CEO Speaker Series With Sir Martin Sorrell

Thursday, March 4, 2021
Simon Dawson/Reuters

Founder and Executive Chairman, S4 Capital; Founder, WPP plc


Cofounder and Co-chairman, The Carlyle Group; Chairman, Board of Directors, Council on Foreign Relations 

Martin Sorrell discusses growing a business during uncertain economic times and the future of digital marketing.

The CEO Speaker Series is a unique forum for leading global CEOs to share their insights on issues at the center of commerce and foreign policy, and to discuss the changing role of business globally.

RUBENSTEIN:  Thank you very much. And we're very pleased to have today in our CEO Series, Sir Martin Sorrell, who is one of the best-known businessmen in the world, and certainly one of the leaders over the last several decades in the advertising world. Before we get into the advertising world and some other things we want to talk about, Martin, I'm just curious, you and I travel a lot. We used to travel a lot. What's it like being penned up in your home in London or your office in London? You're used to traveling probably three quarters of the time. Has this been a big change in you? Do you like it better, or do you like it worse?

SORRELL:  Well, you can see, I'm in my pajamas, when you're respectably dressed, David. I like it, as a terrible thing to say about COVID when it's caused such havoc. But I must say that the last year, as it is a year now, I feel from a personal point of view, the physical body, getting into a hotel at eleven o'clock at night and taking a call at three thirty or four o'clock in the morning is not paradise, as you well know. So I feel a little bit more rested. And to the point, I don't think I'll go back to that.


There won't be a new normal. There will be a next normal. I think I'll be less in the office, our people certainly will be. We reckon, probably three days in the office. We consolidated our leases in our new operation, S4Capital, and we have what now 4,400 people in thirty-one countries in fifty-six cities. So it has enabled us to jettison leases and consolidate properties much faster. And we'll go into different spaces. Spaces where people can congregate, where they can work, meet their colleagues, and then meet clients. Probably have different types of spaces, less office space, more variable commuting, more dispersed living and more dispersed working. So I think it'll be a much more flexible environment.

And I think as far as I'm concerned, I'll be making fewer and longer trips. So I think I'm due to go to Singapore in August. I'll probably go to the region for two weeks, and then come back. Whereas in the old days, I might go to Singapore and come back immediately. So I must say, I've been pleasantly surprised. And technology, as you know, every lump of the road shows in an institution. Why was it that we went from one side of America to another when we could easily do this or much more easily do it in this type of technology?

RUBENSTEIN:  So, in London, I assume, have been vaccinated by now. What was it like and is everybody feeling that they're going to get vaccinated relatively soon? Or is this still a lockdown environment in London?

SORRELL:  Well, we are in a certain lockdown although we're coming out of it. I see that Angela Merkel was. I think things are easing a little bit in New York. They did some announcements today or the last day or so about that, and Merkel's easing in Germany. We will start to ease. The schools are due to go back sort of strangely for about ten days from March 8 before they have their pre-summer, summer term break. And then we'll have restaurants opening up on the 12th, some indoor dining, some outdoor. So we're starting to ease.

On the government, the government didn't do a very good job on lockdown, and got heavily criticized for it. We were talking in our prep session about some of the things that Tony Blair said. But they've done a good job on vaccination. There was a woman called Kate Bingham, who was recommended to buy vaccines in the vaccine program and she did an outstanding job. I think she stepped down after six months with a super job. And Boris Johnson and the government that picked up I think a fair bit of traction to the cost of the Labour opposition—further traction from the vaccination program. So I think we certainly will have enough vaccine to distribute elsewhere, and we are probably up to, it must be about now getting up to about a third of the population have been vaccinated. So we're a little bit behind Israel, but they've done a good job of vaccination.

And I think by the summer, most people will have been vaccinated. And I'm very bullish, David, whenever we get into this outbreak, bullish about what happens from Q2 onwards, from a real world perspective, maybe not from stock markets, but real world per se.

RUBENSTEIN: So you obviously are a believer in the power of advertising given your career. So, if the prime minister said "a lot of people don't want to be vaccinated, they think it might be dangerous" and there's a certain percentage in the United States that don't want to be vaccinated. You think a good advertising campaign could persuade people to be vaccinated who wouldn't otherwise want to be vaccinated?

SORRELL:  I certainly do. I mean, you may have seen we drafted in the queen to try and speed vaccinations. I don't think the anti-vaxxers here, in the UK, have been quite as prevalent or as quite as impactful as they have in some other countries. And I think it's gone quite very well. And people have been very impressed by it. And we're starting now to reach into the fifty year-olds. I'm a grand old man of seventy-six. I had my first vaccination, the Pfizer vaccine, and I had a terrible reaction. My feet were like ice blocks, and then I got into a sweaty fever. And then the following day, I had some symptoms, but I am due to have my second shot on April the 6th with some degree of trepidation.

