The advertising industry is in the midst of a “pivotal moment” following recent major events, according to the S4 Capital Executive Chairman, Sir Martin Sorrell.
Speaking at MAD//Fest London to NDA Editor Justin Pearse, Sorrell looked at the recent “strange” Cannes Lions International Festival of Creativity to highlight the situation currently facing the industry.
“If we’d had this discussion in December of last year or January of this year, we wouldn’t have gone through the five or so things that we can run through, starting with the withdrawal of COVID stimulus and finishing with the extended Chinese lockdown, hovering inflation, the war, and hiking interest rates. When people booked Cannes, they weren’t focused on that, but had changed when they turned up in Cannes. That’s the big thing,” he said.
As a result of the first half of the year, Sorrell also pointed to the fact that Merrill Lynch has downgraded its forecasts for all of the holding companies by as much as 15%.
Sorrell did make it clear, however, that much of the pressure on the industry would be felt within analogue rather than digital, with S4 believing that digital will grow at between 10% and 15% over the coming years, while analogue struggles.
“We’ve been looking at the data in the US and Europe, and that quite clearly shows that there is a strong correlation between GDP growth and spend as a whole. But the correlation with digital spend is at much higher levels,” he explained.
With all this in mind, Sorrell highlighted three things that marketers should be focusing on, including being agile, taking back control, and having a first-party data strategy.
Agility is something that, according to Sorrell, all businesses say they have, but not many truly have. He believes it’s “absolutely key” that businesses are in a position to quickly adapting to changing circumstances, and shouldn’t just be saying they are.
Meanwhile, “in a digitally dominated world”, he thinks it’s equally important for businesses to have more control of their content, data, media, analytics, and their technology, which ties closely into the need to focus on first-party data, particularly in the face of significant changes to identity within digital advertising.
That’s so meta
As with almost all discussions about advertising at the moment, the conversation turned to the metaverse – something that Sorrell is “excited” about.
“In Cannes, every conversation you had – whether it was with the CIO, CTO, CMO, or CSO – at some stage or another, usually at the beginning, you would’ve talked about the metaverse or metaverse opportunities,” said Sorrell.
Equally, he thinks that the metaverse, while not overhyped in terms of its “long-term importance or significance as another channel”, it may have proved to be “overhyped in the sense of initial take up”.
For context, at S4, around 10% of its incremental growth is expected to come from metaverse-related activities this year, accounting for around 4% of the entirety of its revenues.
“We’re in the plains before the foothills. It will be huge, and it’s right to get excited about it… It’s a very sexy area, which people are interested in,” he added.
The diversity challenge
One of the other huge industry talking points is the issue of diversity, and Sorrell didn’t shy away from the shortcomings of S4 when it comes to that area.
“In gender diversity, we look good overall. We probably have more women than men today. But where we lose out is at the senior levels – only about a third of our senior leadership is female. And that’s not acceptable,” admitted Sorrell.
“People of colour – we’re super good on that. That’s 40% of our workforce, in the jurisdictions that we can get the data… We do well on people of colour. We do particularly well on Hispanic and Native American, but not so much in the Black community. That’s an area where we have to raise our game.”
In an attempt to improve diversity within S4, the company works with UC Berkeley on a leadership programme for women, and has an internship programme aimed at the Black community within universities and high schools.
Overall, Sorrell has “seen significant change”, but is “hesitant” to say that, because it’s something he’s heard throughout his life. Nonetheless, “What we saw in North America, after the murder of George Floyd, he was the immediate change. The tech and media companies didn’t have very good diversity stats, particularly from the racial point of view,” he said.