S4 Capital’s Martin Sorrell: ‘Direct-to-consumer is a symptom of the disease’

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After his exit from WPP in April 2018, Sir Martin Sorrell started S4 Capital as a “clean sheet of paper,” he said in an interview in February. However, he began to fill in that paper by looking back at his former company.

“I looked at the WPP portfolio, and I identified three areas of growth. One would be data, one would be digital content and one would be digital media planning and buying,” says Sorrell. S4 Capital bought the programmatic media firm MightyHive in December 2018 to go along with the digital production firm, MediaMonks, which it purchased last July.

With stakes in two of the three identified growth areas, Sorrell reflected on the progress of his new company (which he still called a “peanut,” albeit now a “$650-million peanut,” he said) and how it aligns with the in-housing and direct-to-consumer trends among marketers.

S4 Capital is less than a year old. How would you characterize the company at this point?
Good start. We’ve got two legs in content and in media, MediaMonks and MightyHive, which are very strong. And our approach is purely digital. It’s focused on data — first-party data — driving content creation and media planning and buying or programmatic. It’s faster. It’s better. It’s cheaper, but cheaper might be the wrong word.

Why do you say cheaper?
It’s amazing how that phrase on its own resonates with CMOs and marketing people. It resonates with financial and procurement people, too. Faster, better, cheaper really does resonate.

You mentioned being digital only. Why digital only as opposed to digital primarily?
It’s controversial because there are some people who say there’s no difference. It’s a bit boring of a comment, but they say there’s no difference between digital and analog. I think separating them draws attention to the need to shift the thinking from analog to digital. It’s very difficult to do that because often the analog business is the cash cow, and the digital business is the spendthrift business, and you get these tensions. When I’ve talked to a client and said we’re purely digital, I’ve not been shown the door to exit. The door’s been opened.

Correct me if I’m wrong, but it seems S4 and MightyHive have aligned pretty closely to the in-housing trend that’s going on.
The clients felt that what agencies were focused on is permanent incumbency. Talent and technology are the two areas which most occupy you when doing these in-housings. We’re not looking to establish ourselves permanently, not like bed bugs.

Are there challenges when it comes to in-housing?
The areas that people talk about most is keeping talent — if you limit them to one category or a couple of categories — good talent wants to work on lots of things. That’s one thing. And then keeping up to date with technology.

We’re seeing the direct-to-consumer brands kind of pressuring the larger CPG companies especially to adopt more DTC-type tactics and roll out their own versions of DTC brands—
If you went back in time, manufacturers were worried about Walmart, Tesco, Carrefour controlling the consumer relationship in-store. How do you influence purchasing habits in-store if the retailer controls it? Along comes the internet, and you think, “Ah wonderful, we’ve got a direct relationship with the consumer. Oh, hold on a second, the growth of the e-retailers — Amazon, Alibaba, Tencent — are now interposing themselves along with Google and Facebook through the control of data.” So it’s driven by the battle for data. That’s the issue. It’s not “I want to be direct-to-consumer.” It’s “I can get the data, and I will have the data, and that will enable me to build a direct relationship with the consumer.” Direct-to-consumer is a symptom of the disease.

What’s your overall assessment of the state of the agency business?
It’s summed up by that tagline of faster, better, cheaper. I think we’ve identified those needs, and we’re delivering, on a small scale, what needs to be delivered. So the question for us now is how do we take it to a larger scale, both organically and via acquisition?


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