But as Tony Blair said, why don't you postpone the second doses, and that way, we'll get more people vaccinated. And as you know, I think Pfizer and AstraZeneca are meant to give about 83 or so percent protection on the first shot. The first Pfizer shot anyway. So maybe that was the best way of doing it.

RUBENSTEIN:  Now, in the advertising world, if you have an advertising campaign for some product or service, do you think, if it's a bad product or service, good advertising can overcome the defect of the product or service? Or, in the end, does the quality of the product or service win out?

SORRELL:  Well, I have a daily call of the top eight people in our company. We meet at two o'clock every day, in Singapore and Amsterdam. I'm in London. Boulder, Colorado and Scottsdale, Arizona. I asked them this question because I thought it was a bit of a sink as I asked them. And the view was, and we're not going to name the products or services, but we did come to the view, with the general view, of our eight leaders, was that good advertising can sort of maintain the momentum of our less-than-adequate product, right?

I think conventional wisdom is you can only sell a bad product once, sort of like political advertising. If the electorate doesn't like who you're trying to sell, you know, the second time around the ballot box, you'll get to know it. But our view was, and I'm not going to name those products or services, they will not be to invidious position for you to put me in. But basically, we do think that great emotional advertising, ones that establish a strong emotional bond and relationship, can be really effective. It helps when the product or service is outstanding.

I also add that our operation, our store, is purely a digital operation. WPP was probably, when I left three years ago, about 60 percent traditional and 40 percent digital. In the digital world relationship, this is particularly important, given what happened yesterday with Google's announcement about the demise of third-party cookies. This is data from third-party sources by which you can track people, and Google, basically, along with Apple, said on the grounds of privacy to the first-party data. that is client data, data that a client owns.

For example, Procter & Gamble owns about 1.2 billion consumer profiles. So this is direct-consented data that they have. And I'm just saying that, in a digital world, relationship building is critically important. And what we're going to see, and we've already seen it, but what we're going to see increasingly in the digital world is that we're building up relationships through the use of consenting data. And through content developed from that data and distributed through digital media.

RUBENSTEIN:  So are there campaigns, let's say an advertising campaign, you think was spectacularly successful? A classic, great one, or is there anyone, you'd say, was a classic one that didn't really work?

SORRELL:  I'm never gonna say the ones that don't work. I asked my colleagues for their views. We all have the view that the Old Spice, not ads that we've done at WPP or indeed S4, that was Wieden & Kennedy; the Old Spice ads, which is a Procter & Gamble brand, were outstanding. Then we think the Airbnb campaign, the “be like a local,” that's probably a little bit more in our sphere. Interestingly, we think the agency that came up with "be like a local" lost the business. We love the campaign, but lost the business pretty quickly. There have been disasters, which one shouldn't name or name the agencies involved, but I would... thinking of those campaigns. Nike does a great job. I think Apple has done a great job. Google has done very good work. So there is something there obviously. Historically outstanding campaigns, Procter, always there are outstanding campaigns that put out the Old Spice and the Airbnb.

RUBENSTEIN: So if I came to you and said I have a new product or service and I want to advertise it, but I only have a limited amount of money. Would you recommend I put the advertisement in television, radio, newspapers, social media, streaming services on a blimp somewhere? Where would I?

SORRELL:  It's all digital, David. I think personalization at scale. I've been doing S4 for about four and a half years, and we're purely digital. And we're very focused on that, which is about half of the media market. So the market is about $500 to $550 billion in media, about $500 billion in marketing services and about $700 billion in trade, but it's about $1.7, $1.8 trillion in total. But coming back to your small break into the market, I would say digital media gives you personalization of scale. And the Netflix model is a really good example.

So when we do campaign, say for Narcos 3, let's take that as an example. We created in that case, $1.6 million different potential creative executions. So then we track David Rubenstein. We see, we don't know it's you. We have a number. We don't know it's you personally. And we watch you on Or you might be on the New England Patriots sites. And we'll serve your piece of content, which compares Narcos 3 to a business because of the journal, a sport, or team, in the case of the Patriots. So I think that's where a knack for a relatively small, absolute amount of money. You can measure the effectiveness much more effectively, and get the sort of results that you would demand given your regular success record.

RUBENSTEIN:  So what is a nice Jewish boy from London, who went to Cambridge and Harvard Business School, how did you avoid private equity, investment banking, or things important like that? How did you get into advertising?

SORRELL:  Well, it was purely by accident, actually, David. I was working for an entrepreneur called James Gulliver who actually was in the food retailing business, and don't ask me how he built the food retailing business that he sold to the song ops at RCA Corporation, and made a lot of money. And I was his gopher. I was called financial advisor, but I was actually carrying his bag.

And one of the investments that he made was in a very traditional agency called Darling Compton, which was injected into a shell company, called the Birmingham Crematory. This was a little shell company on the London Stock Exchange. Rather like dare we say injected S4Capital in or Wire and Plastic Products. That was the basis of WPP. And James had the stake in the agency. And that agency was chaired by a man called Ken Gale, and he made a bid. Effectively it was a reverse bid for the Saatchi brothers agency's search. And so that's how I got into the business, by accident.

