Nineteen minutes inside Sir Martin Sorrell's head
Adland's prognosticator on how AI will wipe out a generation of media buyers; a rough outlook for the economy; how the Cannes Lions are out of step with the times; and diversity in retreat
Welcome to a midweek update from Unmade, edited in London.
Today: the view from the northern hemisphere, as Sir Martin Sorrell offers a stark outlook. And a solid day on The Unmade Index, thanks to the Reserve Bank’s pause on interest rate increases.
Don’t forget: Unmade’s conference on the impact of AI on the world of media and marketing takes place in Sydney next week. Book your ticket to humAIn now.
Sorrell on how AI will wipe out a quarter of a million agency jobs; why the ‘shenanigans’ of Cannes are a bad look; and moving diversity down the agenda
Tim Burrowes writes:
Talk about all killer and no filler.
While you were going to bed in Australia, the first day of MAD//Fest was getting under way in what’s usually a car park at an old brewery in East London.
There’s nothing of the scale of MAD//Fest in Australia. Around 15,000 marketers signed up for tickets, and it felt like they all showed up at once. The first morning was soon a lockout, with the human queue stretching back a couple of hundred metres along Brick Lane. Thank goodness for jetlag getting me out of the door bright and early.
Sir Martin Sorrell, the world’s most influential advertising executive, was one of the morning’s drawcards. As founder of WPP and now S4 Capital, Sorrell has been the ultimate weatherman for the global economy for the last couple of decades.
And with a session timed for just 20 minutes, Sorrell had no time for niceties like allowing his interviewer to ask questions. He proceeded to offer a brain dump of the main trends affecting the industry. There was a lot. Here are the takeouts…
1. AI will take agency jobs
More than six months on from the arrival of ChatGPT, I’ve concluded there are two types of agency bosses: Those who understand that their world is going to change dramatically, and those who are in ill-informed denial. Sorrell is not among the latter.
Yesterday, he put a number on it. Around the world, we’ll see quarter of a million fewer media agency planners (in other words, most of them).
“If you think the web was important; if you think the smart phone was important, stand by.
“Media planning and buying, revolutionised. Algorithms are going to replace 25-year-old media planners in fairly quick time. There won’t be 250,000 people at the holding companies running media planning and buying networks around the world.”
Sorrell reeled off a string of imminent impacts for the communications world. “We will really see the impact on visualisation and copyright. We’ll see hyperpersonalisation. Targeting of consumers.
“AI is a supertool to improve productivity. It’s going to have huge repercussions.”
2. The platforms have already captured adspend
Old media has lost the ad war, Sorrell pointed out. “Global media is about $900bn. Global digital is about 650 of that. The numbers never lie.
“Google is 215 last year, probably 225 this year. Meta 115 last year probably 125 this year. Meta is very much on the up. TikTok, we think, is about 47 billion outside China .”
And even the global platforms that weren’t initially advertising-led have moved in, Sorrell said.
“Amazon 41 last year, going up to 45 or 50. I think they’ll get to $100bn. Apple probably last year around seven billion. Microsoft last year around 11.”
Until now, the Australian advertising industry has been complacent about the impact of Amazon. That, however, is changing fast.
Sorrell also shared some gossip on the likelihood of Netflix parting ways with Microsoft, which currently powers the streaming service’s advertising tier. “From what I hear that’s probably a partnership that won’t last. The Netflix people will develop their own technology.
“You’ve got to think about Apple and Microsoft invading too.
“From an AI point of view, Apple is very secretive about what it does. Apple will do huge amounts in the AI area.
“AI is going to reinforce that (platform-dominated) structure. Despite the VC (venture capital) market and private equity. The investments needed to develop AI platforms are so huge the big just get bigger.”
3. Climbing the mountain of conflict
Sorrell also argued that the west was taking risks in trying to limit the market power of the digital players, suggesting that they need to be developing technology for the west including artificial general intelligence in what amounts to an arms race.
“Having a strong technology sector is vitally important. Attempts to regulate them and hamper them, you shoot yourself in the foot. If you’re going to be defensively strong. Wars are going to be fought with AI, developing AGI.”
