'India is still under-branded'
Sir Martin Sorrell is credited with unleashing the power of consolidation in an industry that hitherto had a smattering of large agencies working on their own steam. WPP, the world’s largest communication company that he heads, owes its status to the calculated moves this financial wizard has made in acquiring strong media brands across the world and then making them part of his well-orchestrated system.
During a recent visit to India, he took time out to speak on issues as diverse as global business dynamics, new media and the challenges to old media. Excerpts of the interview:
Given the downturn, what can a company do to maintain an effective advertising and communications strategy?
If I am advising a client who is pressed for budget, I would obviously look at areas that are attracting consumers and also those that offer value. Today, people are spending more than 20 per cent of their time online (of the total time spent on various media). Also, there’s been a rapid growth of mobile telephony that takes a lot of our time and much can be done there, too.
However, compared to this trend, most clients are only spending 12-13 per cent of their advertising budgets online, which, in my view, needs to be corrected. Along side, there is a situation today where the price of communication in old media is coming down, making it more attractive. The philosophy of airlines selling empty seats at the last moment at very low prices is coming to traditional media, too (catching the ads at the last minute before the press/TV deadline). Hence, clients today have many options and can take their pick of media. Given these trends, most media owners who are focussed on one media and one country, are a bit challenged today.
How will the downturn change advertising in general and WPP in particular?
Our strategy is built on three things: new markets (India is one), new media (Quasar is an example of our new media initiative in India) and consumer insights, which is also getting important in the Indian context. So, I am very optimistic about all WPP businesses in India. The recession has intensified all these three trends.
Interestingly, while old media is coming under pressure in older, more mature markets; it continues to flourish in India. But even as old media flourishes, new media will get into sharper focus. Conspicuous consumption will continue as a phenomenon, but it will be different in the short-to-medium term. There will be a desire on the part of companies to understand the impact of downturn on consumer behaviour, which is where the role of consumer insights comes in. We are placed in a very good position to tap into all these fronts with our presence in these areas.
What about media owners buying equity into their advertisers’ businesses?
That’s a very difficult model. The market will decide if this is sustainable. The answer to your question is: as long as people know about the separation of editorial and advertisement, as long as the reader knows that it’s an advertorial, it’s OK. However, the fact is that the boundaries between editorial and advertising are increasingly getting blurred. Although, because of this, media planning and buying will become very complex, which is good for us as we are well placed to understand this and offer clients solutions.
How is media business coping with changes in technology and emergence of global markets?
One is paranoid about one’s business all the time. But for media owners, it is a much more difficult task than it is for agency owners or agency managers. If you are a onemedia-one-country company, then you have placed your bets on one technology… so, it’s much tougher as opposed to a Murdochian approach where you have a much more multifaceted business and spread. So, as a media owner, you have to diversify.
Take the example of Latin American print companies that have tended to be one-company, print companies, ruled by families. Whereas in developed markets such as Germany, the media groups tend to make minimal stretches, may be due to control issues, and they tend to make acquisitions.
In India, the role of print media is very rich—there is an intellectual tradition and it will be harder to displace. However, it will happen, the question is when. Because of the diversity and size of the Indian market, it will take a longer time.
Do you think Google’s auctioning method of advertising has had any impact?
Google is a lot more friendly now. We have a joint venture on search with them. Nikesh Arora (of Google) is trying to build relationships with the agencies. Well, they have enviable growth levels… Google auctioning is not totally transparent in the sense that many things are not clear to people, but a lot is changing with the possibility of a stronger Microsoft-Yahoo! front. Also, with the growth of social media, people’s recommendations to one another are assuming great importance. Else, how do you explain the growth of Twitter, or Facebook.
How does it challenge traditional advertising?
It does challenge traditional advertising. Though there are no clear answers yet. New media tends to be more promotional than tactical. But certainly in a high-pressure, recessionary environment, switching spends from traditional media to Twitter and Facebook… is an attractive thing to do today. But if this is the right thing to do over the long term, remains to be seen.
Is somebody at WPP already mining Twitter or Facebook to offer clients solutions?
Yes, it is happening. But, today, most of the stuff on the net is available for free and it remains to be seen if that model can be sustained as the advertising/revenue model is based on it. Also, when a certain media has overwhelming support, or strength, it tends to skew the market. Recently, James (Murdoch) noted that BBC has a market advantage (it got £3.5 billion in annual public funding this January). Nothing against the BBC, they have built a fabulous online brand, but we want a very strong other media as well— along with a strong BBC. We are concerned about the balance in media. In that sense, people have welcomed the proposed Microsoft-Yahoo! merger.
Where would you place India in terms of its contribution to your overall revenues?
India is getting to $200 million, China is about twice that… so India is part of top 10 markets. But compared to the size of the market, India is still underbranded, it still has a long way to go.
How relevant is India in strategic and business terms for WPP?
India is very important with its over one billion people. We are in a very strong position, more by luck than good judgement, as we acquired JWT (in 1985) and Ogilvy (in 1987-89). Both companies had strong positions in Asia, which will continue to be the case. Intellectually, advertising has played a big role here. Chairman Ogilvy always liked to come to India—he did not fly, but liked to take a boat to this place. His books have been very popular here and translated into many dialects. We have always been bigger than our competitors in India.
WPP is at the #1 spot, but there’s been a drop in your earnings. How do you view your performance?
We have had a very tough first half. We went from flat revenues last year to minus 5.8 and minus 10.5 in the second quarter. These are not numbers to be proud of. But we think the second half will be better.
Over the last few years, all the US-based communication groups, including OMD, have started to consolidate their presence in India. Is that a threat to you?
Without wanting to be too aggressive about it, I don’t think the America-based companies travel particularly well—I don’t think culturally, it is part of their DNA. I don’t think they enjoy travelling beyond their borders. Can’t blame them as they deal with homogenous markets, unlike the Europe-based groups, which get it much, much better and that’s because of circumstances as they operate in a relatively heterogeneous market.
But the competition seems to be impacting you. Vodafone and Nokia have moved out of your group...
Nokia moved out due to pricing pressure. Vodafone, they were going to incumbent agency in other markets…
What do you think about the success of IPL?
Well, I am on the board of Formula One, and I hope that matures here as well. Three things would remain big in India: Movies, news and live sports. Of these, the spends on live sports have consistently grown, and IPL is going to get more important in time.
What’s your view on the growth in India and elsewhere?
People here are used to a higher growth level so, even a GDP growth of 6 per cent seems less—though, I think, it’s pretty good. In the UK, we will settle for this—we’d settle for even a minus six (laughs)…