Maurice Saatchi's looking for a CFO. The headhunter was frustrated in his efforts to find somebody and Maurice said I'd like somebody like Martin. And Maurice said, that's a good idea. And I'd like to have somebody like him. The rest is history. He came and he recruited me, and I became the CFO of Saatchi.

My father had always said, an answer to your question, is my Jewish father probably had a big impact on me. And he said, look, find any industry that you enjoy. Find a company within that industry that you enjoy and have fun with, build a reputation, and then if you want to start a business on your own, go out and start your business. So I started WPP when I was forty years old. Maybe a little bit on the older side. I borrowed against the stock I had in Saatchi's and that's how I started Wire and Plastic Products. It was a shell company and we built that into what became the world's largest advertising marketing services.

RUBENSTEIN:  When you left Saatchi and Saatchi you bought WPP but that's a wire products company. Why didn't you buy an advertising company? Why'd you buy a wire products company?

SORRELL:  Well, because if I was putting it crudely, one would call it the shell way. So I mean, it's a bit like stacks, but it's not a stack. It's a quoted shell company usually a cash shell.

In Wire and Plastics' case it was a small manufacturing business. It made wire baskets, and the criteria that we had for the shell, because I had limited resources, it had to be a company with a market cap of about a million pounds, no debt, a manufacturing business that we can understand, and management that was not senile was the way we described it. That could still run the business as we built it into a major advertising and marketing services company. It's sort of like... now quite popular, not just in the U.S., but here in Europe.

The chancellor yesterday, issued a report by Lord Hill. Actually she did two very interesting things, David. Firstly, S4Capital is a dual-class structure and share strategy company. So I have a controlling share. And it looks like they will amend the legislation around listings to enable dual-class companies to be listed as premium listings here in the UK. And even in a class called standard, we're a standard listing, which is a level under premium, because we have the dual-class structure. And at the moment, we're not in all the indices. But if we became effectively acceptable from that point of view, we would be the indices.

RUBENSTEIN:  Okay, so when you started WPP, you bought that to use it to make acquisitions. But usually people make acquisitions, historically, of companies that are sort of not competing with each other. You bought a number of large advertising companies which historically competed with each other and put them under the same roof. How did you think of that? And didn't you think people in the antitrust world would say you can't do that?

SORRELL:  Well, as a brands approach I mean it is interesting, you know. If you said to me, “who's the most brilliant man in terms of managing brands?” I would say Arnault with LVMH. I mean, he consistently, all the studies that we have done over the years in terms of the strength of brands, his brands with LVMH, Dior, or whatever it is come out on top, and he runs a house of brands approach.

I can't remember how many brands he has. And he calls them maisons. I think it was around ninety or something. And somebody said to me, it was ninety-three. His sources as you run things, sort of separately, or is separately, in a sense competitively. In the ad business, this what I call the market share approach, which is what you just highlighted, really started in 1950s, with a man called Marion Harper who ran into public group. And what he did was he had different agencies for different clients. Primarily, conflict.

So if you had Procter, you have them in one agency. If you had Unilever, you had it in another agency. And at WPP, well, our first major deal, which was a hostile deal, was J. Walter Thompson. And that had Unilever as a primary client. And then we added Ogilvy which actually had Ford and Unilever, which were both JWT clients. In fact, David Ogilvy had often talked to the Thompson management, two or three times about merging Ogilvy and Thompson. So it's sort of fitted together.

But against that, you know, later on we bought Gray. And Gray was a big Procter agency, and that was a seminal transaction. We did that around 2005. And because that really did highlight our strategy, because we had Procter inside Gray. And we had the Unilever, but you know, from a global point of view, they were sort of ahead of all their competitors, but both clients accepted that, and you ran it.

It's a strange thing. Goldman Sachs and McKinsey could run competitive brands or could devise competitive companies, competitive brands within the same channel, within the same brand. Agencies, for whatever reason, couldn't do that. So having separate agencies made sense from a market share. It's a market share model. Where you're building share.

RUBENSTEIN:  Right? So you built WPP into the largest advertising company in the history of the world. And then you retired in 2018 from that company, and you're seventy years old.

SORRELL: Seventy-three.

RUBENSTEIN: Okay, so you're seventy-three years old. Why didn't you say I'm going to go to sit down and play with my grandchildren? Or I'm going to kind of do whatever you do when you're a sir? You've been knighted already. You can go to lots of places and say, you're already a knight. You're knighted. Why didn't you just kind of retire? And then you started a new company. Why did you do that?

