As head of WPP, Martin Sorrell had been one of the best known and outspoken critics of the tech giants, credited with first dubbing Google a “frenemy” as early as 10 years ago. His exit from WPP after an investigation into alleged misuse of company funds leaves a void not just at WPP, but in the ad and media industries as they try to curb the tech giants’ expansion into digital media.

Sorrell built WPP into the world’s biggest advertising holding company, but it’s now on its heels. The agency model has been squeezed by clients’ demands for more transparency in how their money is spent, clients’ contracting fees, competition from other industries trying to take a bite out of the agency business and cheaper alternatives for digital advertising services. Client spending with WPP is down, its share price has declined 30 percent, and hedge funds are betting against WPP and its ilk.

One of the factors driving the struggles of the holding companies is the shift to digital, which tech giants have capitalized on at the expense of traditional media and marketing companies. The tech giants are at a pivotal point now, though, with public opinion turning on them and rumblings of government regulation growing louder. Last week, Congress grilled Facebook CEO Mark Zuckerberg for two days on his business model after revelations that Facebook enabled Russian interference in the 2016 U.S. presidential election.

“Congress and the EU are seeing the bloom coming off the rose, and it’s unfortunate that Martin should be leaving at a time when he’s unable to take on Google and Facebook in a different way,” said Rob Norman, the recently retired longtime global chief digital officer of GroupM. “It’s pretty clear that the last five to seven years, the playing field has been tilting in one direction — not just for WPP, but media owners and advertisers in many ways.”

“How he played his cards was going to be super important,” said Jason Kint, CEO of Digital Content Next, a trade association for digital publishers and vocal critic of the duopoly. “We were just starting to see those cards get played.”

WPP’s calling attention to the duopoly had outsize impact, just as it did when its agency GroupM would demand transparency standards that exceeded the industry’s. Sorrell’s star power gave his words extra punch, and he used that voice to win over clients. It’s hard to imagine a less visible, less quotable replacement having the same impact.

David Chavern, president of the News Media Alliance, which represents 2,000 publishers including Dow Jones and The New York Times, recalled Sorrell speaking at one of the trade association’s conferences a couple of years ago.

“The audience was absolutely enthralled,” said Chavern, who has lobbied for an antitrust exemption for his members so they can bargain collectively with Facebook and Google. “You just had to ask one question, and the rest of the 45 minutes was his answer. He was the celebrity in this world, and there aren’t many of them. It has to be considered a loss for the debate about advertising and publishing.”

As Sorrell talked about the tech giants as frenemies, WPP also has become a big customer of Google and Facebook, spending $7 billion there in 2017. Google and Facebook ranked No. 1 and No. 3, respectively, for clients’ media spending, ramping up significantly over the past five years. WPP’s spending on traditional media was dwarfed by comparison. Google, Facebook, and increasingly, Amazon, have become must-buys for advertisers, so as WPP spends money with them, it helps solidify their market share at WPP’s own expense.

At the same time, Sorrell went around to industry conferences and talked to investors about the importance of preserving traditional media, which some could see as a contradiction.

“At the very least, his role and voice across the industry had outsize impact,” said Kint. “So we don’t know at this point what will fill that from the buy side. There probably was no company more in a position better to weaken the duopoly.”

 

  • LinkedIn Icon