The ad and marketing giant appears to have a head start on rivals, but CEO Martin Sorrell doesn't think it's digital enough
Walking around in a black T-shirt and jeans at a beach resort near Athens, Sir Martin Sorrell looks impatient. Then again, this is no vacation. The chief executive of London advertising and marketing giant WPP (WPPGY) has gathered 250 staffers and other "smart people" together in Greece to brainstorm about the future.
Right now, a select group is huddled in a room listening to an executive from Britain's Guardian newspaper give a presentation entitled "Oh My God, the Internet Ate My Business!" There's an orchestra conductor and juggler on site to get peoples' creative juices flowing. Middle-aged ad execs and young Internet entrepreneurs play with Nintendo Wii consoles and various other gadgets nearby, acutely aware of Sorrell's missive to "think open source, think Wikipedia."
For Sorrell, 63, the annual October conference is part of a broader strategy to make the $15 billion agency a leader in the emerging world of digital communications. While WPP has spent more than $1 billion in the past three years buying up digital media companies, such as New York search-engine marketing firm 24/7 Real Media, Sorrell frets it's not enough. "We don't believe, given the pace of activity in digital and online, that our existing businesses can move fast enough," he says.
like there's no tomorrow
In addition to setting up a new business unit a few years back called WPP Digital, Sorrell is now pushing for every one of his 133,000 employees—along with the 15 heavyweight members of his board—to embrace digital technology like there's no tomorrow. Even the global financial turmoil, which whacked 45% off of WPP's stock price last year, isn't distracting him from that mission.
No one is being spared in the push. At an Oct. 20 board meeting in Palo Alto, Calif., Sorrell had all the directors—including himself—learn how to upload video and create their own Facebook pages. (Sorrell hasn't kept his going, but others have.) Mark Zuckerberg, Facebook's founder, personally helped give them a primer. The directors had fun, but the exercise was meant to help them fully grasp the phenomenon of social networks and how they may affect the ad business.
"This meeting brought home how much digital technologies are accelerating the rate of change in WPP's businesses and markets and the importance of adapting to stay apace of the curve, if not ahead of it," says Jeffrey A. Rosen, a WPP nonexecutive director and deputy chairman and managing director of investment bank Lazard LLC, a subsidiary of Lazard (LAZ).
old habits die hard
At first glance, it might seem Sorrell's concern about falling behind is misplaced. Since transforming WPP from an unprofitable shopping-cart company into the owner of such ad giants as JWT (formerly J. Walter Thompson), Y&R (Young & Rubicam), Ogilvy & Mather, and Grey Group, Sorrell has turned his attention to making it a major force in the digital realm. More than 50% of the company's 2008 revenues are expected to have come from Web marketing and sources other than traditional TV, radio, and print.
Google (GOOG), which Sorrell likes to call his "frenemy," counts WPP as its biggest client and one of its biggest competitors, given that both companies sell advertising space to companies. In late October, WPP announced a joint venture with Google to fund research on how Web marketing can help brands. But it's also trying to challenge Google's ubiquity by collaborating with Yahoo! (YHOO) to build a new platform to buy and sell ads via the Web.
Yet despite Sorrell's enthusiasm for all things digital, creating a cyber-savvy culture at WPP remains a challenge. Old habits die hard, especially when Web initiatives generally remain less lucrative than traditional advertising. "It is easier when the CEO gets that, but it doesn't make it easy," says tech guru and WPP nonexecutive director Esther Dyson.
WPP has set up digital training courses for 3,000 managers to find ways to engage customers with tools like Twitter and Facebook, among other new channels. Like many agencies these days, WPP is focused on hiring and retaining digitally astute young talent. Paul O'Donnell, the Europe, Middle East, and Africa chairman of interactive marketing company OgilvyOne, figures he pays 15% to 30% more to hire young people with one-third less experience than those versed in traditional advertising channels.
a coordinated giant
Sorrell also is pushing for greater cooperation among WPP companies to incorporate TV, video, print, mobile technology, and social networking into every campaign. WPP Digital, the entity set up in 2005 to invest in, partner with, or acquire dot-com players, is now working on "delivery architecture" to facilitate the cross-unit collaboration, says Mark Read, CEO of the digital unit and director of strategy for WPP overall. Increasingly, people at one agency also are being asked to assemble teams from across WPP to accommodate clients who want digital components, such as social networking, to be a core part of their ad campaigns.
"If you go into a client with a fruit salad PowerPoint presentation that says 'look at how digital we are,' it's not very effective," says Trevor Kaufman, chief executive of Schematic, a Los Angeles digital ad agency bought by WPP in 2007.
Yet collaboration is easier said than done. Kaufman notes, for instance, that WPP colleagues sometimes pretend to understand digital when they don't. And sometimes sister companies don't play nice. One recent case: A traditional agency in the WPP group made a proposal to a client that included a mobile widget—a shareable program that lets users do everything from display photo slide shows to embed multimedia movie trailers, music, and audio messages.
The agency didn't really understand what a widget was, Kaufmann says, and the client didn't like the proposal. So the agency turned for help to Schematic, which instead designed a Facebook application. "The client loved it, the agency produced it without working with us, and we got no credit or revenue," says Kaufmann. Such internecine squabbles undermine Sorrell's vision for a consistent digital delivery across WPP's units.
one powerful presentation
For a sense of how Sorrell wants it to work, consider how WPP recently won a hefty portion of a Johnson & Johnson (JNJ) contract that consolidates all of its U.S. pharmaceutical advertising. The contract, which is widely reported to be worth more than $100 million, was split between WPP and rival Interpublic (IPG). (Johnson & Johnson and the agencies have never commented publicly on the breakdown of business.)
To woo the pharmaceutical giant, WPP staged a science fair-style presentation inside JWT's New York office, where representatives from 20 WPP units sat in different booths, showing off displays such as a WPP-designed social network promoting a prescription drug and an interactive Web site to inform doctors about new treatments. A digital partner company (not part of WPP) called LiveWorld (LVWD) also demonstrated a new online database that, with a single click, listed the names of everyone in WPP's U.S. network with expertise in marketing disciplines relevant to J&J brands. All of them, WPP boasted, could be brought on to a virtual team serving J&J, with JWT acting as a kind of portal.
For Sorrell, such cooperation is less about sharing the wealth than about beating back rivals for a slice of digital business. It was WPP's digital acumen that helped it shut out three of its biggest competitors—Omnicom (OMC), Publicis (PUBP.PA), and Havas (EURC.PA)—who also were bidding for Johnson & Johnson's business. But Sorrell knows that the company can't afford to be satisfied with its progress. "We don't take anything for granted," he says. "Fear of failure drives us quite heavily."