SORRELL: Well, the three reasons really. One is my mother's genes. My mother died when she was ninety. So I think I inherited her genes, physical genes. Hopefully, you know, I'll live even beyond ninety so that was one thing. Secondly, I dislike intensely portfolio jobs. You know, I don't like dipping in and out of things. And thirdly, like I think I had a point to prove after leaving WPP, I wanted to demonstrate that we could build a very strong growth business.

You know, one of the things we came under pressure with WPP really is in 2017, was pressure on the top line. You know, from your experience in private equity and beyond that, like for like, top-line growth is the key driver of total shareholder return. Now, it's different to when I was at WPP or at Saatchi's as CFO. In those days, I think there was a more equal balance between top-line growth and margin growth. Today, top-line growth, like for like, not growth through acquisitions, but like for like, what retailers will see same-store growth, is a critically important, dynamic call for total shareholder return. So we're building S4 totally around digital, because digital's revenue growth is.

Even last year, when the world was being beset by COVID, digital advertising grew. The clients switched money from traditional media, to go back to one of your previous questions, into digital media. And as I look at this year, with GDP forecasts have increased by 5 to 6 percent. By the leading investment banking houses, such as Morgan Stanley and Goldman Sachs, have about five to six in share and four to five next year. You're going to see a very strong growth in digital advertising. It's been strong in Q4 of last year, as some of the numbers coming out about the platforms in Google at 21 percent in Q4. Like for like, Amazon up 40 percent. Facebook is up 30 percent. And these are huge increases in digital advertising. We haven't announced our annual results for 2020 yet. We'll do that later in March. But you'll see from them the sort of growth that we're seeing in digital marketplace.

RUBENSTEIN:  Now, what does S4 stand for? Are there four Ss there or what?

SORRELL:  Well, there are... It's really my grandfather on my father's side came to the UK in 1899. When my mother died, I found my grandfather's marriage certificate and he married my grandmother. He came from Kiev, as best as we can figure out, in 1899, escaping the pogroms. My grandfather claimed that he had cut off a Kozak's hand at the age of ten. The Kozak put his hand on the barrier or wall, and he claimed to have taken the sword and chopped off his hand. Anyway, he came with my grandmother, and they were either remarried or married again in the UK, or married for the first time. And they signed the wedding certificate with a cross. And the four witnesses signed with crosses as well. Because they couldn't speak a word of English.

So that's S1, my father is S2, I am S3, and my three boys S4. Wait, I have grandkids now seven of them. So maybe it should be S5.

RUBENSTEIN:  Okay, and you have seven grandchildren. And you can remember their birthdates and everything?

SORRELL:  With a little bit of prompting.

RUBENSTEIN:  Okay, so let me ask you this. Very often, advertising is designed to focus on people who are eighteen to forty-nine. People over forty-nine, we buy a lot of stuff, too. And we have more money than the people under forty-nine. Why don't you focus on people like me?

SORRELL:  Well, they do—we do. I mean, we try and get you as well. But you know, you raised a very interesting question. Because there were a number of people who tried to build agencies around the older age group and they made the same argument as you. And I remember David Komansky, who used to sit on the WPP board, he used to have these great statistics from Merrill Lynch about the wealth concentrations amongst the older age groups like you and me. And, well, more you than me, and they would say we ought to build it up a bit.

The reason that advertisers are so consumed with the younger age groups is they are the consumers of the future. So they like to build that relationship over a long period of time. And for the future. I mean, many of the companies that have been successful, are terrified when they look at the age profiles of their products and services because they're so geared to the older age groups. And they worry about what's going to happen in the future to purchasing and penetration within the population. So it's natural to focus to build.

You remember, I referred to relationships, emotional relationships in a digital world tend to be a more data-based relationships based on data and facts. But building that is the real reason why advertisers so keen on the younger audiences.                                              

RUBENSTEIN:  Am I watching the wrong shows when I see advertising and it's for adult diapers and dentures and things like that? Am I in the wrong television?

SORRELL:  You're probably watching the right shows. If it was baby diapers we'd probably be in the wrong show.

RUBENSTEIN: Okay, so let me ask you, if David Cameron had called you up and said, I think I'm going to lose this Brexit vote, can you get an advertising campaign that might actually save the British Empire? What would you have done?

SORRELL:  A very difficult question. I mean, the brilliance of the Brexit campaign was take back control. And Dominic Cummings, whatever you think about Dominic Cummings, or indeed of Boris Johnson in terms of was he an opportunist or not? What they came up with was a crystal-clear campaign. It was a negative campaign, but it was much easier to say no than yes. But it was to take back control.

Interestingly, Jeremy Hayward was the cabinet secretary to David Cameron at the time of the referendum. Sadly Jeremy died. And his wife Suzanne here, but it's worth reading up. She has written a book based on tapes on Jeremy before he sadly died. I believe it was of cancer a few months ago. And in that book, it describes how he tried to persuade Cameron not to go, I mean, Lionel Barber, tells the story again. Tnhe referendum was on a Thursday, and Lionel Barber went to see Cameron on the Tuesday. And what Barber had done was very interesting. He pulled his foreign correspondents on the Financial Times back to the UK, and to go out into the country and try to see what's going to happen on this Brexit vote.

