WPP CEO Offers Outlook on Advertising's Future

WPP Chief Executive Martin Sorrell identified three areas where the company is placing its bets for growth in coming years: a geographic shift in power, the rise in new media, and an increased focus on marketing information and insights.

“There’s a shift in power, which I still don’t think we fully understand here standing in New York, from the West to the East — and modify that to the South,” said Sorrell, keynote speaker at ad:tech New York, referring to China and India in the East and Latin America in the South. “Every single client we deal with is focusing on these parts of the world for growth.”

During the first six months of 2009, 35.8 percent of WPP’s revenue came from North America, 38.1 percent from the U.K. and Western Europe, and 26.1 percent from the rest of the world, according to the company’s earnings report published in August.

Sorrell said he also expects online marketing budgets to catch up with consumer use of new media. Currently, clients spend about 12 percent of their marketing budgets online, he said. Yet consumers spend 20 to 28 percent of their time online.

Why isn’t more money invested in online marketing? It’s generational, he said. “People who run media agencies tend to be an older vintage. They tend to be resistant to change,” he said. Executives approaching retirement age don’t want to spend the last three or four years of their careers dealing with massive change, he said.

A third area of growth, he predicted, involves marketing information services. With that in mind, WPP last year acquired TNS.

With an estimated $14 billion in annual revenue, Sorrell broke out WPP’s revenue sources as follows: $4 billion from marketing information services; $3.5 billion from interactive marketing; and about $2 billion from its media planning and buying services.

Sorrell offered contrasting thoughts on mobile advertising’s potential. While discussing the opportunities in Asia, he pointed to China Mobile, which has more than 500 million subscribers. (In contrast, there were about 270 million subscribers in the United States, according to IE Market Research Corp.)

At another point during his keynote, he said one of the biggest disappointments in online advertising has been the slow adoption of mobile advertising in Western Europe. He expects that could change, though, as more consumers begin to use smart phones.