WPP's Sir Martin Sorrell: It pays to be paranoid about China

WPP chief executive Sir Martin Sorrell has issued a strong warning for media and ad agencies to be wary of the threat from rivals in growing economies, particularly China, saying it "pays to be paranoid".

Sir Martin Sorrell: PR is becoming a "more important part of the mix"
Sir Martin Sorrell: PR is becoming a "more important part of the mix"

Speaking at an Institute of Practitioners in Advertising event in London, Sorrell also reiterated his optimism about the prospects for PR, saying social media have given the sector a "new lease of life".

Sorrell commended the firm’s growth in the UK but urged the domestic sector "not to be complacent" about companies in fast-growing countries.

He pointed out that China is now WPP’s third biggest market. It is set to generate revenue of £1.65bn this year and employ 16,000 people, a similar number to the company's UK workforce.

"It would be very arrogant of us to believe that 1.3 billion people, or 1.2 billion people, cannot produce better advertising agencies, media companies than we can. It pays to be paranoid."

Sorrell pointed to the recent acquisition by Chinese comms firm BlueFocus of part of Canadian ad agency Vision 7. More generally, he highlighted the rapid growth of Chinese firms such as online ordering service Alibaba, now the 16th most valuable company in the world 11 years after being formed.

"Watch out. We all said the Chinese copy, they steal. They may have done those things, but we said the same about the South Koreans, we said the same thing about the Hong Kong Chinese, we said the same thing about the Japanese and look what happened.

"They are coming."

However, Sorrell, who was interviewed by Newsnight and Dragons' Den presenter Evan Davis, said the concern that "keeps me up at night" is clients’ focus on the cost of media services.

"We have to break that. We have to get clients to look at the horizon rather than their boots," he said.

"We have to get them to think about how they can expand their market shares, how can they grow their sales instead of the cost. That’s the biggest threat."

Sorrell said PR was becoming a "more important part of the mix".

Social media have given PR "a completely new lease of life", he explained, especially as the line between public relations and other disciples "becomes more blurred". PR is also becoming more effective at using data, said Sorrell, whose PR agency portfolio includes Finsbury, Hill+Knowlton Strategies, Burson-Marsteller and Ogilvy.

The WPP chief described Google as "scary" and "all powerful".

He views the company as a "frenemy". He said WPP’s relationship with Google accounts for £3bn of its £75bn annual budget for buying media – its biggest for any single company, driven by mobile and video.

That compares with around £650m for Facebook, although that figure grew by 50 per cent last year and WPP hopes to double it in 2015. The value of Twitter’s relationship grew threefold from a small starting point, Sorrell added.

Sorrell told the audiance at London's Ham Yard Hotel there was a succession plan in place at WPP should he leave the business – whether he was "hit by a truck tomorrow", or departed in three or five years' time.

Yesterday WPP announced that Sorrell earned more than £36m ($53m) in 2014 under the group's long-term incentive plan.

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