With his usual mix of feistiness, candor and wit, WPP Group's CEO revealed to a group of media and advertising bigwigs efforts within his 20-year-old company to remain relevant in today's rapidly evolving marketing world. His remarks were part of an interview this morning with New Yorker writer Ken Auletta at an event sponsored by the Newhouse School at Syracuse University.
Staying on top of change
Of the many challenges he handles running the world's second-largest advertising-and-marketing services company, the toughest, he said, is staying on top of technological changes. "What keeps me awake at night," he said, "is the thought that somewhere there are software engineers working in a garage, probably in Shanghai, who'll disrupt things as we know it."
WPP, like all companies involved in media and communications, is being buffeted by the continuing growth of the internet. Traditional media -- broadcast and cable TV, print, radio and outdoor -- will not be as profitable in the future as it has been in the past, he said. Digital media, already the fastest-growing sector of all media channels, will continue to take more share. Currently it comprises only 7% of global advertising spending; Mr. Sorrell believes that it should grow to 20%.
"We spend 20% of our time online, according to Google or Yahoo," Mr. Sorrell said, "so by logic, 20% of all dollars should be spent online."
U.S. trailing online outlay
In some countries, such as the U.K., online and search outlays already comprise 14% of total media spending, besting the U.S. and other developed countries. "I think inexorably online and related activity will get to 20% -- farther, probably, because [people] will be spending more time online," he said.
That the business model of traditional media companies -- WPP included -- will change shouldn't have come as a surprise to members of his audience, which included the Wall Street Journal's managing editor, Paul Steiger; New Yorker editor in chief David Remnick; Nina Zagat, co-founder of Zagat Survey; and Henry Schleiff, CEO of Crown Media Holdings/Hallmark Channel. But he drew an appreciative laugh when he said that he's unwilling to be cut out of the business -- disintermediated, in the latest parlance -- by the array of new technologies and companies, from Google and YouTube to the even much smaller SpotRunner, that are moving into traditional media's space.
Ads by consumers
The web, he said, has democratized access to information that was never before available publicly. "The power is in how you use the information, and analyze it," he said. But the result of widespread internet use is that structures of companies and media will have to change radically. "In our own business, for instance, there's advertising being made by consumers," appearing on sites such as YouTube and Heavy.com, he said.
"Our established agencies are not moving fast enough" to adapt to the change, he said. Rather than disregard the fledgling technologies, some of which, like that used by a start-up SpotRunner, could replace companies' need for creative and media ad agencies and ultimately put much of WPP's holdings out of business. That's why Mr. Sorrell is investing in them. "We could ignore it," he said, "but I'm not prepared to preside over a company that gets disintermediated."