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Interview With Sir Martin Sorrell

Image via S4 Capital
Recently, the founder of Think Content Asia and Branding in Asia sat down for an interview with ad world icon Sir Martin Sorrell. 

Recently, the founder of Think Content Asia sat down for an interview with ad world icon Sir Martin Sorrell.

The Founder and Executive Chairman of S4 Capital, discusses a range of topics including the effects of Covid-19 on the ad industry, the disruptive growth of digital, what’s ahead in 2021 for both S4 and the industry, and more.

You can watch the video of the interview as well as read the transcript below.

Bobby McGill: We are happy to sit down for a chat today with the Founder and Executive Chairman of S4 Capital Sir Martin Sorrell.

Launched in 2018, the digital advertising and marketing services company has experienced rapid growth since its birth. Already in the first two weeks of the new year, S4 Capital has announced three new acquisitions which see its ranks expand to about 4000 people based in 31 countries.  We’re fortunate to sit with Sir Martin at the start of the new year and learn a little bit more about what’s to come, as we kick-off 2021.

Sir Martin, thank you so much for joining me today.

Sir Martin Sorrell: Thanks, Bobby. They’re not acquisitions, they’re mergers. An important distinction. It sounds a bit semantic, but we’re looking for people to join us on this mission of creating the new advertising and marketing services model and disrupting the old. I want to get that straight out of the traps, as they say. We’re very much determined to create something new and disrupt the old.

Bobby: Pardon my little stumble on semantics. It does bring up an interesting point. The other day, following the Tomorrow acquisition, on LinkedIn, the founder of Tomorrow had mentioned how over the past year he had been approached by all of the major network agencies and had turned them all down, but with S4 Capital he said specifically, “It felt right.” I’m curious what do you think it is about the workplace culture, the workplace model, that makes people want to join?

Sir Martin: I think it’s what I just said. We’re sort of men and women on a mission. We have about nine investment analysts that follow the company. Exane BNP do an interesting analysis, comparing us to the holding companies. I have to say I don’t think the comparison to the holding companies is right. It’s like comparing apples with oranges. We’re different. That’s part of the reason why you saw those comments on LinkedIn.

Firstly, we’re on a mission, as I described it, to create a new model. Secondly, we’re there to disrupt. Thirdly, we’re basically founders and entrepreneurs who want to build a significant business in our industry.

And being purely digital, being built around data, first-party data, and the signals around content, around digital media, and data, and analytics, being faster, better, and cheaper, going to market faster, better, cheaper, and last, but not least, having a unitary structure, one P&L, without conflicting silos and conflicting, fragmenting earnouts, because we don’t do earnouts as well.

We found at WPP that that created fragmentation. You see it still at WPP. It’s a company that is divided, and split, and pitted against one another, rather than one firm. They claim they’ve simplified it, but I think that’s just simply not true. They’ve probably made it more complicated by really enforcing the silos and building them into the bigger ones.

So, I think, for all those reasons, we’re different, and I think that’s why companies, such as Tomorrow, there’s an empathy there, there’s a common mission, there’s a common understanding that makes us very different, and we have to make sure, as we grow, and we’re growing quite violently, we’re growing quite strongly, both organically, analysts are looking for us to grow in a Covid year last year, like-for-like by 15 to 20% it will be at the north end of that.

So, we’re growing violently, organically, and we’re growing violently, if I can put it like that, by merger, by consolidation. I think that entrepreneurs and people who really are interested are really taking risk in the company. People who run the holding companies have nothing at stake. They have their positions at stake, they have their jobs at stake. That’s why they fire the soldiers, and the generals just sit there, sending emails to one another. Used to be paper, but it’s now emails to one another, with increasing magnitude, it seems, if you look at the numbers.

I think it’s a very different approach, it’s a very much more modern, totally digital. We took a risk, really, because we said we wanted to focus on digital, which many of the clients would have to either coordinate traditional and digital themselves, or they would leave it to us to do that. Digital is now half of the market. It will be 70% of the market. The market’s about $500 to $550 billion last year.

This year probably will be about 550 to 600 billion. Traditional media will continue. There’ll be a bounce back, but traditional media will continue to grow far more slowly than digital. Digital this year will grow by about probably 20% globally. Last year, if the advertising media market was about 500 to 550 billion, digital media was about 250 to 275. This year it will grow, as I said, by about 20%.

It’s a more risky environment. The other thing is, I think when you sell to a network, you sell. When you merge with us, you take quite respectably about half of your investment, or the value of your investment, off the table, in cash. The other half you roll into S4 Capital stock. We’ve done well, obviously, from two years ago, from zero basically. We’re now about three billion pounds, about four billion dollars.

