as a result of what is happening economically, they’ll be a different geographical emphasis. But technological transformation, in a recession, can become more and more important.” He says, “The second principle is what we call the trinity model." He explains, "This is where data provides the insights to create, produce, and distribute content through digital media in a continuous loop. Because in a 24/7 world, you have to take back control of the process. Life is no longer about briefing an agency and having a perfect film after one month, two months, or three months. It's about continuously refining and getting data back."
In every recession, marketers find themselves in poorly charted waters because no two downturns are exactly alike. And it's no secret that consumers set stricter priorities and reduce their spending. As we’ve come out of Covid, brands that went in strong have survived and been able to build some momentum. And, if they continue to spend their way through the potential recession, then they’ll definitely find any uphill climb an easier one. Sorrell comments, “I think [brand leaders] are moving down the funnel, I think they’re becoming more activation focused, performance driven, measurement focused, media mix focused. There is a little nervousness about the possibility of a recession. I think it will be very difficult for the next two and a half years.”
Sorrell’s advice for brand leaders? Regarding his clients, he says, “We’d want them to invest. I agree with Mark Pritchard (Chief Brand Officer of Procter & Gamble) - it would be nice for people to double down or double up. I think the economic pressure is going to be quite severe.”
But what is the reality for the next few years? What behaviour should we be expecting from clients? Sorrell says, “I think clients will be looking at their portfolios, holding companies perhaps may look at what they have and how they position it. Media, digital, data - separating that from traditional creative, PR, etc..” He says, “I think you are going to see more of that. More clients looking very carefully at what they have.”
But Sorrell acknowledges that encouraging clients to spend through is not easy. "There is statistical and academic evidence to support the fact that companies that spend through recessions on brand awareness as well as performance come out of recessions in a better state than those that don't. Having said that, it's very difficult to get companies to do that." He expands on the problem that sprouts from the fact brands report "earnings on a quarterly basis," adding further, he says, "I was talking to one of our people who, before joining us, was client side. She said that if any of the quarterly figures went awry, there was a reduction in marketing spend."
Delving into how to get clients to spend, Sorrell breaks down the point of contention. "If the client relationships are with the marketing and sales functions and not with the finance and procurement functions, then probably it's going to be more difficult." He continues, "Having a narrow relationship with the client may not be sufficient, and you'll have to build a case during a recession - or slowing economic conditions. You have to continue to build the case for investment in marketing, just as you would have to build the case for investment in production or any other aspect of the operation. Building relationships within the financial and administrative side of any client is crucial. In tougher economic times, there is more work to be done than justification." Sorrell states, “In these inflationary times, efficiency is paramount. The drive for efficiency, whether agencies like it or not, has just begun. They [brands] are really going to be calling for agency partners to be efficient and agile at what they do.”
Management Styles, Investors and S4 Capital
To say that Sorrell is straight-talking is the understatement of the decade and, over the years, his preferred management style has been a major topic of debate. As you might expect, he prefers to lead from the top explaining the principle of "Unitary structure,” meaning “no competing fiefdoms.” He says, “We have everyone together as one." This is not a surprise to hear given Sorrell's history. Through his time at WPP and S4 Capital, he's united; (granted, some may say wound-up) dozens of major businesses under his brand umbrella.
We asked him about the core differences in his approach to running a business and he wasn’t shy in touting the benefits of this sort of leadership. "I think we stand out because we're owner-managed," he says. "We're not manager-managed. And I believe that people who own a significant part of the business in which they work wake up and behave differently. And that's not to say all manager-managed businesses are bad, it just means that owner-managed businesses are better.” Sorrell illustrates,
“If you look at investment history, be it in the private sector or the listed sector, I think investors, shareholders - the returns are always better where management has a significant amount of root risk. They don't have options or deferred stock. They're an entrepreneurial manager instead."
All things considered, S4 Capital is still a very young company. While having someone like Sorrell as tiller is a significant ingredient in the recipe for success, it takes more than that alone. "Being young gives us agility," Sorrell says. "Plus, we haven't had time to acquire bad habits. Though 'faster, better, cheaper' sounds glib, those are characteristics of everybody we brought together. They understand the digital ecosystem, and they are more efficient."
When talking about his team and the brands they support, Sorrell invokes images of a young, ragtag group of newcomers ready to take on the establishment. "They've all got a chip on their shoulder," he says. "That's it. They've all got a point to prove." That said, it's also clear that Sorrell doesn't want his agency to be confused with the big tech companies currently dominating the digital landscape.
The Metaverse, NFTs and Avatars
Asking Sorrell about the future of Facebook/Meta and the great brand boycott last year he responds, "We operate in the bubbles - the Washington bubble and the London bubble. It reminds me a little bit of Trump and Brexit." By bubbles, Sorrell is referring to the ways social media platforms both unite and distance users. Thanks to the way the algorithm works, local information takes precedence over all else. "We're all in bubbles - of the West Coast, the East Coast, London, Washington, or whatever. For instance, I remember speaking to my colleagues in Latin America, and they had nothing to say about Facebook. They weren't seeing much of anything of the boycott going on last year. I did see an FT article with a very interesting graph. It showed that since last year's IDFA change, ad revenues have shifted from Facebook to Apple. Even so, I don't think there will be a longer-term boycott."
