Martin Sorrell.
Martin Sorrell, the founder of both WPP and digital advertising pure play S4 Capital, sees a shrinking future for the big global holding companies, a case of the strong devouring the weak.
At the World Economic Forum in Davos, during a series of interviews, he said Publicis and Omnicom are strong, while Dentsu and WPP are weak.
"There are two very strong companies and four weaker companies,” Sir Martin said.
“The two strong holding companies are Publicis and Omnicom is devouring IPG. Publicis might devour parts of dentsu, which is one of the weak ones.
“WPP also is one of the weak ones...I think probably the six will go to five, and five could go to four, and four could go to three."
The global group of holding companies is being led on growth by France's Publicis Groupe which at last report upgraded its full year growth guidance to 5.5%, up from 5%, after a “strong” September quarter with active account pitches.
Sir Martin pointed to the Omnicom share price, which is down about 17% since the takeover of IPG was announced.
“Shareholders are a bit bemused by it obviously,” he said.
“It's going to result in a lot of redundancies; the number of people will go from 127,500 to about 110,000. So, you'll see synergies at least double to what they're saying they will achieve.
"IPG sold on weakness, as it lost Coke, General Motors, Amazon, Pfizer, and J&J. IPG has lost over $1.5 billion worth of revenue in the last 3 or 4 years … strong will consume the weak. "
The Omnicom-IPG deal aims for $US750 million of annual “synergies”. While this traditionally means more value when combined, it usually comes with job losses as duplicated functions feel the fiscal knife.
The marriage of rivals brings together the world’s third biggest advertising group, Omnicom, with the fourth, IPG, to form a company with 100,000 people and revenue of $25.6 billion (net revenue of $20 billion), with 57% of that in the US.
He also speculated that France-based Havas, which has listed separately to its former parent Vivendi, and Japan's dentsu could get together.
“Havas now is separate and its market value looks cheap from the outside, it's not been as strong as people forecasted when they did the restructuring and splitting up of Vivendi,” he said.
Sorrell's S4 Capital reported like-for-like net revenue down 12.6% to GBP 179.3 million in the September quarter.
The company said the results reflected lower activity in both content and one of the larger technology services clients.
Full year like-for-like net revenue is expected to be down low double digits as the company focuses on lowering costs, seeking efficiencies and on developing bigger clients.
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.