During a CES panel today, Martin Sorrell, the S4 Capital executive chairman and former CEO and founder of WPP, fielded questions on the subject of “how brands are adapting at the dawn of the new decade.”
Sorrell's answer—that it lies within the S4 business model—should come as no surprise. After all, he's touted that business model in interviews and at trade shows around the globe over and over and over (see here, here, here and here). CES wasn’t any different.
S4's business principles include being “purely digital"; adopting the mantra of being “faster, better and cheaper"; and giving employees a stake so they're invested in S4's vision. The fourth core principle involves adopting the so-called “holy trinity” business method, which involves a subset of other principles using first-party data, developing digital content, and executing with media buying and selling through programmatic.
Failure to adapt to these core principles, said Sorrell, will lead to demise of agency holding companies, which he claimed is already underway. “This will be the year the client-and-agency model will decay,” Sorrell said, adding that the only way holding companies will survive the next decade is through “dismemberment or by going private.”
“2020 will be the year when the rubber really hits the road for the holding companies,” he added. “The pressure will intensify because growth will be really hard to come by.”
Sorrell highlighted the turmoil in the Middle East, China and a polarizing 2020 U.S. presidential election as reasons why growth will be difficult to achieve. To hear him tell it, S4’s business model will thrive in this environment because of its approach, all while the holding companies sink due to their “analog baggage that is impossible to get rid of.”
So far, S4 has proven its business model can work, he said. It now needs to take that next step and show mega-brands such as Procter & Gamble that its methods can still be effective when taken to the next level. “We are running $400 million in revenue now, $100 million EBITDA,” or earnings before interest, tax, depreciation and amortization, Sorrell said. “We want to double the size of the company organically every three years."
Asked what he wanted to see in five years, Sorrell responded: "Total acceptance by our industry, clients, by press—by whatever—that this model is the model of the future."