In fact, Sorrell believes Facebook has bright days ahead. "I think Facebook will do more," he says. "They'll focus more on the platform, revenue growth, and profitability. And despite all the pressures, Facebook said it will go from $83 billion to about $115 billion this year.” By the end of 2022, Meta plans to invest over USD 1 billion in programmes that give creators new ways to earn money for the content that they create on Facebook and Instagram.
Another digital creation currently piquing Sorrell's interest are NFTs. When asked his opinion on whether or not brands will continue to latch onto the trend, he expressed some doubt over the financial validity. "I think NFTs at volume make sense," he says. "I'm not sure about low volume, high value. So, the baseball card analogy comes to mind. I think Gary Vaynerchuk, to his credit, is sort of going for the high volume, and I agree. I think that makes sense. Though I'm not sure that the unique high value makes sense. I would look for higher volume and low value." He comments, “We had our first retainers on the metaverse last year, and we own NFTs."
Being so intensely focused on upcoming digital technologies, Sorrell also offered us a glimpse into his preparations for the metaverse. "It’s a much hyped, very sexy area. In reality, from our point of view, revenues for us last year were $900 million. Of the delta, that’s $340-400 million. I’d say $30-40 million is coming from the metaverse.” How is this metaverse spend broken down? Sorrell explains, “Healthcare initiatives, which are huge and are already enjoying a big impact. Sports. We’re streaming NBA games with Verizon and Oculus. Pop concerts. Training and education. Work from home - we already use it for some of our management meetings. But the technology isn’t at the place we want to see.”
Sorrell predicts that revenue opportunities are limited at the moment but with huge potential in the longer term. He believes that the metaverse will become increasingly key in channel distribution and very important in e-commerce. And we are already seeing the use of Avatars in an e-commerce environment, particularly in sportswear.
Cannes Lions, Latin American Talent and Dad
"The festival has improved. But it doesn't recognise creative and technological talent in Latin America to the degree that I think is warranted," says Sorrell of Cannes Lions. He says, "Take for instance our company - out of 9,000 people, 3,500 are across Mexico, Columbia, Argentina, Brazil, and Uruguay. I think they are an under appreciated group of people. There should be more recognition." He's also passionate about companies, including, "Mercado Libre, Globant; DAVID - all these companies do particularly well productively or creatively. There is a Latin American "mafia" of marketing people who have done extremely well in major companies around the world; Coca-Cola, Unilever, they are extremely strong in terms of their creative and technological abilities."
Moving on from talking about talent and agencies in the most urbanised continent in the world, Kelcie tells Sorrell a short story of her 90-year-old Grandmother's response to a condensed relay of his life story so far. Of Sorrell, Jean said, 'He sounds like the kind of chap that wants to do things for the benefit of others but maybe it's not communicated that way.' On hearing this, the son of the late Jack and Sally Sorrell is smiling from ear to ear.
It's our first flash of the man behind acquisitions and alma maters. Feeling we're on the verge of a double-albatross, we ask Sorrell about his work-life balance and, in doing so, unearth a solemn fact; he doesn't have one.
"There's always been a lack of separation between work and play. Part of the reason being my dad always gave the advice 'find an industry that you enjoy; find a company within that industry that you enjoy- and build a career; build a reputation and then if you fancy doing something on your own, do that."
Sorrell's Father, Jack Sorrell, was a retailer who worked seven days a week. "He wasn't enamoured with holidays. In later life, he rather liked Florida - but beyond that…not so much. He was full on. He worked Saturdays in the morning and came home in the late afternoon. Sundays, I would go on trips with him to look at stores, and he would get his sales data."
I can't help but wonder if Jack Sorrell saw the potential in his boy or anticipated the capacity of his son's future and the decisions his business acumen, learned from those Sunday store visits, would lead to. Born in London's East End, Jack Sorrell was one of seven children, and past age 13, had no formal education. "You had to go out and earn your living because your family couldn't survive without the kids working." Sorrell states.
For a moment, we all forget where we are. Sir Martin shares memories of his father reciting "great chunks" of Shakespeare to his dying day, proudly sharing with us, "He could do the whole hog. Henry V, Richard III, As You Like It, Midsummer Night’s Dream… he was amazing." There is no doubt the young Sorrell doted on his dad, and almost in unison, all three of us take a micro-moment to contemplate the thought - ‘what if he was still here now?’
Sorrell looks pensive and talks us through his youth in North West London. Opening up about the salad days he shares, "I had a brother who died. So I was an only child and given even more care and attention. [His dad] was very focused from the point of view of being a provider for the family."
Suddenly, and in the blink of an eye, after what seems like hitting a downhill chip over sand onto a sloping away green, Sorrell moves on to take a draw, bringing us all back into the game.
In 1968, and before entering adland, Sorrell went into consulting but "had to get out of America because my mum wouldn't let me be drafted." He shares, "Those were the days when you would be drafted if you had been educated in America. You got 9-months for every year of education. I had 2 years of education so I would get 18 months - that was the height of the draft."
