LONDON: S4 Capital, Sir Martin Sorrell’s post-WPP venture fund has published its first stock market prospectus, with a warning to agencies as it seeks to compete with the consultants.

The document, which appeared on Tuesday night, is the first detailed indication of the venture Sir Martin announced just weeks after leaving WPP, the company he founded.

In June, speaking at a packed fringe session at Cannes Lions, Sorrell gave detail about the direction of S4. “It’s going to try and deal at the highest levels of the companies that it deals with,” he said, admitting it was a very optimistic ambition. This was before the company acquired MediaMonks in July for $348m (£288m).

At Cannes, Sir Martin joked that compared with the ad agency holding groups, S4 was but a “peanut", adding, “though it does occur to me that some people have peanut allergies" – a line he restated several times.

On the front cover of the prospectus, the copy reiterates the themes and aims Sorrell had been talking about since his return: “To create a new era, new media solution, embracing data, content and technology, in an always-on environment for multi-national, regional and local clients and for millennial-driven digital brands.”

What does that mean? Unlike WPP, S4 Capital operates under a single profit and loss statement to compete directly with consultancies – of both management and technology hues – including “IBM, Accenture, Deloitte and PwC”, all of which have begun to move into the marketing space. In response, S4 will offer clients “digital marketing services, which are agile, efficient, and of premium creative quality – in other words faster, better, and cheaper.”

Outlining the risks of S4’s current position, and the need to push on with acquisitions, the prospectus notes that consultants are “moving more directly to compete with combined operators such as MediaMonks”. The document also contends that clients are moving away from individual agencies and towards more totalising media companies. This is quite a contrast to his defiance as head of WPP, when he dismissed the scale of the threat from management consultancies.

Future acquisitions will take place in a range of spaces: data analytics, content, media planning and buying.

For MediaMonks, the core issue is the small number of clients that provide a large proportion of the company’s revenue, with one key client accounting for one tenth of the firm’s revenues in 2017. To resolve this, MediaMonks will need to find more business with more big budget advertisers. In the meantime, S4 is reliant on MediaMonks to meet its expense costs. The numbers for the company are looking good. However, in the first six months of 2018, MediaMonks’ revenue grew 50% to $62.7 million compared with 2017.

Sir Martin, meanwhile, will own 18.6% of S4 Capital’s shares but will retain controlling power through a voting share. Compared with his salary at WPP, which hovered around the tens of millions, he will draw £100,000 a year, with a potential bonus of up to his full salary. His contract includes a 12-month non-compete clause.

Sourced from S4 Capital, WARC