The exit of Martin Sorrell from advertising, and specifically from the WPP marketing giant he built and reigned over, marks a significant turning point in world business, writes Kyran Fitzgerald.
Martin Sorrell has long been the ‘King Kong’ of the international ad world, a 73-year-old with chutzpah by the bucket load, the money man who took a chaotic advertising industry by storm.
He stepped down last week as chief executive of WPP, the huge global conglomerate. It has 200,000 employees.
Mr Sorrell’s resignation is being linked to reports of allegations of misconduct, which he vigorously denies.
Many believe his departure is more closely connected to the seismic changes underway across the global media world.
The Sorrell era may not have ended, of course, but his departure from the empire he built over 33 years has been prompted by the same tidal wave that forced Rupert Murdoch into a dramatic retrenchment.
Sorrell has had a particularly lengthy stay at the top of the tree, part of a generation of business leaders who thrived after the fall of the Berlin Wall.
Many hung on to positions of power rather a long time, enjoying a profitable trip on the globalisation merry-go-round.
Some are still in the thick of the game in their 80s, for example, George Soros, Mr Murdoch, Warren Buffett. The even more venerable Charlie Munger is in his 90s.
But a new breed of executive — many still in their 20s — has been rising up, scenting opportunity amid the chaos of creative disruption.
Sorrell has certainly changed his industry more than any of his peers have.
He would have little in common with the colourful characters portrayed in the TV series, Mad Men. Ad men in the 1950s and 1960s lived on their wits and high on the hog.
It is 1962 and the ‘made man’ character, Don Draper, describes an American social and work landscape of deep racial intolerance and hatred.
Thirty years later, the London-based WPP founder had a touch of the outsider, too.
He went head-to-head with his old bosses at Saatchi & Saatchi, in Britain, and then took on Madison Avenue, the home of US advertising.
Sorrell was fortunate to live through a revolution in social attitudes and in economic structures.
Sorrell is the grandson of Jewish immigrants, and his parents inculcated in him a strong work ethic. He was the money man in an industry dominated by supposedly creative agencies.
Always at home with detail, he was similar to characters such as UK venture capitalists, James Hanson and Gordon White, the acquirers of sleepy, underperforming entities, which they then ruthlessly shook up.
He was originally recruited to the industry as a financial advisor, joining Saatchi & Saatchi as chief financial
officer in 1976.
According to the biographer, Ken Auletta, Mr Sorrell “terrified those sitting across him as he crunched numbers in his head, staring down his opponent”.
The agency, founded by Maurice and Charles Saatchi (who were born into an Iraqi Jewish family), soon found fame almost by accident, when it devised some brilliant ads for the campaign of a rising political star, Margaret Thatcher.
Infamously, in late 1978, the agency produced a picture of a dole queue snaking out from an employment office and disappearing into the distance, under the caption: Labour isn’t working.
Mr Sorrell operated in the background. He said of the Saatchi brothers: “They would let you do what you wanted to do, as long as you got no public credit for it.”
The CFO wanted to control his own destiny. He had invested in a small shell company, Wire & Plastic Products, renamed WPP. By the mid-1980s, funding was freeing up.
It was the era of the shelf company. Sorrell quit to build his own business. He used WPP to buy 18 companies over the next 18 months.
In 1987, he engineered the takeover of J Walter Thompson, the famous agency with revenues 13 times those of WPP. As Auletta relates, he loaded the merged entity with debt. Two years later, he took over Ogilvy & Mather, another famous agency.
Its founder, David Ogilvy, described Sorrell at the time as an “odious little shit”. The two men later became firm friends, Ogilvy becoming chairman of WPP.
A recession in the run-up to the first Gulf War almost toppled WPP, but the group survived and Sorrell continued on his merry way, amassing businesses like pretty baubles.
Eventually, Sorrell targeted Asia and China, in particular.
It has diversified, with three-quarters of revenues nowadays coming from areas such as data, or media buying, and not the traditional ‘Don Draper’ advertising.
As industry expert Sandy Greenberg told the broadcaster CNBC: “Sorrell is an innovator, an agent of change, and also responsible for all the excesses of the humongous holding-company model.”
It is a model which many today distrust, appalled at its “bloated excesses and lack of transparency”, to quote the expert.
And Sorrell’s pay packages have been the stuff of legend.
He took home £43m (€49m) in 2014, and over £70m two years later. The commentariat was aghast. But Sorrell was quick to respond that he saw himself not as a highly paid manager, but as an owner of the business, with 2% of WPP.
He sank most of his earnings back into the business, following the advice of his father, who told him to invest in the companies that he knew best.
Sorrell has built extraordinary value for his shareholders over a sustained period.
Over the past year, the tide has turned against WPP in line with the industry generally.
WPP’s stock market worth has plunged by 30%, as the tech giants, led by Google and Facebook, snaffle more and more of the traditional advertiser’s lunch.
According to the latest industry estimates, Facebook and Google alone will account for 57% of the digital ad spend in the US this year. Last year, Google brought in $74bn (€60bn), and Facebook $36bn in digital ad revenues.
Sorrell is now departing at a time when the advertising model, as traditionally understood, is cracking.
The founding CEO of WPP has long been alive to the threat from the digital players, with their huge access to consumer data and to a swathe of key advertiser clients. In recent months, Sorrell has confessed that the threat posed by Amazon, with its unparalleled market penetration, was keeping him up at night.
Client billings at WPP fell last year, at a time of very strong, global economic growth.
Sorrell has referred to Facebook and Google as his “frenemies”. It will take more than a few rounds of buckshot to scatter this particular group of bears.
Technological transformation has also bred a new type of consumer, more resistant to brand pitches and more adept at blocking the ads fired in their direction.
Sorrell and his ilk have had a pretty good run. They have enjoyed good grazing.
Now, it is a case of pastures new.