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Sir Martin Sorrell: There’s Plenty to Be Optimistic about but the Pressure Is On

London, UK
The S4Capital founder and executive chairman eyes a digital and data-driven recovery and shares hopes that any recession will be shallow
As the global economy teeters, S4Capital founder and executive chairman Sir Martin Sorrell is sharply focused on digital, data and diversity as the drivers that will boost the business and take it squarely into the future in robust health.

Speaking to Little Black Book after his recent appearance at MAD//Fest London 2022, Sir Martin said he was hopeful that if there is to be an economic downturn, it will be shallow. He said that an assessment of the situation by one of major banks was that the current situation points to a cyclical recession rather than structural or event-driven, a case of the market balancing out.

“I’m not saying it’s self-correcting but I think the odds are it will be - I’ll qualify that by saying I don’t know. Maybe I should say I’d like it to be shallow but I think it’s going to be with us for some period of time,” he said, pointing out that conditions such as tensions between the US and China, the Russia situation and pressures of climate change are underlying situations.

“Climate change has been an underlying, long term issue. If we had had this conversation on January 1st, we would have bemoaned the lack of action on climate change and the impact as we know,” he said.

Looking at immediate challenges faced by marketers as they attempt to deal with inflation and their squeeze on their customers’ wallets, Sir Martin said that he’s already seen clients pay more attention to data as a key tool to both navigate tricky market conditions and prove their own worth.

“We’re starting to see greater focus on measurement, greater focus on media mix modelling, greater focus on activation, greater focus on KPIs, greater focus on results. Although everybody says it’s business as usual - and maybe we’ll see that in the Q2 results - but everybody’s cautious about the second half of the year and from then onwards. So clients are very focused on what they’re expected to do, so sales, sales returns,” he said. “Data is becoming more and more important, you can sense that. And, to put it crudely, they’re concerned about their jobs. They want to make sure that they achieve what they’ve undertaken or been told to get.”

The increased demand for data coincides with the deathwatch of cookies (Google’s Chrome browser will block third party cookies from 2023 and Apple has already blocked them from Safari). All of which means that the need for businesses to acquire first party data and seamlessly integrate it into their businesses is more intense than ever.

As the founder of an explicitly digital-first business, Sir Martin is particularly galvanised by the opportunity in that space  

“The optimism is around digital which is around 60-65% of the market and will be 75% by 2025, so is growing to 10-15% whereas analogue is flatline or down… Advertising is going to rise as a proportion of the GDP from 1% to 1.5% And that will be driven purely by digital,” he said. 

And within that expanse of digital, he sees long term potential in the Metaverse space. For now, revenues from the space comprise a relatively small fraction of the company’s overall revenues, though he estimates that it will make up 10% of growth in 2022. (Revenues were $900 million in 2021 and look set to reach $1.3-1.4 billion by the end of this financial year and Sir Martin predicts that $30-40 million of that will be from Metaverse projects). 

Sir Martin revealed that within S4Capital, people have already started using the Metaverse for internal meetings and that he’d seen tolerance for spending longer stretches of time in the Metaverse grow.  He also sees strong potential in areas such as e-commerce and education. However he predicts that the Metaverse boom will not be immediate.

“To put it in perspective, where it may have been overhyped is not in its long term potential and significance as a channel - because it is a channel. But it may have been overhyped in terms of initial take up,” he said

Virtual production is another tech-led area that Sir Martin sees as an exciting new driver of efficiency for clients. Last year, Media.Monks opened a virtual studio in New Delhi, featuring an 8,000 square feet stage and three secondary studios equipped with cutting edge LED screens and tracking equipment. These virtual ‘volumes’ are still in relatively short supply, so this collaboration with Epic Games gives Media.Monks a huge advantage.

“It means we can create content in Delhi for anywhere in the world… It’s an incredible change in technology and it’s high quality,” he said.

Another area that Sir Martin is determined to address is diversity, and S4 Capital is “ committed to reflect the communities in which we work”. While the company has made progress in some areas, he is open about where there is still progress to be made. For example, according to the company’s 2021 annual report, the company’s gender balance is 43% women, 44% men and 13% undeclared - but according to Sir Martin, the company still has work to do when it comes to senior levels. Equally, he said, in North America where the company has done well to include more Hispanic and Asian American people in its ranks it needs to push further to bring more African American talent in. The S4 Fellowship programme has seen the company work with historically black colleges and universities to recruit for the four year programme. Now, though, the company has also created an internship programme aimed at Black high school students.

He recognises that improving diversity and inclusion is an important topic across the industry. “Everybody’s trying, I don’t think people are sticking their head under a stone. Everybody’s worried. With 9,000 people it’s probably easier than with 100,000 people. It’s moving in the right direction but it’s not fast enough for many people’s tastes and that’s understandable.”

Overall Sir Martin isn’t complacent about the challenges in the market (indeed, at the suggestion that clients ‘come to him’ for advice his rejoinder was:‘first of all, clients don’t come to us, we scramble over everybody to get to them”). However he’s bullish about the opportunities ahead. 

“There’s plenty to be optimistic about but the pressure is on,” he said.