And Lionel went to see Cameron and apparently said to him, according to his report, you're going to lose this. Cameron said, “no, no, no, my poll numbers are telling me we're going to win.” And right up to Thursday evening, even after the polls have closed, not dissimilar to what we saw with Hillary Clinton and Donald Trump in 2016, Cameron still believed he'd win. I don't think Cameron thought he was going to lose, and all the data they got seem to suggest that, but the answer to your question, you would have had to come up with a crystal-clear tagline that was as effective as take back control. Take back control was, given inequality, given the fragmentation that we've seen, given the populism we've seen, was phenomenal. Make America Great Again is another example. Good or bad of a similar campaigns, and campaign slogans have to be extremely simple and crystal-clear—and take back control. There's a wonderful TV documentary. I'm trying to remember who produced it. I think it was on BBC, about the Cummings campaign. And it’s well worth watching to see how the campaign slogan and campaign itself evolved. It was really excellent and an excellent lesson.

RUBENSTEIN:  So you've been knighted by the Queen, I assume was a big honor. You know, your grandfather...

SORRELL:  My mother thought so. My mother thought so.

RUBENSTEIN:  Your mother lived to see that, so congratulations.

But suppose the Queen called you up now and said, I'd like to spiff up royal family's image a little bit. What would you suggest the royal family do to kind of have an advertising campaign that could make them a little bit more up-to-date?

SORRELL:  Well, we're on the cusp. I mean, I watch The Crown avidly and that's not necessarily a historically consistent or accurate view. But you know, I often think about whether The Crown actually helps the monarchy and helps royalty or not. And I think net, it really helps.

And it's a bit like that great debate about when Prince Philip, which is actually referred to in The Crown series, decided to have a BBC documentary about the royals. It made royalty seem too human. I disagree. I think it's human. I think the issue, and we're on the record, it's tender territory. But what is happening currently, and I find fascinating, I mean, this PR tug-of-war between Buckingham Palace and Harry and Meghan, which, you know, will come to a crescendo with the Oprah Winfrey interview on March the 7th. And it will be broadcast here in the UK on ITV the following evening. I mean, it is quite extraordinary that it has got to this sort of level and we now got accusations of bullying being laid out in the Times newspaper.

So coming back to your question, I think it's an exceedingly difficult problem at the moment for the royal family. And you have Prince Philip who has been ill. I think I read a story this morning that indicated that he had heart surgery and was recovering, which I'm delighted to hear. So maybe he will make his 100th birthday and beyond. But it's an exceptionally difficult situation. They remain, and I don't know, I mean, this is as serious, in many people's eyes, as the abdication crisis with Wallis Simpson, and we'll see how it pans out, but difficult times.

RUBENSTEIN:  Before we go to questions from our members, I have one final question. In the end, do you think as a businessman based in Britain, that Brexit is going to be good for the business community or not good for the business community?

SORRELL:  Well it depends. I mean Rishi Sunak's budget yesterday had three elements to it. Firstly, was to maintain protection for people who need protection, which was good. Secondly, he signaled he would have to balance the budget. So corporation tax would rise in 2023 from 19 to 25 percent. So we will still be competitive. And then thirdly, around the Lord Hill reforms: free ports, a reconstruction bank, and other measures to try and improve the British economy.

I mean, my view is the UK economy has to be post-Brexit. I was a remainer, so I didn't want to take back control from the EU, but on the basis of the dice cast, the next thing is going to be very difficult. So if the UK economy was going up on a curve like that, we've got down under the curve as a result of Brexit. It's going to take, in my view, five to ten years to get back on track. But the way we will do that is by being what I call Singapore on terms or Singapore on steroids. I thought the free port idea... That what the government is going to do, they say, they're going to do. We have to see how they actually invest in it to create free ports.

So eight free ports around the country, these will be lower tax zones. So you know, sort of things that you see in South America, for example. In Uruguay, on a smaller scale, where around Montevideo you’ve seen a burst of unicorn-type digital activity because tax rates are lower, infrastructure is improved, offices are built, etc. If the government can do that, if we can really, there's all this stuff about digital taxes, which didn't come yesterday.

There were rumors of a 2 percent digital tax on Amazon, etc. If the government, the Lord Hill reform of our dual-class structures and owner-managed firms... If the government is really serious about that, and puts money behind it, then you could see a faster recovery. I said five to ten years. Maybe it'll be faster, but we have to get in. We have to be open for business. We have to be very fleet-footed. We have to be, in a way, S4 versus, you know... a digitally-focused firm versus the bigger firms in the industry, versus an Accenture. I think there is a massive opportunity.

