AdAgeChina: Now that foreign ad agencies can operate in China without a joint venture partner, what are your plans in this market, regarding WPP companies already present in this market?
Martin Sorrell: I don’t think our approach will change. We have strong partners who have been immensely helpful in building our businesses in China. They are strong mutual partnerships and I anticipate that will continue. We have now 5,500 people in 13 joint ventures in that country. Changes with the WTO will make things more interesting, it gives us more opportunities to grow, but I don’t think it alters our strategy materially.
AdAgeChina: Which smaller WPP agencies might move into China now that the barriers to entry in this market are lower?
Mr. Sorrell: I think we’re pretty well established in all the major areas--advertising, media, information and consulting, pr and branding identity, health care, interactive. Nothing leaps out and says because of the changes, we’re now able to expand more. We’ve already entered every area we want to be in.
AdAgeChina: Looking at the market long-term, why wouldn’t it be advantageous for WPP to own 100% of all its operations in China?
Mr. Sorrell: Partnerships evolve over time, so there could be changes, but there are no immediate plans to change our situation as a result of the WTO right now. If you’ve got a partner, that adds value obviously. Fifty or 75% percent of a business can be better than 100%, because Chinese joint venture partners know the market. It would be arrogant of us to think we could come into a market and know everything about it or its 30+ provinces. Local knowledge and expertise is very important in the context of the development of this market and we’re appreciative of what we’ve been able to do with our partners. I may be wrong [about not wanting to buy them out now], but I don’t think so.
AdAgeChina: You’ve made some very optimistic predictions for how quickly China’s ad market will expand. In particular, you believe China can replace Japan as the region's biggest market as early as 2008. Why are you so confident that China will grow so quickly?
Mr. Sorrell: China’s growing more than 20% year-on-year, Japan isn’t doing that, and China is already in parity in some areas of consumer spending with the world’s No. 2 market, so by the Beijing Olympics [in 2008], I do think it will probably be the second-biggest ad market in the world.
AdAgeChina: Even some WPP agency execs in China think that’s too optimistic.
Mr. Sorrell: Well, that’s my point of view, even if they feel differently.
AdAgeChina: What company presents the greatest competition to WPP in China?
Mr. Sorrell: Dentsu, absolutely. They have a different model, a volume-based approach, low margins, a lot of client service, and not as much emphasis on creativity. They’ve built a substantial operation in China. I’m not saying it’s right model for China, but that’s the way they go about it and it has made them a serious competitor.