WPP’s Sorrell: Google Still Our Frenemy, But We’ll Give Them $850M This Year
By David Kaplan - Fri 23 May 2008 01:27 PM PST
In a wide ranging interview with Reuters, WPP Group CEO Sir Martin Sorrell held forth on a number of his favorite subjects: Google, the ad economy, acquisitions and the ad holding company’s growth margins. He may still regard Google as a “frenemy,” but from Google’s perspective, Sir Martin feels he should be regarded as a very good friend.
-- My best frenemy: Sir Martin wants to be clear that WPP is a major Google customer. “I think we’re spending about $850 million a year with Google (NSDQ: GOOG). That excludes, I think, search with Dell. So that will add to it. If you look at that, it’s about — it might be 4 or 5 percent of Google’s revenues this year. That will be smaller than our share for traditional media normally which would be around 20 or 25 percent. If you ask why that is, I think it’s because Google has focused and grown at least initially on SMEs. You know, it’s sort of a mechanical Yellow Pages, a crude way of putting it. But it’s been extremely successful in, I think, improving the primary demand for Internet advertising and search obviously.” That said, WPP doesn’t have any particular fidelity in its relationship with Google. Last week, for example, the company struck a deal with Yahoo’s (NSDQ: YHOO) Right Media’s ad exchange system.
-- Sizing up Google: So as WPP looks to team up with Google’s competitors, the frenemy tag will stick. That’s simply due to Google’s size relative to WPP and other major ad holding companies like Omnicom, Interpublic and Publicis. “It is still what — $175, $180 billion. It’s $22 billion of revenue. You add up all our market caps in the top four (global advertising groups), I think we get up to maybe about $50 (billion) maybe less — $40-, $45 billion market cap…You add up all of our revenues we get to about 33-, 34-, 35 [billion]. So we’re 50 percent bigger than (Google) on revenues and combined market caps of the four (ad groups, including WPP) is about a third or a quarter. So the market’s saying something about the relative growth prospects and dynamics of the last four businesses and their business. I don’t think… the position has changed whatever the companies that you mentioned were saying.”
-- On Microhoo: Since the dance between Microsoft (NSDQ: MSFT) and Yahoo has stopped for the moment, things can strike up again. Sir Martin has previously said that he thinks the deal’s collapse is “a shame” for the ad industry. Lots more from Sir Martin after the jump.
-- Chicken soup for the ad economy?: While surprised at the continued strength of the US market relative to Europe, Sir Martin still expects some slowdown in China, which will have residual impact. Keeping things in perspective, though, Sir Martin adds: hina is still growing at 20 percent plus and it can’t carry on forever. The GNP can’t continue to grow 10 percent per annum consistently so — forever. The laws of compound arithmetic just make it very difficult. So ‘09 I think you have a little bit of relaxation and also I don’t think the world has decoupled. So if America’s weak, as we have said before, you may not catch a flu, but you may certainly catch a cold.
-- Digital strategy: Organic growth, plus acquisitions, along with adding technology and increasing its presence in emerging markets is what separates WPP from the pack and will help it attain its goal of generating 25 percent of its revenues from digital, Sir Martin says.
-- Go ahead, advertisers, ignore online video: To any naysayers who regard online video advertising as too small to be worth thinking about, Sir Martin thinks you need to change your point of view. “You could say.. that the internet is only 10 percent the worldwide advertising budgets and therefore it’s small. The fact is [mobile is] growing very rapidly from the small base. People would make similar arguments about China a few years ago or India or might continue to make it about Vietnam or Pakistan or Indonesia or Russia or the Middle East. These are small markets geographically in these cases and therefore deserve to be ignored. If that’s what people believe so be it and let them ignore it.”
-- While your’e at it, ignore mobile ads too: Those who ignore mobile ads, like video ads, do so at their peril—the peril being that you’ll miss big opportunities. “Okay, you’re paying money and you (have a) choice. You either decide that you’re going to invest some time and effort in looking at that or not. And if not you risk missing out on an opportunity. It may be the Beatles, it may not be the Beatles.”
-- He should know: Congratulating the Reuters reporter on the completion of company’s merger with Thomson last month, Sir Martin ends with a pearl of wisdom and a caveat : “Sorry. It’s not done, it’s just starting. The easiest thing is to do the deal. The most difficult thing is to make it work.”
Posted in: Advertising, Marketing, Companies, Google, WPP
Tags: martin sorrell,