We’ve grown quite substantially. We’re thinking that will continue to be the case. And so, entrepreneurs like the system where you take half, you bank half in cash, and the other half you let run in the growth of the company. With the unitary P&L, we very much unify the way that we look at things and the way we do things.Looking Ahead at 2021

Bobby: You described the growth as “violent,” so I don’t feel so bad about using the word “acquisition.”

But, getting back to you announcing three mergers right off the bat for 2021, is this indicative of what we can look forward to being an aggressive acquisition, I’m sorry, merger strategy for 2021?

Martin: We’ve done a lot since we started. We started with nothing, and with a vision about building this new age, new era advertising and marketing services model, and disrupting the old. We started our core deals around MediaMonks content, and data, and digital media. Then we added eight companies over the last couple of years to MediaMonks, and seven to MightyHive. Actually, it’s more than that now. It’s nine and seven. Nine around content, and seven around data and digital media. We’ve created these two practices which we’ll launch in 2021.

Looking at 2021, we have three objectives. The first is not around expansion by merger.The first is to bed down these very significant client wins that we’ve had, BMW MINI in Europe, and Mondelez globally, including Europe. The task is to bed those down, because those are what we call ‘whoppers’.

“The comparison to the holding companies is not the right comparison, because we’re tech-born, digital-native.”

We have five clients with revenues of more than 20 million dollars. The first is Google. Considerably more than 20 million. The second is a well-known telecommunications company, which we’re NDA’d, which I won’t talk about, you already mentioned it in this session. The third and fourth will be a BMW MINI and Mondelez. We’ll see how that pans out in order. And the fifth is Facebook.

Because we have a number of very large digital clients – Uber, Amazon, SoFi, ServiceNow, HP, Robinhood – they all toss out to about 55% of our revenue. That’s why the comparison to the holding companies is not the right comparison, because we’re tech-led, tech-born, digital-native. It’s not even digital-first, it’s totally inbred, we’re tech people, rather than agency people.

Bobby: Which makes you more attractive to tech companies as well.

Sir Martin: Yes. The first objective this year is to focus on organic growth, and bed down, as I said, those big wins, because those big wins, I think, are emblematic and iconic for clients expansion. In Germany, for example, we won a bank called N26 on the back of BMW MINI. We’re in a big, global pitch at the moment, off the back of that, arising from Germany.

So, that’s number one. Number two is to cement our unitary branding. We’ve always been unitary, one P&L, seamless, not the BS that you hear from the holding companies. This is real stuff. We work together seamlessly, and the branding is going to follow that. You’ll see that very shortly.

The third is the inorganic, or growth by deals, or mergers, which we’ve started off strongly in 2021. I wanted to do that because that’s a signal around Brexit. If I can be sort of grand about it, there’s a sort of a new mercantilism that is necessary around Brexit for the British. Otherwise, we’ll be increasingly marginalized.

“If I can be sort of grand about it, there’s a sort of a new mercantilism that is necessary around Brexit for the British. Otherwise, we’ll be increasingly marginalized.”

We have the devolution question around Scotland, Scottish independence, driven in part by what’s happened over Europe, because the Scots wanted to stay quite clearly in Europe. The UK is going to be under pressure economically, not just because of the impact of globalization and technology, but because of COVID-19, sadly of course, and because of Brexit.

So, we’ve had this troika of things, this triple whammy, that is hitting the country, and there might be a fourth. The continued problems around devolution, not just the Scots, but the Northern Irish as well. We have to see what happens.

I think, for the UK to prosper, if you think about the UK was on a growth track, as a result of Brexit on top of growing, we’ve fallen off that growth track, particularly Brexit, it will take us five years to get back on that track and go beyond.

Ultimately, I think we’ll be resourceful enough to go beyond where we would have been if we had stayed in Europe, which I believe we should have done. But the die is cast, the electorate have made their mind, we had our referendum, and we’re out. Now the uncertainty has been removed by the deal being done, which, I think psychologically was good. I don’t think, materially, it made much difference. Now we’re on our way. And I think what it needs is an aggressive, Germanic approach. Get off your backsides and export whether it be goods and services, high-value manufacturing services, whatever.

“We’re very keen to expand as aggressively as possible. Partly, that’s because probably 2021 is going to be a rebound year, and we see this as a very big opportunity.”

In a way, what we were trying to do is to signal that this is a new era. UK is less than 10% of our business. It’s not important, commercially for us. North and South America are very important, commercially. We’re 70% North and South America, we’re 20% Western Europe, we’re 10% Asia-Pacific, and we want to get to 40-20-40. Countries like Vietnam, where you are, will become more and more important for us over the years.

Tomorrow was important because it doubled our size in China. We now have about 500 people out of 4,000 in Asia-Pacific. Asia-Pacific is going to become more and more important to us, particularly as India, and China, and Indonesia, and Vietnam, and other parts of the region become more and more important economically.

Read the entire interview transcript over at Branding in Asia Magazine.