Martin Sorrell, one of the best-known and most powerful men in advertising and the chief executive officer of global advertising and communications conglomerate WPP Group Plc., wants his empire in India to grow even larger than it is. WPP controls the majority stake in the Indian arms of several large agencies including Ogilvy and Mather and JWT, but Sorrell, who spoke to Mint on the sidelines of advertising’s annual jamboree at Cannes in June, says he would like a controlling stake in Rediffusion DY&R, too. And that he would like to acquire firms affected by a possible slowdown in India. Edited excerpts:
What is the group’s priority in India?
The WPP Group’s revenues from India total $350 million. Our current market share is 50%. We are doing extremely well organically; our topline growth is at
20-25%. Obviously India as a market cannot continue to grow at the same rate throughout. There would be some relaxation at some point of time. But once things start slowing down in India, we think that the competition may give up. We see that as an opportunity. Globally and in India, we are looking at acquisitions across the sphere: advertising, media, public relations, digital, etc. In India, we remain interested in acquiring more equity in Rediffusion DY&R. They went through a sticky patch in the middle, but now have benefited hugely from the LG and Tata Nano win. We have always been interested in Rediffusion and continue to be interested in the same way.
Big plans: Martin Sorrell, chief executive officer, WPP Group Plc.
Rediffusion had earlier said it was not interested in selling majority stake to WPP. What’s the status now?
Well, Diwan Arun Nanda (founder of Rediffusion) changes his mind, occasionally. The positive thing would be that they allow us to pick up more equity.
Are you in talks with local start-up agency CreativeLand Asia Pvt. Ltd for an acquisition? Will there be a merger of WPP agencies Grey Worldwide and Equus/Red Cell (Equus Advertising Co. Ltd)?
We were considering a merger for Grey and Equus but there’s absolutely nothing happening on it now. Both these agencies are doing well for us. I wouldn’t know about CreativeLand Asia.
Havas Group chairman Vincent Bollore’s bid for greater representation on the Aegis Group Plc. board has been rejected for the fifth time. How does this effect WPP with regard to your interest in Aegis’ market research firm Synovate?
It’s up to Vincent to decide what he’s going to do. We certainly could use Synovate and if Vincent gets to buy Aegis and wanted to get rid of Synovate, it will be interesting. But it’s hypothetical until he buys them. I have consistently said that I think he will buy them (Aegis). If that happens, Bollore would have to decide how to bring together the other separate parts. If Havas and Aegis were to merge, that makes them a better company and better competitors. The two separate are weaker. So maybe it’s in our interest that they stay apart.
What is the true story behind the Madison-Mediacom deal where it looks like Sam Balsara has actually bought out Mediacom? Will there be a reversal or swap of shares after 18 months?
Everyone said that it’s impossible to do a deal with Sam (Sam Balsara, founder of Madison group). We kept at it and worked out something that benefits both him and us, especially on a client connection. WPP got an opportunity to team up in media with one of the best people, probably the best independent that OMD, Publicis Groupe, Carat etc have been trying to do something with. In all our four brands in media, Mediacom was probably the weakest. Sam has tremendous talent and his aspirations in India are long term, as are ours. We merged the two businesses together to try and build a relationship with him in India. As for reversal of shares etc, what you see is the structure. What you see is what you get on Madison. As for financial and other terms and conditions on the deal, we don’t need to discuss that with anyone. It’s our business.
A merger is under way between research major Taylor Nelson Sofres Plc. (TNS) and GfK AG. But you seem to still be interested in acquiring TNS?
I can’t answer that. But you know what the situation is. We have had reservations on the GfK bid because of synergies that don’t really go with the 15 per cent profit margins. We think that the management structure is a strange one with GfK-Verein being a 30 per cent shareholder, which will result in a company that will probably trade at a discount. (GfK is 57% owned by GfK-Verein, a not-for-profit organisation which is focused on the promotion of science and education.) For us, TNS ticks three strategic objectives: growth in emerging markets of Asia, growth outside of traditional advertising and the fact that it would make our measurable business such as research much bigger. We have had difficulties with TNS who refuse to give us the information they are giving GfK.
(Sorrell has met with TNS management and presented them with a list of 188 questions about the business, and wants the same data that the TNS’s proposed merger partner, the German group GfK, has received.)
Are you worried about the competition in India?
Well, Omnicom Group talks a lot about what it’s doing in India.
Publicis Groupe talks a lot. As for IPG, they’ve been strapped by accounting and other problems. There’s always a lot of chatter but not much happening other than noise. If you look at the facts, it seems to negate the impression of competition making much of a head-away in China and India. In markets such as Russia and Brazil, they are in strong positions but not in India and China. There have been acquisitions made that have blown up in three months, and joint ventures that are totally meaningless. That said… we’ d still be on our guard because there’s no saying what people (competition) can do.
What are the challenges for WPP and do you buy Google’s argument that it is not trying to disintermediate the ad agency?
Our focus in the short term is the implication of a slowdown in the West and of that leaking to the rest of the world. In the long term, it is the challenge of growing business in Bric (Brazil, Russia, India and China) economies. Thirdly, how do you cope with the technological changes? On Google, you have to judge people not just by what they say, but also by what they do. There have been instances of Google and others going to our clients directly. There are no great inroads made by them as yet with our clients, but you don’t know what’s going to happen. The advertising industry at large does worry about this.
What will be the likely impact of the US slowdown?
Sometimes when business gets tougher, there are some companies that will decide to invest more. Global companies talk about it and some actually do it. If the US slows down, Western Europe slows down too and so will India and China. It’s all interlinked. India and China are not independent forces. Keep in mind that the economy is growing because of free trade. Economies will slow down and the reason will be free trade as well. I don’t think anyone can escape it. It might take a little more time but India and China will slow down too: 2009 will be a tough year for us; (but) 2008 is a pretty good year -- (it has) Beijing Olympics, US presidential elections, European football championships, etc. (And) 2010 will also be a better year with the Shanghai Fair, the Asian Games, the Winter Olympics in Vancouver and the World Cup in South Africa.