Sorrell: Ad Industry Consolidation Creates Leverage

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Nov. 7 (Bloomberg) -- Sir Martin Sorrell, CEO & founder at WPP, discusses the challenges presented by consolidation in the global advertising business and his outlook for growth in ad spending. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

Advertising business?

One area is in media buying.

There is a lot of discussion about this over the years.

Created businesses from bloomberg.

If you are doubled in size, probably three times more difficult to manage.

There is an issue about the economy.

In terms of media buying, there are leverage.

In the u.s. quite difficult to get economies of scale.

In the rest of the world like result, russia, china, the next 11, there is leverage.

Pog is between you -- turn you call it.

Lex what does this mean for twitter, google?

One of the argument has been low-key on what the benefits are to clients or people inside the business.

One thing they have talked about is getting greater leverage with new media.

I think that is masking the real issue, which is it is the legacy media where the pressure will be felt.

In looking at the cvs results this morning, quite extraordinarily good.

The free to air in traditional media companies are doing well at this particular stage at the moment.

How long cannot that hold up?

If you look at next year, nominal gdp, and we are very sensitive to nominal gdp, probably going to be up next year.

If you look at the forecast, goldman sachs, looking at six point five percent including inflation.

I think deutsche bank is still there percent real inflation.

Seeing projections of more inflation.

On that basis and the fact that we have world cup -- the should all make advertising in theory better than this year.

Worldwide gdp does not match.

Worldwide gdp is growing by 6.5% come at you have to take 150 basis point haircut.

We have the strongest asian business but not a strong is worldwide gdp.

I would expect advertising to be up at least 4-4.5% on the assumption that advertising stays the same.

Broadly what you gain on the market swing because advertisement is great, you lose on the mature market.

Who do you think this benefit of the websites we're talking about?

I actually think at tech ipos -- ad tech ipo's. you look at yumi and others.

Aol just bought -- what is interesting is driven by these changes, there is a recognition the tools need to change as well.

There are companies popping up growing rapidly and now popping up in public.

We're sitting here with the s&p, nasdaq at an all-time high.

So you look at it in historical context.

Also at a stage where interest rates at an all-time low.

Twitter's ipo is perfectly timed.

I cannot think of a better timing.

True.

There must be some bumping this up some point in time.

That is part of it.

Most of it trying to calculate what the shakeout is.

Analysts note's are wildly different when you look at revenue for 2015. 30% difference.

There is a lot of unknown.

Exactly.

With this deal, have you seen any high profile client defections?

There are patents emerging.

Clients are not going to say we're going to fire this.

Even if bloomberg brings them up.

There are decisions already being made that we have seen that indicate a change.

Clients are very sensitive about these.

It is their money, not our money.

If they are not fully informed were fully briefed on the decision they can sometimes take decisions, which i think we are starting to see.

Strongest 100 basis points, 200 points stronger than the competition.

You saw that as a result yesterday.

So there are changes starting to take waste.

Only one quarter and early.

They still need regulatory there is a lot of discussion about this over the years.

Created businesses from bloomberg.

If you are doubled in size, probably three times more difficult to manage.

There is an issue about the economy.

In terms of media buying, there are leverage.

In the u.s. quite difficult to get economies of scale.

In the rest of the world like result, russia, china, the next 11, there is leverage.

Pog is between you -- turn you call it.

Lex what does this mean for twitter, google?

One of the argument has been low-key on what the benefits are to clients or people inside the business.

One thing they have talked about is getting greater leverage with new media.

I think that is masking the real issue, which is it is the legacy media where the pressure will be felt.

In looking at the cvs results this morning, quite extraordinarily good.

The free to air in traditional media companies are doing well at this particular stage at the moment.

How long cannot that hold up?

If you look at next year, nominal gdp, and we are very sensitive to nominal gdp, probably going to be up next year.

If you look at the forecast, goldman sachs, looking at six point five percent including inflation.

I think deutsche bank is still there percent real inflation.

Seeing projections of more inflation.

On that basis and the fact that we have world cup -- the should all make advertising in theory better than this year.

Worldwide gdp does not match.

Worldwide gdp is growing by 6.5% come at you have to take 150 basis point haircut.

We have the strongest asian business but not a strong is worldwide gdp.

I would expect advertising to be up at least 4-4.5% on the assumption that advertising stays the same.

Broadly what you gain on the market swing because advertisement is great, you lose on the mature market.

Who do you think this benefit of the websites we're talking about?

I actually think at tech ipos -- ad tech ipo's. you look at yumi and others.

Aol just bought -- what is interesting is driven by these changes, there is a recognition the tools need to change as well.

There are companies popping up growing rapidly and now popping up in public.

We're sitting here with the s&p, nasdaq at an all-time high.

So you look at it in historical context.

Also at a stage where interest rates at an all-time low.

Twitter's ipo is perfectly timed.

I cannot think of a better timing.

True.

There must be some bumping this up some point in time.

That is part of it.

Most of it trying to calculate what the shakeout is.

Analysts note's are wildly different when you look at revenue for 2015. 30% difference.

There is a lot of unknown.

Exactly.

With this deal, have you seen any high profile client defections?

There are patents emerging.

Clients are not going to say we're going to fire this.

Even if bloomberg brings them up.

There are decisions already being made that we have seen that indicate a change.

Clients are very sensitive about these.

It is their money, not our money.

If they are not fully informed were fully briefed on the decision they can sometimes take decisions, which i think we are starting to see.

Strongest 100 basis points, 200 points stronger than the competition.

You saw that as a result yesterday.

So there are changes starting to take waste.

Only one quarter and early.

They still need regulatory approval.

Giving a price target of $43 per share.

New overweight.

$32 rating it a new buy.

We will talk to brian wheezer in the next hour.

This text has been automatically generated. It may not be 100% accurate.

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