Reasons to be cheerful

He's the man who predicted the current advertising recession. But now, the WPP chief, Martin Sorrell, believes that agencies have grounds for optimism, he tells Raymond Snoddy
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The Independent Online

Sir Martin Sorrell, the 59-year-old chief executive of WPP, the world's second largest advert-ising and marketing services group, could walk down almost any street in London and go completely unrecognised. Ironically, outside ad-land and the business pages of the serious press, the man who predicted the current advertising recession has no public profile at all.

"Thank God for that," says Sorrell, who also brushes aside a nickname - June 21st (the "shortest knight") - that refers to his height. "Par for the course," laughs Sorrell, who in less than 20 years has taken WPP, whose advertising agencies include Ogilvy and Mather, J Walter Thompson and Young & Rubicam, from employing two people in one office to a multinational giant employing more than 50,000 people in 170 offices around the world.

The power of Sorrell, or rather that of WPP, is that it is responsible for one in five of all the advertisements placed in the British media. As a consequence, Sorrell is paid about £2m a year and is worth an estimated £130m. Despite having had a bank rescue along the way, WPP companies have recently underlined their strength compared with rivals Omnicom, Interpublic and Publicis, by winning the entire global HSBC account for advertising, media and direct mail. Sorrell was recently judged the ninth most influential figure in the UK media.

Nevertheless, he insists: "My view is that I am a pretty powerless individual because when I say go left, everyone else goes right." But there is no doubt he can command instant attention when he issues pithy comments about the depth and length of the recession, or the effect of the internet on traditional media. He famously predicted - correctly - that we would live through a "bath-shaped" recession and would only begin climbing out of it this year, boosted by Euro 2004, the Olympic Games and the $1.5bn now being spent on political advertising in the US presidential election.

Little is known about his private life other than the fact that his wife Sandy has a degree in French, that he likes playing cricket, and that all three of his sons appear to be merchant bankers. I ask him if it is true that all three are bankers: "Could be. You'd have to ask them - but I wouldn't let you," says Sorrell.

He is talking in the boardroom of his modest headquarters in London's Farm Street, near the Church of the Immaculate Conception. From here he oversees a multi-national client list that includes Ford, Unilever, Shell and IBM.

Although current WPP television ads - such as the Land Rover campaign with Masai warriors and hippos - are eye-catching enough, increasingly the aim is to use all available media outlets including direct mail, the internet and interactive, alongside traditional commercials. "But 30-second ads will still be important, network TV will still be important and there will still be couch potatoes," predicts Sorrell, who says he loves Sky television and thinks Sky+ is "fantastic."

The continuing growth of the internet and interactive advertising will accelerate, he says. He is currently intrigued by forecasts that interactive advertising in the United States will prove more important than magazine advertising by 2007.

"I think the challenge facing paper publishers - newspapers and magazines - is getting greater and greater," he warns. Periodicals will come under greater pressure than daily newspapers. "I read less weeklies and less fortnightlies. I don't get my 'market close' from the FT any more - I get it from Bloomberg the night before. Can I wait for Fortune or Business Week or The Economist? The answer is probably 'no'."

He gives ITV, and its chief executive, Charles Allen, good marks. "ITV is making a big effort. Charles Allen is trying very hard to pull Carlton and Granada together and make them more efficient and effective - and the key is programming." But will Allen survive? He won't comment on that.

Sorrell is considered one of the best-informed figures in the media, restlessly processing gossip, rumours and economic trends. He processes the company's daily cash returns with equal vigour. "People accuse me of being a micro-manager. But I am a micro-manager," he concedes. He never switches off his Blackberry communication device.

Sorrell believes The Independent has done "a fantastic job" taking the paper tabloid, but is less certain about The Times. "There seem to be split views on that. But I like it [the Times compact] as a reader, rather than fighting with a big newspaper."

On the economic front, his legendary pessimism is slowly giving way to optimism, not least about his own business, although there is always a streak of caution, and worries remain about the UK. "I feel pretty good about the business," says Sorrell, but warns that whoever wins the US presidential election will have to start to deal with the US deficit and the weak dollar.

This Cambridge-educated economist also notes that in a time of unprecedented competition and low inflation his clients, the advertisers, are finding it difficult to increase the volume of their businesses.

Despite the pressure, Sorrell is very optimistic about the medium-term prospects for both his industry and WPP, which last year had revenues of £4.1bn and pre-tax profits of £473m. At the moment, 45 per cent of WPP business is located in the US, 35 per cent in Europe and 20 per cent in the Asia-Pacific region. He wants equal thirds in future, and believes that this could happen from natural growth. But, at present, the developed world spends about two per cent of GDP on advertising and the developing world half a per cent. Countries such as China and India have to move to two per cent by 2015 for Sorrell's transformation to happen. By then, he emphasises, Asia will be home to two thirds of the world's population.

To get his growth from the developing world, WPP doesn't have to make acquisitions - although of course it will. A few weeks ago, WPP acquired an advertising agency in China and Sorrell is mulling over a bid for Grey Global, one of the last large marketing businesses not already part of the big four world marketing networks. "We are in the process of seeing whether it fits. We have discussed conflicts of interest with our major clients and, as long as we keep it separate, it's fine," he says. A bid for the company, valued by analysts at about $1.5bn, may be only weeks away.

But what of succession planning at WPP, as Sorrell heads towards his 20th year in charge amid controversy about three-year rolling contracts and bonuses that could eventually reach £44m?

Sorrell stands to mock attention, and says he is about to engage in "corporate speak": "There is a formalised process where the board meets every year to discuss not just myself but the top hundred people in the company." So far, his contract has always been renewed.

Yet: "I suffer from founder's disease. You never see the writing on the wall, but someone could tap me on the shoulder one day". There is no sign of that happening just yet.