But one other thing. I mean, Boris Johnson has not been particularly pleasant about business. He is reported to have said some unpleasant things about business and business people. Rishi Sunak, of course, is an ex-Goldman hedge fund manager. And he must be a candidate for Prime Minister at one time, maybe in the near future. And he is very focused. I'm talking about advertising and PR.

He is very focused on his image and the sort of things he's doing on digital media, on Instagram and public relations and social media are quite sophisticated. His attitude toward business is very, very different. And you saw in him a budget statement yesterday. I think a number of the things that he came out with are really from a business, in a super deductibility on investment.

You're used to it in America. We aren't in the UK. So it is 130 percent investment allowances on capital investment to try and stimulate investment. There's some interesting things he's doing.

RUBENSTEIN: Okay, let's go to questions from our members.

STAFF:  We'll take our first question from Jeffrey Rosen.

Q:  Good morning or good afternoon, Martin. That was a good presentation. I'm going to risk offending David by suggesting that since this is the Council on Foreign Relations, we might ask you to comment on one issue related to foreign relations. Specifically, you were an early adopter of the importance of China and India in the future of a lot of evolution of global economies. Can you speak today about how you see China evolving over the next five years?  What the issues are and the opportunities? And could you speak as well about India and how you see them relative to each other?

SORRELL:  Okay well let's just back up for a moment. S4—WPP was a third, a third, a third. That's the Americas, EMEA, and Asia. We're 70:20:10 and I wanted to be 40:20:40. So that clearly signaled, Jeffrey, that China and India are of critical importance. I mean, obviously, we're in most of the Asian markets, and we're in Japan, and Australia and New Zealand. But you know, it's not just about China and India. It's about Vietnam, and Indonesia, and the Philippines, and other parts of Asia, but those are the two.

Now how do I see China? Very simple. By 2028, it will be the biggest economy in the world. It won't be on a per capita basis for a long period of time. But I said this to David, that I'm just as worried as anybody else about the downside of globalization.

You know, the industries that have been crushed by globalization in developed markets. I'm just as concerned about inequalities as Reagan and Thatcher in the 1980s. I'm just as, concerned as anybody else about climate change, about Black Lives Matter, and everything else. So all the other things that we are focused on in an ESG world, but the biggest issue for me at S4, I think, is the rift—

It must be two years ago in Singapore I talked about the Cold War and the rift between the U.S. and China, which I think started under President Obama. I don't think it was just under President Trump. And of course, business people agree with President Trump that China had taken advantage of various things, intellectual property and other things, to build its economy. You now have, when we're watching and listening to the first speeches from President Biden's administration, Blinken's speech, I think, yesterday or a day or so ago. China is pegged as the biggest challenge to America. And I think it's going to be very difficult for America to come to terms, or increasingly difficult to come to terms with the rise of China.

So as somebody who's trying to build a global business, and to go back to David's question about Brexit; if Brexit is going to be successful, if we were Singapore on steroids, it means that we have to engage with the U.S. So we have a free trade agreement with the U.S. and we'll have one with China, too. And is that possible? So I think the danger is we're forced to make choices, and I'm very uncomfortable with that.

India, to me, is easier. I mean you have the added complication that India, under Prime Minister Modi, has taken a very strong view on China. And the Chinese apps, for example, have been banned from India. And we've talked to a number of Chinese companies about how they keep their platforms and their apps operating in India and the answer is they haven't been able to do so. So India, to my mind, will be an easier approach.

For us it's quite difficult. Our model, as you know Jeffrey, because of your history with WPP, our model is a transparent model. The Indian and Chinese markets, the Chinese one in particular, are not a transparent market. There is a lot of opacity. There is a lot of corruption there. And President Xi did go after that in other areas, but in the media, it still exists. So I would say it's my number one concern. And when you talk to people about it, experts such as those in this organization that we're talking to today and others, they don't really have an answer to it. I mean President Xi has gone. He will be in power until 2035. And the same thing applies to Putin as well if his health holds up. So when you talk to people, there is no solution.

I mean, we hear President Biden will adopt a more multilateral approach. It will probably be more predictable. He will try and secure allies to deal with China. But I don't, at the moment, see a way through and I worry that we will have to make a choice. And there will be two different systems, two different approaches. And I think it could be much more difficult, Jeffrey, than WPP at one stage. We must have had 20 percent of the Chinese market and 40 to 45 percent of the Indian market. I mean, to get to that, again, it's going to be a very difficult thing to do.

STAFF:  We'll take our next question from Tom Glocer.

Q:  Good morning, David and Martin. Good afternoon, Martin. Could I get back to the post-Brexit impact?  I think of the UK a bit as a house of brands. Scotland, Northern Ireland, etc. So what do you think the odds are that we're going to see Scotland secede from the union, followed by Northern Ireland? You're reunifying with Ireland, and England retracts back to the Emerald Isle?

SORRELL:  Well, you know, it goes back to 1300 I think, technically. You might even have Plaid Cymru, which is the Welsch nationalist party for the devolution from Wales.

