Martin Sorrell on S4’s hiring pause and profit warning—plus his metaverse bullishness

Do you foresee any staff trimming in the future?

We have to get our costs in line with where our revenues are. We have to see how things develop as we go through the rest of the year, but I think every organization is [slowing down hiring]. Google has slowed the pace of its hiring and so has Microsoft. You’re going to see and hear more about [agency layoffs]particularly in agencies that are exposed to traditional media.

What does Media.Monks’ first-time appearance on the Forrester’s Wave report (which included Media.Monks as one of the 13 “significant” creative and content service providers alongside Accenture, BBDO, Deloitte, Ogilvy and others) mean to you?

It demonstrates that the model is working, at least in terms of building relationships with clients. Our mission is to create a new model and disrupt the old one. We now have over 9,000 people in 32 countries and we are trying to deliver seamlessly for our people and our clients. So I think what the Forester thing does is signal that we are making inroads in the content area, in the analytics and digital media area, and last but not least, the technology services area; it’s only 10% of our revenue, but it’s growing the fastest of our operation. The issues that we faced have been more in the content part of the operation. Technology services and data and analytics have continued to grow strongly.

Meta saw ad revenue fall in the second quarter and e-commerce companies including Shopify had layoffs. How are you viewing the digital landscape right now?

I think there are some dynamics at work. There are clients who believe that the worst thing you can do is cut brand spending or advertising spending in the recession. What we’ve seen is two things: Clients are by and large moving down the funnel looking very closely at media mix modeling, looking very closely at measurement, return on investment and looking at performance. Now all of those things should benefit us in theory. That’s one bucket. The other bucket that we’ve seen is there’s a little bit more delay in decision-making.

In terms of cuts, no [I haven’t seen any], but to be brutally frank, clients like to keep agencies motivated and they really don’t tell the agency either until one minute before midnight or even past midnight. I think being realistic about it, I think we’ve seen people move down the funnel. So that would explain, for example, why you’ve seen the problems at Snap or the problems at Facebook. They tend to be more upper funnel work.

In terms of impact, you saw the holding companies in the second quarter… they’re forecasting six or seven percent [revenue growth] for the year and we’re saying, we’ll do excess of 25% for the year so there continues to be a very significant gap in revenue generation between the digital part of the marketplace and the traditional.

What do you think of other holding companies having increased their guidance so far this year?

All of their guidance implies a lower growth in the second half. Mathematically, Publicis may have pushed up to 6% or 7%, but what they did in the first half it implies they’re going to slow down in the second half. Now, whether that’s because they really believe it’s going to slow, or they’re just being cautious and under-calling, it’s another question. Analysts say either they think that’s what it’s going to be, but most of them think that they’re just trying to be excessively cautious.

Are you still bullish on the metaverse and Web3 moving forward?

[Revenue from metaverse work] is relatively small, but it’s growing rapidly. If you look at it as a percentage of the whole [revenue], it’s only about three or four percent of the whole. So it is yet to gain significant revenue traction, but it will. So we remain very bullish on that. We remain very bullish on things like Apple TV, on Microsoft’s position now in advertising given their tie-up with Netflix, given what they did with Xander and AT&T all these things will make Microsoft a force along with Apple TV. They [Microsoft] were a little bit of a force before in advertising, but now they are going to be a real force.

Leave a Reply

Your email address will not be published.

Back to top button

Adblock Detected

Please consider supporting us by disabling your ad blocker