Sir Martin Sorrell: Booming Ad Industry Should Prioritise Digital Transformation To “Make Hay While The Sun Shines"

16 Jul, 2021

The advertising industry should avoid the "albatross around the neck" of traditional business and embrace digital to fuel growth, according to S4 Capital Executive Chairman Sir Martin Sorrell.

GDP and digital growth is fuelling a boom in the advertising industry to level that S4 Capital Executive Chairman Sir Martin Sorrell has not experienced during his 50 year career.

Speaking at MAD//Fest London last week, Sir Martin said that the the industry should “make hay while the sun shines” and prioritise digital advertising over traditional business.

“Commentators don’t look at the industry the right way. It’s a tale of two cities. We’ve got a $1.7trn-$1.8trn industry. Of that half is digital. You should look at digital separately to traditional. The 5-6 holdcos problem is that they have analogue and digital businesses. They are faced with structural change in the traditional business,” he said. 

Sir Martin added that the pandemic has accelerated the shift to digital, rather than create new trends. Whilst confident about the industry in 2021 and 2022, Sir Martin struck a more cautious tone on 2023 when he believes GDP growth will return to pre-pandemic levels of 2-3%.

“The pandemic has accelerated existing trends and made them more apparent. I’m very bullish about 2021 and 2022, but I'm concerned about 2023. Digital was about 50% of the market last year. This year it will be 55-60%. By 2024-2026 it will be 60-70% of the market. 

“My takeaway is to move from the traditional part of the business to digital. Or start with a clean sheet of paper, which is an advantage and something S4 has benefited from. You don’t have the albatross around your neck of the traditional business.”

TikTok can disrupt the big five platforms

Sir Martin told attendees that huge revenue growth at the ‘big five’ platforms is further driving the $600bn digital advertising market.

“Google will go from $180bn to $40bn in ad revenue. Facebook will move from $80bn to $110bn, and Amazon from $20-25bn to $35bn. That's an incremental £100bn of digital ad revenue in 2021.” he said.

But Sir Martin sees TikTok as a contender that can break the dominance of Google, Facebook, Amazon, Tencent and Alibaba: “Bytedance (Tiktok’s owner) has gone from revenues of about $7bn in 2019 to $30bn this year. It’s the first significant breakthrough of a  platform beyond the big five.”

Sir Martin’s keynote went on to address how clients and agencies must adapt to the end of cookies by focusing on first party data and why there is still more work to do to address the industry’s diversity problem.

All sessions will shortly be available on MAD//Fest London’s YouTube channel. Nearly 4,000 people attended MAD//Fest London on 7-8 July, the first industry event to take place in-person since the pandemic. Speakers included incoming KFC CMO Jack Hinchliffe, Facebook VP EMEA Nicola Mendelsohn CBE, Resi Founder Alexandra Depledge MBE, Boots CMO Pete Markey and Ogilvy Vice-chair Rory Sutherland.

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