Well, as you know, salmon and sturgeon are really at war with one another in Scotland, and that just unfolded in the last three or four days. And the first minister gave evidence yesterday for eight hours up in Scotland. I will say I don't think she'll lose the vote of confidence. But the independence movement in Scotland, I think, has been damaged by the intervening strife between the two of them... I would guess that in both cases, you know, there is a high chance, a strong chance of devolution in both cases, that both decisions are visceral decisions. In a way it's like David's question about the Brexit campaign.

You know, I think both stir such emotions in people. And this goes back to the power of advertising and the power of communication. They serve such emotional reactions, that I would... If you asked me to bet money, I would have said a week, two weeks ago, it was even stronger that the intervening sign of strife within the SNP party might derail devolution. I don't think so.

And then as far as North and South Ireland, I was taught all Irish men and women are erudite. I was talking to somebody who's in our business. And he said, "well, when Northern Ireland and IRS separated 100 or so years ago, and they knew that economically it was going to be debilitating, but they thought that at some point in time, there will be an opportunity to bring the two parts of Ireland together." And I think that's sort of inevitable, too. So I would bet you know, it's interesting when the chancellor yesterday talked about a United Kingdom when he was trying to unite the country and level up the country, etc. Well things that went through my mind is when we had a United Kingdom? Will we have a Scotland as part of it? I think the odds are really against the UK on this, on those two issues. Scotland, maybe a little bit less certain, but both are visceral, and in a campaign, will be difficult to combat.

STAFF:  We will take our next question from Andrew Gundlach. We're having some technical difficulties. We'll move on and take our next question from William Cohen.

Q:  Hi. Thank you both. This is very interesting, and I wish you would both explain to us who are the artists of the paintings behind each of you because the contrast is quite stunning. But Martin, could you comment please on the efficacy these days of the Wunderland Thompson merger now some three years on. Is it getting the job done?

SORRELL:  Okay, I think David's painting is his mom's. So these are old scenes, David, from Washington.

RUBENSTEIN: Old scenes from Washington. My late mother-in-law painted them, yes.

Q:  They're wonderful.

SORRELL:  Mine come from one of our people in our creative department in London, our content practice. And it's a bit of the history of S4 and, so you've got my crest somewhere there. You've got all sorts of funny things. You know, we called S4 a peanut at the beginning and we poke fun at that. So there's the morphing from peanut to coconut. So there's all the history there.

Wunderman Thompson- that's a real specific one. When I was still at WPP we did talk about VML, and that was in train. And the structure was that Jon Cook would run...I think he's an exceptionally good digital executive or manager that he would run the combined operation. Wunderman Thompson, I think, is a more difficult one. VML is a Kansas City-based digital company of considerable strength, and a pure digital company. Wunderman is much more mixed. In a way it's a little bit like my Ogilvy one. They took the origins, that's the Wunderman, were in direct mail, direct marketing. So some of its operations are not quite as strong in the digital area, as you would believe, so quite more mixed. JWT had gone through some leadership changes. Some un-forced and some forced. And I think was not in a particularly strong condition to merge.

The other thing is, I think, when you put two businesses together, even if they're in the same parent company. If you call them, for example, Wunderman Thompson, it clearly signals that digital or perceived digital is more important than traditional. It also is a bit of a breaker for the management of the traditional agency. You know Wunderman Thompson clearly relegates Thompson to secondary status. And then under the management of the company or Wunderman people, the Thomson people, their heads go down, and their shoulders slump. So I think, if I had been there, I don't think we would have called it VMLY&R or we would have called it Y&RVML.

That may sound sort of pedantic, but I do think what it would say is Jon Cook's in charge of it from VML, but there's equal voices for the more traditional part of the business and the new part of the business. And the same would be true of Wunderman Thompson. If they had called it Thompson Wunderman, it's just, I don't think when you fuse these businesses in the way that it's done, that you immediately create, you know, a digitally-led or digitally-strong company by just slamming two things together. I think it has to be done more carefully, probably over a longer period of time. Maybe at a different time when each of the individual parts are a little bit stronger. So net net, if one looks at the marketplace, I don't think Wunderman Thompson has made the inroads that... There's a lot of movement of money, revenues within the company. So even VMLY&R... I mean, for example, I'm aware that large amounts of the fraud business, getting very specific, were switched from GTP, which were the specialist fraud agency into VML. So when you look at the relative performance it's claimed, it's quite difficult.

The other thing I would say is this. When you look at WPP as a whole, when you think about what we did with JWT and Ogilvy, for example, we took the media of our operations out and the digital operations out and put them into other parts of WPP. So it's very unfair. It's a bit like you have a body, you chop the arms off and you chop the legs off. And you say you haven't got a healthy human being. Well you haven't, because you've taken the growth parts and put them into other different parts of the operation.

