Sorrell Discusses Impact on WPP of Publicis-Omnicom Merger

CEO Mocks Rivals' 'Wonderful' Weekend Gathering in Miami

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WPP will become a more horizontal business if the Publicis –Omnicom merger goes through, according to WPP CEO Martin Sorrell.

Martin Sorrell
Martin Sorrell Credit: Jonathan Fickies/Bloomberg

In wide-ranging remarks at today's third-quarter results presentation to analysts, Mr. Sorrell said, "The best thing about POG from our point of view is that it will push our people to horizontalize even more. The way forward is about building WPP into a more cohesive operation, whilst acknowledging that verticality is important from a tribal point of view."

WPP owns agency brands including Grey, JWT, Ogilvy & Mather, Mindshare, MediaCom and MEC.

Mr. Sorrell, who makes frequent jabs at his rivals' pending merger, also made light of last weekend's meeting of top executives from Publicis and Omnicom. "The latest interesting one was a wonderful weekend in Miami. Everybody's happy about it – going to Miami for a four-day conference is not exactly Siberia in winter."

Separately, Mr. Sorrell spoke to The Wall Street Journal today about allegations that U.S. intelligence agencies may be spying on German Chancellor Angela Merkel's cellphone. He compared it to himself or Maurice Levy, CEO of Publicis Groupe, calling to reassure the other CEO that he wasn't tapping his phone. "For brand America this is not good," he said, adding that the revelations "raise the whole privacy issue in a different and much deeper light." He said the allegations are likely to raise concern over the use of data in advertising.

WPP reported revenue up 5% to $4.33 billion in the third quarter of 2013, boosted by an acceleration of growth in the U.S. and Continental Europe.

North America, which accounts for 35% of WPP's total revenue, grew 4.6% year-on-year to nearly $1.6 billion in revenue. WPP's home territory, the U.K., which makes up 13% of the total, saw revenue up 8.1% to $570 million.

Mr. Sorrell said, "What we lose on the faster-growth market swings, we gain on the mature market roundabouts." He said that companies are starting to spend more in order to protect their market share in the U.S. and Western Europe.

Asia Pacific and Latin America grew 5.8% to $1.3 billion in the third quarter. Mr. Sorrell said, "We remain BRIC bulls." He added, "China has slowed, but looking at the forecasts I think China is stronger than people give it credit for. Brazil for the first nine months is still running at 11-12%, and India is at 6-7%. Clients intuitively believe that the BRICs and the next 11 [fast-growing marketets] offer more hidden promise than the mature markets, where the focus is still on squeezing capacity."

Growth in data investment management was strongest in North America, Africa and the Middle East. Mr. Sorrell said, "You have to have a data business. We have clients who are investing $4 to $4.5 billion a year in a real data business. We are getting genuine consumer insights -- it's like Dunnhumby and Tesco. This is a real business where you get real stuff you can interpret. We have to link it to what we do in media and digital. Once you've done it people will copy you so you have to do it again, it's an iterative process."

Talking about the U.S. deficit and the government shutdown, he said, "We've papered over the cracks with chewing gum and wire and we have to wait until January and February for another potential crisis. We've seen little or no impact from the shutdown. I think the shutdown is a little bit of a red herring for our industry."

PR and public affairs operations shrank by 0.9%, accounting for $370 million in revenue in the third quarter, although Mr. Sorrell forecast those businesses will return to growth by the end of the year.

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