Sir Martin: The POG merger was a case of 'Eyes bigger than tummy'

In this edition of ‘30 Minutes with Martin Sorrell’, Storyboard’s editor Anant Rangaswami spoke to WPP’s CEO Sir Martin about the biggest news that shook the industry last week - the collapse of the Publicis-Omnicom merger. In this candid chat, learn about Sir Martin’s skepticism about the merger, how WPP gained from the deal and his views on Twitter’s IPO, Alibaba.com’s strengthening foothold and BrandZ in India. Read the excerpts below:

Storyboard: What are your reactions to the failure of the Publicis-Omnicom merger?

Sir Martin: I guess we really weren’t surprised. We had said for many weeks that this so-called merger was doomed to failure, although we were surprised by how speedily it unraveled and how soon the obituary was announced. Having said that, it was predictable. We spoke in July last year and I had predicted that strategically volte-facefor both companies, it was clunky structurally and that it would have had regulatory issues that it has had here in China, not to mention the problems with clients and people.

I think it started to escalate on the client side virtually every day. We looked at TV, press or digital journals, and there was always another client up for review or about to move. E-trade in Europe announced the move of its media business from Publicis to WPP recently. There was also Pepsi in China, Marks & Spencer in the UK, Vodafone globally, Miller Light were all examples of account moves in just the last three-four weeks. For every one person we lost to either Publicis or Omnicom, we gained four on the people front. The momentum was always building.

To sum it up, I think the original decision was an emotional one; I think both John (Wren) and Maurice (Levy) wanted to use it as an opportunity to knock WPP off its perch. It didn’t have much of a strategic rationale or a client one, either. If it did, they were very slow to articulate it and that was telling. What is interesting is taking ten months to fall flat on its face. But the market moves in strange ways. There is a great phrase in England that goes, “Eyes bigger than tummy” which I think applies this time around.

Storyboard: How do you think they will pick up the pieces now, individually? What are the next steps for Publicis and Omnicom?

Sir Martin: That is an interesting question. If you go back into the archive, you will hear that both companies were trying to say “We are just as good separate as we are together”. This begged the question, if you are just as good separately, why do you bother to get together? I think they were preparing you and I and others for the fact that they were going to split asunder.

I spoke to an Omnicom executive here in Beijing and he said that the smoke signals started developing around December last year. I heard another Omnicom executive make the joke that John Wren would never visit Paris again unless it was for Maurice Levy’s leaving do.

At the end of the day the social issues , as the investment bankers call it, really prevailed.

Storyboard: Moving on from the merger and onto the Twitter IPO. What do you think about Twitter’s price taking a beating and the Alibaba listing. What are your thoughts with regards to these two?

Sir Martin: I don’t know, is the answer. But Twitter was priced well and did well after the IPO. I think it was the revenue per customer or time spent per customer that troubled people on Twitter. These things are roller-coasters and are very high evaluations and I don’t think it is a surprise that it has ups and downs. I think Google remains the strongest; Facebook is making ground - they are becoming much more effective and almost Google-like in some of the things they are doing. This isn’t surprising given that Sheryl (Sandberg) and others are from Google. I believe they are becoming much more professional and effective with clients and agencies.

We have always been a bull on Alibaba. We saw Jack Ma 18 months again and met his new CEO. We talked through his plans not just for social and sustainability initiatives, but also for the financial, transactional and logistical platforms which are tremendously impressive. We have been pushing Alibaba and have been getting people in the west to understand it all this while. Now we don’t need to do that anymore.

I remember saying about a year ago that the evaluation would be at about $150-200 billion and it looks like it is going to be somewhere between that. My view on Alibaba is that it will have strength following the IPO, but it is a heady evaluation. It is fabulous business with tremendous penetration and scale in China with multinational ambitions. Ma, just like Sergey (Brin) and Larry (Page) is a disintermediator, so anybody else who has a legacy business including ourselves, need to watch out.

Storyboard: Coming from digital brands to brick-and-mortar brands, I understand you are coming to India for BrandZ. Can you tell us why it is so important for you to come to India for an event like this?

Sir Martin: BrandZ is a brand evaluation tool developed by Millward Brown that we have been using for many years. We have another one - BrandAsset Valuator made by Young & Rubicam, too.

We developed BrandZ which is, in financial terms, a global evaluation table or ranking. This has been going for about five or six years now. We decided to do it for China and Latin America about two-three years ago. We are doing the 100 top Chinese brands in New York, same as we did in China a few weeks ago. We did the top 50 brands in Latin America and we are going to do the same in India too. We will be trying to value India’s most valuable brands. This indicates some of the changes we see in the world, the shift in the balance of power from the west to the east, to the south and the south-east. Some of the great brands like Alibaba that we mentioned in the context of China will be evaluated, along with tremendous brands in India like Reliance, Mahindra, Godrej or Airtel. These are brands that have become very successful in the Indian and regional context, and increasingly on the global context.

BrandZ emphasizes the growing role of Indian brands globally.

Storyboard: Why is it important that you put this in your calendar?

Sir Martin: India is very important to us and it is just another demonstration of how much we value it. I am here in Beijing, and I would like to be in New Delhi and Mumbai as well.