A major risk to the west comes if it loses access to microchips, mostly produced in Taiwan at the moment, said Sorrell. “If the Chinese move on Taiwan in any significant degree before we have alternative sources of semiconductor supplies - chips - there will be trouble.”
And he urged politicians to dial down megaphone diplomacy. “This continuous PR stuff, anti Chinese rhetoric never does any good. The trouble starts when you say it publicly. If you say it privately they will listen and talk to you about it in an extremely constructive and intelligent way.”
4. ‘Gouging’ Cannes is now the province of the platforms, not agencies
Sorrell bemoaned the shift in the centre of gravity of Cannes Lions - held in France last month - away from celebrating agency creativity to a tech-dominated talking shop. He said it left the advertising awards ceremonies, held in the Palais des Festivals in Cannes, as overshadowed as the beach parties laid on by the tech platforms.
“Tech has dominated. The big six platforms were all there - Google, Meta, Amazon, Alibaba, Tencent and TikTok.
“Don’t get me wrong, Cannes is a super networking event. Basically people go there now without a pass. They walk down La Croisette, they go on the beach if they get invited and it’s become very much tech dominated.
“But very few people go to the Palais. People don’t stay for Friday for the award ceremony, they bugger off on the Thursday. Only the winners stay. I’m shocked this year… well, surprised… by how few people were in the Palais and looking at the work.
“They don’t like the prices, they’ve become too expensive. Accommodation is super expensive. There has been gouging to a very significant degree.”
5. Scaling back on Cannes in a ‘tough’ year.
Sorrell predicts that sending staff to Cannes will be harder to justify next year.
“Cannes was planned a year in advance; what you saw at Cannes this year was Cannes thinking from last year. If you planned Cannes now, it would be very different. People would be very much more concerned about expense.
“I don’t think it does the industry a great service for CEOs and clients to observe the shenanigans that go on there. It could be a bit better balanced.”
On the economy, he said: “‘23 is not going to be a good year and I think ‘24 is going to be a tough year too. I’m spreading a bit of gloom, but I think it’s realism.
“Things change after the US presidential election in ‘24, whoever wins.”
6. Dialling back on diversity
Sorrell offered unfashionable views on Donald Trump, and on the push for marketing diversity.
“When you talk to US businessmen, privately the simple fact of the matter was that when Trump was president in 2016, although it was a shock to the system, the Dow and economic GDP didn’t do too badly - it was low rate, low tax.”
He predicted that marketers would focus less on diversity as budgets became tighter.
“Sustainability and diversity, unfortunately, given the economic pressures, given the lower GDP growth, higher inflation, higher interest rates, the priority for any CEO will be ‘where’s the beef, where’s the sales?’
“Like it or not, people are moving lower down the funnel, looking for performance measurement and return on sales.
“Diversity and sustainability, sadly, takes a little bit of a back seat. Sadly, because of economic pressures which are huge. There’s a disconnect between what CEO say and how companies are behaving.
“There’s a lot of uncertainty about.”
And that was all in less than 20 minutes. Imagine if they’d given him an hour.
SCA leads the charge upwards on Unmade Index
Most media and marketing stocks on the Unmade Index followed the wider ASX upwards on Tuesday, as the market reacted to the Reserve Bank’s unexpected pause on interest rate rises.
The index closed up 0.85% to 645.7 points.
Southern Cross Austereo was the biggest winner yesterday, with its price moving upwards by 5.49%, the stock’s fifth positive day in a row. SCA has risen by 17% over the last week and 28% for the month.
SCA’s audio rival ARN Media was up by 2.86%, while Nine was up by 1.79%. The only broadcaster to fall was Seven West Media, which dropped by 1.33%.
Time to leave you to your Wednesday.
Unmade was the only Australian media covering MAD//Fest. You’re reading this exclusive coverage because Unmade’s members help pay for it. You can support us by becoming a paying member too.
I’ll be back tomorrow with an interview with Nick McKenzie, who led Nine’s investigation into murderous SAS soldier Ben Roberts-Smith.
Have a great day
Toodlepip…
Tim Burrowes
Publisher - Unmade
tim@unmade.media
