Gideon Spanier: Storm over Martin Sorrell sparks a wave of change in adland

Gideon Spanier
Sir Martin Sorrell remains the focus of attention at Cannes Lions despite his sudden exit as chief executive of WPP: Getty Images

Sir Martin Sorrell may have lost his crown as the most powerful man in global advertising but the former WPP chief executive is still the talk of the town at Cannes Lions, the industry’s annual festival of creativity.

The gossip over glasses of rosé isn’t just about the recent lurid claims over Sorrell’s personal conduct, with questions about whether he will turn up for his planned appearances to talk about his new start-up, S4 Capital.

His spectacular fall illustrates how the agency business, in particular, is going through rapid and tumultuous change. The big agency groups, led by WPP, have been the lifeblood of Cannes Lions for the past decade or more, turning the festival into a £66 million-a-year business for its British owner, Ascential.

But things have suddenly got very tough for agencies as advertisers have taken more control of their marketing and data, and gone directly to the likes of Google and Facebook — hitting growth at WPP and its rivals.

Agency groups have sent about 25% fewer delegates to the South of France this year. The festival was always likely to be quieter because France’s Publicis Groupe has pulled out for 12 months and spurned the awards on the grounds that Cannes Lions had become too bloated.

The organisers have responded by reducing the number of awards and the length of the festival. Even so, Ascential has warned investors that spending by the other agency groups has been lower than expected.

Cannes Lions maintains its “reset” is bringing the focus back to creativity and more marketers than ever are speaking at the festival. The companies that are most visible here reflect the way the market is changing. Ascential chief executive Duncan Painter says: “We want brands taking the lead, talking about what they want from creativity and from agencies.”

Google, Facebook and Spotify have commandeered the best beaches to entertain on La Croisette. Chinese giants such as Alibaba and TenCent have sent more people.

And the management consultants from Accenture, Deloitte, IBM and McKinsey have rented yachts and set up cabanas as they muscle in on the agencies’ turf.

The prospects for the ad industry still look buoyant — for those companies willing to change. A slew of forecasts shows that global ad expenditure is set to grow between 4% and 6%, including in the UK this year. But look closely and a picture emerges of a two-speed market.

Small and medium-sized enterprises and e-commerce firms are driving most of the growth by investing in digital media such as search and social. Meanwhile, traditional, big advertisers such as consumer goods companies and carmakers are holding or cutting ad spend in the face of digital disruption.

That spells bad news for the likes of WPP, which expects practically zero revenue growth this year, because newer, digital and e-commerce businesses are less reliant on agencies.

Mark Read, the interim boss of WPP, says the group’s agencies must become more collaborative and agile. “I don’t think WPP needs to be smaller,” Read says. “We need to be simpler to navigate [for clients].”

The declining influence of the big agency groups has been a defining trend in the ad industry in recent years. They have become unwieldy and siloed through acquisitions and they have struggled to address questions about lack of transparency in media-buying.

But the biggest challenge is the disruptive effect of technology. Now advertisers can easily create and buy digital advertising themselves, and they can do so much more than just advertise. Many brands see their marketing as part of a larger, end-to-end, data-driven, connected experience for customers — from the inception of an idea and developing of a product to building awareness, generating a sale and managing customer relationships.

This is where management consultants scent an opportunity to challenge, if not displace, the agencies and are acquiring capabilities in creative, content, design, data, analytics and media. They argue they can manage the marketing “cloud” as part of a broader effort to drive business transformation for clients — in a way that an ad or media agency is not equipped to do.

Accenture, the most acquisitive of the consulting firms, has described its fusion of management consultancy and creative agency as a “cagency”. McKinsey, which is sticking to a more advisory role, has unveiled research claiming that marketers who use data to inform their creative work can drive double the revenue growth of companies that do not integrate the two disciplines.

In this brave, new, data-driven world, marketing becomes an investment, not a cost, because it delivers business outcomes, according to McKinsey.

The caveat is creativity itself cannot easily be measured. It is “not entirely rational”, as William Eccleshare, chairman and chief executive of outdoor advertising company Clear Channel, puts it. But no one doubts that data, analytics and automation are going to transform communications, so long as consumers give their consent.

The question hanging in the Cannes air is how far the balance of power is going to shift from the Mad Men to the Marketing and Maths Men and Women.

...but there’s no end to the knees-ups yet

It’s still party time despite fewer attendees at this year’s festival.

Jon Bon Jovi sang at consulting firm MediaLink’s bash at the clifftop Hotel du Cap, where WPP executive chairman Roberto Quarta rubbed shoulders with New York Times boss Mark Thompson, Google’s Emea president Matt Brittin and Unilever chief marketing officer Keith Weed.

Down on the beach, a younger crowd watched the Killers play a private gig for Spotify before they headed to the Carlton Hotel terrace, the Gutter Bar or a yacht party.

There are more events today. Lord Heseltine, the owner of Campaign, is here for the advertising magazine’s 50th anniversary, which includes an evening drinks party on the beach.

Later, News UK and Google will go head to head with rival bashes. Rupert Murdoch’s company has got Kylie Minogue to sing, plus Fat Boy Slim and Idris Elba are DJing at its rented chateau while the internet giant has booked Duran Duran.

When the ad folk are having this much fun, it’s no wonder that Sir Martin Sorrell wants to stay involved in the business.

Gideon Spanier is global head of media for Campaign