Whilst at Harvard Business School, Sorrell met Mark McCormack - a subject of one of the case studies on the course. "The case course was called "Management New Enterprises." It was all about successful entrepreneurs, and he asked me to come back to the UK." McCormack gave Sorrell a job, and it wasn't until 1972 that he took leave from McCormack "to do something" with his dad.
"One of my regrets," says Sorrell, "Is that we had an extremely close relationship but didn't do anything in the business sense." In 1971 and 1972, the father and son tried but, in Sorrell’s words, "failed miserably." Sorrell says, "Although I would speak to him 4/5 times daily - we tried and failed because of disagreements on everything. It was a great shame and one of my biggest regrets."
The Birth of Saatchi, The Beatles & MBAs
Sorrell then went on to work with food retailing entrepreneur James Gulver. "I was described as a financial adviser but more his bag carrier," says Sorrell, explaining, "What we'd do is take stakes in companies including a confectioner and a double glazing firm, which led to Garland Compton being reversed into a shell company, Birmingham Crematorium." Ken Gill, the Chairman at the time, felt that Garland Compton had a strong reputation and created Garland - Compton Ltd Saatchi & Saatchi. And the rest is history."
We compare the 70s with now and agree that there are more similarities than differences, which shifts the conversation to the state of education. When Sorrell was in his 20s, both The Beatles and The Rolling Stones were overthrowing Liverpool and London. And although, in his words, he was "part of that time", he "wasn't in the scene," though, The Beatles were a firm favourite. He "loved them."
Sorrell believes undergraduate degrees should be completed in the United Kingdom, and "you should go to America for postgraduate." He says, "Your working life is 40 years. Three years undergraduate and two years postgraduate - a five-year investment in the context of your working life is a small investment. Education should be continuous."
Bringing his father back into the present, Sorrell shares, "My dad saw 40 as being the mid-point then retired at 60 - I'm 77 and still trying to work." Does Sorrell believe in retirement? He says, "I think people die faster when they retire."
In 1908, Harvard Business School was the first business school to offer an MBA degree program, and now the globe is saturated with them. "The MBA has lost its purpose," says Sorrell. "People are going for MBAs at 26/27 years old, and that was not the original purpose. McKinsey said, 'we'll take undergraduates for two years and you take them for two years at Harvard Business School, then we take them back.' So you graduated at 25/26."
Graduating from Cambridge with a 2:2 and finishing in the top third of his class at Harvard Business School, Sorrell reflects on what he would do if he had his time over again. He states, “I would focus on learning code, Spanish and Chinese." We move on to talk about mentors and whether it's essential to have one. He replies, "It depends on who it is. mentors who've done nothing? No. Mentors who've done something? Yes." He advises, "You need mentors who have experience - not just an advisor."
Sorrell's mentors? "My dad," he shares. "After my dad died in 1984 it was my lawyer Phil Reese who died in 2003." He says, "There have been people that I worked closely with and who had my personal agenda at heart. Reese was a lawyer and we were his biggest client but it went beyond that. I felt he was giving me advice as a friend. Obviously my father had my personal interests at heart." His advice for you and I? Find someone "Objective as well as having relevant experience."
In his 78 years, Sorrell has accomplished a staggering amount. He can't hide his optimism about the growing digital boom and he speaks of the future and technologies that scare many of his generation to death as if they're just another step in a world he knows like the back of his hand.
When we asked him what it takes to start a relevant, profitable agency in 2022, his response was equally forward-thinking: "You almost come back to the qualities that are needed, and I think entrepreneur ownership," he replies. "The thing that distinguishes independent ownership is the unification of ownership and control." He states, "You sort of see a bit at Omnicom. You know they're faltering. And John Wren's [Omnicom Chairman and CEO] solution back [in November 2021] is to remain as Chairman and CEO, and appoint Daryl [President and COO of Omnicom Group] to COO. Why doesn't he get on with it, just become Chairman and let Daryl become CEO? I think you see political shuffling instead and for that reason, managed businesses are better."
Sorrell earned fortune, fame, and a knighthood by taking risks and taking full responsibility for the results. It's just another part of his "owner-managed" philosophy. It's also a way of seeing things that many independent business or agency owners often ignore. Once they get big enough, many of them can't wait to hire managers to shoulder some of the workload. Statistics aside, we ask Sorrell, what’s next for him personally and S4 Capital? "I can't split the two." He says, "It's important that S4 is a success." And in this answer, we find our conclusion.
The grit of Sorrell is indisputable. His work-life balance? Non-existent. His legacy? Well, that depends on who you're talking to. His father's son? Without a doubt. From his steel-like business acumen to his persistent grafting, the Chet Baker listening, Telegraph reading, CNN watching, business obsessed Sorrell is a mirror of his dad. And although Sir Martin may count not going into business with his father as one of his biggest regrets, we look at things a little differently; his entire working life has been in imitation of Jack Sorrell. It seems his dad really did take Henry V to heart: 'This story shall the good man teach his son.'
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