Sorrell sees mixed prospects for social nets

23 June 2009

LONDON: Social networks like Facebook and Twitter have less potential to generate ad revenues than sites such as YouTube and MySpace, which will benefit from their focus on online video, says Sir Martin Sorrell, ceo of WPP Group.

According to Sorrell, one of WPP's main short-to-medium term objectives is to boost the share of its revenues derived from digital media to 33%, compared with the current level of 25%.

He also argued that the various forms of web-based video currently being established are "probably the most revolutionary and most significant of the new media developments."

Indeed, he predicted that the influence of this form of content could come to "dwarf what we saw from the personal computer and what we saw from mobile in terms of its impact on the media."

Given this, it appears that "video-driven sites" like YouTube and MySpace will have a "greater opportunity for developing advertising revenues" than many of their online counterparts.

By contrast, "sites like Facebook and Twitter are more social networking sites, where the advertising revenue potential is more limited and more restricted" due to their differing models.

Indeed, Sorrell added, "we've seen cases, even in the case of Facebook, where Mark Zuckerberg – who must be the person on the planet who knows most about social networking – has made one or two mistakes by trying to commercialise too much."

When discussing Twitter, the rapidly-growing microblogging service, the chief executive of WPP credited the site with producing "a lot of noise", but also wondered "where is the cashflow?"

Overall, the websites at the heart of Web 2.0 are "all very sexy stuff, but there is a lot of sorting out to be done and a lot of volatility and a lot will not be here in the future," he added.

With regard to newspapers, Sorrell said the "online media model will only be successful if it's a mixture of advertising revenues and subscription revenues."

As such, "looking for content that consumers are willing to pay for" will be essential if news titles are ultimately going to succeed on the web.

Sorrell also said that WPP will be looking to target the "third sector" of "Asia, Latin America, Africa and the Middle East and central and eastern European regions" as it seeks to bolster its revenues.

He added that the rise of nations like Brazil, Russia, India and China should be seen as "an unstoppable, irreversible trend in political, economic and social power."

Moreover, Sorrell predicted that "the initial signs of recovery will not come from the West, they will come from the East; they will come from China."

The Chinese ad market "did flip up quite considerably in April", meaning WPP saw a 25% increase in its "media business" in the country in the fourth month of this year, its ceo added.

Data sourced from The Australian; additional content by WARC staff