So I think when you look at a company like WPP, you can't segment one channel or one brand from the other. You have to look at what's happening to the thing as a whole. And you can't point to one part. That is like squeezing a balloon and saying that this is doing better than the other, because you have to look at the whole thing. And one other interesting thing about S4 is that we have four principles. One is purely digitals. Number two is this data driven model that I described. Number three, you get to market faster so that it's cheaper. And the fourth is we are a unitary structure. We have no cross charging within the company. It's one P&L, and we look at the whole organization as one and not the individual parts. And I think that's really important in this day.

STAFF: Next question, we'll go back to Andrew Gundlach.

Q:  Can you hear me this time?


Q:  Oh, sorry about that.  Hi Martin and David. Mart, I liked your view on the advertising business. Broadly, in the sense that, for the first time ever, I believe media companies are going direct to consumer. Netflix, of course, leading the way. In some views, it's all going to be subscription cord-cutting, etc. Outside the U.S., of course, a different story. But you're starting to see the AVOD models and the CPMs, of course, are much higher in this direct world. Because, to pick up on David's earlier point, you can target David with the right kind of diapers, not the wrong ones. But the question is, how do you see Nielsen, a company David knows well, and that rating? Are the CPMs sustainable at these higher levels? Will Netflix have advertising one day? How do you see the big picture? And will advertising budgets ultimately be higher or lower five and ten years from now?

SORRELL:  Well, a lot of questions there. So we clearly see digital as being where the growth is. I'm really taking a risk without spoiling the sense. Yeah, I have a case of it this week where the business was up or review and the client said to me, you don't have traditional coverage. I'm not interested in the traditional part of the business because that's a zero sum game, you know.

As the traditional agencies fight for talent amongst one another and poach one another's talent, as they fight for accounts and compete with procurement of the client to lower prices, or inflation guarantees, or pricing guarantees, it just doesn't make any sense to me. Digital is more about brain and brawn. The traditional advertising business is more about volume. The new business, or the digital business is around brain, and adaptability. If you're buying online digital media in a nanosecond, you need brain power not brawn. So digital will grow this year by 20 percent. It's 50 percent of the media market now, $500 to $550 billion, I believe I mentioned as part of the $1.7 trillion. And it will be 70 percent of the market by 2024. That's where the growth is coming. The ad revenues will be a mixture of subscription and advertising.

If you take the $275- $280 billion of digital advertising last year, Google was around $171–$180 billion, Facebook's about $80 billion, Amazon's about $20 billion, and Snap, which has done extremely well, only generated over $2.5 billion in revenue. So when you look at the orders of magnitude, the platform of the six, the other three being in addition to Google, Facebook, and Amazon - Alibaba, Tencent, TikTok. TikTok is the only one that really has generated significant volumes. I think in 2019 it's a KKR investment. In 2019 it was about $7 billion. That's the only one that's really got the... Twitter, Pinterest is even less than Snap, and Snap is doing well. So you have to look at where the money is going.

So on the advertising side, and we saw Google making this big move yesterday, around third-party cookies or crumbling third-party cookies. Apple had gone the same way with IDFA. So first-party data relationships with consumers, so our relationship with David, in terms of, with his consent, to understand his media habits, purchasing habits, etc. And to serve them with content that's meaningful. We'll use first-party data to do it. And we only use the signals from the walled gardens of which Google is one, Facebook's another, Apple's another, Microsoft's another, etc. We'll be using this with increasing frequency. So that's the way the business is going to go.

On Netflix, my own view is, I think Reed Hastings would disagree violently, that they will take advertising. They'll offer a Spotify-type premium service, where you don't have advertising and a discounted service where you do. And I think that's the way to go.

Disney+ is making huge inroads. It must be the most successful new product launch ever. I can't remember. What is it $90 million now? And they say they'll go to $240 million by 2024, I think it is. So it's a super successful launch. And look what's happened to Disney. I mean with all the COVID-threatened parts, theme parks, and cruises, it still has crossed through the Fox merger. And it turns out that we can make a stunningly successful decision to merge Fox, parts of Fox, into Disney. So I think those are some of the things that... Disney came in at a lower price point than Netflix at the beginning. It's upped its prices, maybe that will relieve a little bit of the pressure on Netflix. But some people I talked to think that Netflix will end up inside of Apple. We'll see whether that happens at any particular point in time because Apple really is starting to focus on services and content is part of that. So we'll see how that develops further.

STAFF:  We'll take our last question from Joseph Bower. We were having some technical difficulties and he was the last question. So Mr. Rubenstein, over to you.

RUBENSTEIN:  All right. Well, Martin, I want to thank you very much for giving us this much of your time and insights. I want to remind everybody that this video will be on the CFR website right after this. And thank you very much Martin, and good luck when you get here.

Hopefully when you get your second shot, you won't have an adverse reaction to it, you'll be in good shape.

SORRELL:  Thank you very much for doing this much. And big thank you, David, for doing this, much appreciated. Thanks very much.


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