Emerging markets to drive growth, says Sorrell

05 November 2009

NEW YORK: Advertisers are currently "totally focused on cost", but new media and developing countries are still attracting considerable attention from marketers seeking to drive growth during the downturn, according to Sir Martin Sorrell, chief executive of WPP Group, the agency holding company.

Speaking at ad:tech 2009 in New York - covered by Warc here - Sorrell said brand owners are cutting back even though all the statistical evidence "points to the fact that companies that invest in brands in times like these benefit when we come out of recession."

Indeed, while many major companies report they are continuing to invest in commercial communications in the recession, advertising expenditure levels demonstrate this cannot be the case.

"Most companies say they maintained their spending, or if they have cut it, they have cut it by media deflation. That can't be true, because the traditional media market is down by 10% or 15%," Sorrell added.

Looking forward, WPP's ceo predicted emerging markets will increase their prominence over the next ten years, as growth in more advanced areas like the US, and particularly Western Europe, slows.

"We are in my view approaching a decade where the attention of the world is going to increasingly be on Latin America as well as the BRICs and the Next 11. This shift in power is considerable," said Sorrell.

"Every single client that we deal with is focusing on those parts of the world for growth," he continued, with WPP hoping to boost the share of revenue it generates from these areas from around a quarter at present to 33% in five years time.

Similarly, the UK-based firm is looking to raise the proportion of sales derived via new media, but clients also need to heighten their activity in this area if they are to mirror the behaviour of their customers.

At present, consumers spend around 20% of their time online - with Morgan Stanley recently pegging this figure at 28% for the US - but advertisers currently direct just 12% of their budgets to digital channels.

One reason for this is that "people who run clients, media owners and agencies tend to be of an older vintage, they tend to be resistant to change," Sorrell said.

However, there is also "a natural gravitational pull to 20% or 25%" at work where new media spending is concerned, a process that should be complete in the next five years, he forecast.

To view Warc's Conference Report from Ad:tech New York, click here.


Data sourced from Warc