Sir Martin Sorrell: You can't decouple India from world

Sumedha Srivastav - Televisionpoint.com | Bangalore

Sir Martin Sorrell

The WPP Group is one of the world's largest communications services companies with companies in the group including JWT, Ogilvy & Mather and GroupM among others. Sir Martin Sorrell, founder and chief executive officer, WPP, on his 20th visit to India (his first one to Bangalore) speaks about various issues like economic climate, the newspaper business and the disruptive new media.

Do you think the economic climate has become better?
I think clients feel better, chief marketing officers feel better, chief executive officers feel better. But this is not translating into people signing cheques.

Also I am amazed, when people think that things are improving because sequential GDP numbers getting better. The sub-prime crisis happened in 2007 and the Lehman Brothers collapsed happened almost a year ago.

Roughly, it has been two years of bad times for economies globally. Till the beginning of this year, people thought India was resistant or immune to a global recession, as it isn't export dependent, like, say, China. You really can't decouple India from the rest of the world and the country has been impacted, undoubtedly.

Having said that, since the General Elections, people are more confident here. Unlike the rest of the world where that wouldn't translate into increased spending, here there are signs of that. The situation now clearly indicates a gentle upturn after the sharp fall experienced following the collapse of many big companies, unlike the bath, where the bottom is flat and doesn't get any better.

But relatively speaking are we better off now than we were in September last year?
Yes. We were looking into the abyss then and 2010 is very early to talk about turnarounds, budgets and forecasts. In fact somebody in the UK asked me recently what is the one think that has surprised me most in the last 12 months. I thought about it for a second and said quantitative easing, which is really just a posh phrase for printing money.

All research shows that companies that invest in these times are the ones that come out stronger with stronger brands. Almost all people naturally tend to cut (budgets) at a time like this, but brands that advertise regularly, command more consumer confidence and trust.

What are the three things that worry you the most and three things that give you the most hope about the future?
I shall list the last three first. It's WPP's mantra: new markets, new media and consumer insight - all of which will be accelerated by this current crisis. What worries me is what is going to happen post the short term crisis.

In 2010, top line revenues for the advertising sector are bound to go Northward, with the positive impact of the Winter Olympics in Vancouver, the World Expo in Shanghai, the Asian Games in Guangzhou, the FIFA World Cup in South Africa and the mid-term Congressional elections in the United States in November 2010.

After that in Europe and the US, the governments will have to decide where to cut spending. Predicting a partial recovery towards the end of 2009, with the second half of the year, better than the first half, thank God.

Coming to new media do you think the demand for newspapers has diminished?
The print media is revered more than any other media. It's an extremely powerful medium and is regarded with deference and devotion. Few newspaper or periodical publishers, however, have mastered the connection with new media platforms.

I don't think it has diminished to a very large scale. But this has been on the cards for a long time. I see it my own reading habits. I read newspapers less and depend more on so-called electronic media. II do use my Blackberry, I had a look at the new Sony e-reader. I think there still will be newspapers, but the way you define a newspaper will change.

Is a newspaper on Kindle a newspaper or not? This change will take longer in faster growing countries like India, where newspaper are still revered. Eventually two things are going to happen - first people will have to charge for digital content; and secondly, as a result of all this there will be a lot of consolidation.

What is the proportion of new media advertising globally, according to you?
It is around 13 per cent of worldwide advertising budgets. Earlier you had seen a third of advertising budgets for print, a third for TV and a third for everything else. Now, it will probably get to around 20-25 per cent in new media, 20-25 per cent in television, 20-25 per cent in print and then the rest in everything else.

In India, digital accounts for 10 per cent of the region's $ 400 million revenue. The internet penetration in the country is still low. However, I am optimistic about the increasing use of internet on mobiles as the next opportunity for growth was here.

Our clients want to expand to new markets and digital and consumer insights are key to this growth. The growing importance of technology and digital media would see creative agencies move towards application of technology, which would mean a change in the type of people the network hired.

Which sectors spend heavily on the digital front?
Sectors that were early adopters of the online medium included telecommunications and technology as these were more attuned. Other categories include media and entertainment, travel, leisure, hotels and airlines, and sports - areas where people use data in a sophisticated way.

On an average, companies spend close to 10-12 per cent of their overall media spends on the digital medium. Even conservative businesses like FMCG spend about 12 per cent on digital these days. Another sector is automobiles: in the Western markets, there are cases of car launches done only online.

Online spends of the companies were disproportionate to the amount of time people spent online. On an average, people spend close to 20 per cent of their time online and this reflects the under-usage of the digital medium.

How is the business growing in India?
Personally, I am very bullish about India. If I were asked are there green shoots in the world, I would say No. In the case of India, Yes. There are clear signs that there are green shoots here. Our business revenue in India is $400 million, and is set to grow easily to 3 per cent-4 per cent even in these trying times.

Stating that India and China have been the Asian countries that have been saving and not spending, with China bringing in business worth $950 million, double that of India, the biggest contributor to growth would be organic growth.