LONDON: Sir Martin Sorrell is less concerned about the impact of the digital duopoly and the incursion of consultants into agency space than the impact of “distortions” caused by the low cost of capital.

In a third quarter trading statement, the WPP CEO highlighted these three issues as the ones on which the business is focused.

He acknowledged that Google and Facebook are in a strong position “and they’ve become a big destination for us”, but he cited figures to show that WPP’s digital billings and advertising revenue were growing in line with the market and it was maintaining its market share.

“It does not seem, on the basis of that evidence, that Google and Facebook are making inroads and taking business away from us,” he said, “except in the long-tail category which they specialise in.”

And while much has been written about the growing role of management consultants in advertising, Sorrell dismissed the “wild estimates as to what the internet or digital or interactive revenues of consultancies are”.

Further, he contrasted the outcome in head-to-head clashes with consultancies’ digital units. “The total number of pitches in the first nine months (of the year) was about 71 with revenues of about $92m involved,” he reported.

“The total wins to losses amounted to about a 2:1 ratio, and in revenues it’s actually slightly higher, at about 3.5:1.”

But he did acknowledge that consultancies are having an impact, albeit in a different area. “We think the consultant inroad is more significant not so much in the digital space but in their interaction with client CEOs or CMOs or CIOs – where they go in and say you’re spending too much, we’ll audit your spending and take a fee on a contingency or success basis.”

A greater cause for concern, he argued, is the distortion caused by the low cost of capital.

“Disruption is a given,” he said, “but what isn’t, or hasn’t been until recently, is the rise of activist investors, driven by low-cost capital and zero-based budgeting.”

Sorrell conceded that many activist investors “are strong proponents of increasing marketing spend but when they take shares in their target companies, the reflex action (of the companies) is to cut spending.”

And that, he said, is having a significant impact on consumer goods companies, with pricing now the dominant factor in their revenue growth as volumes have stalled or declined.

“Most people who run CPG companies say that a significant decrease in volume is a negative and a concern and what needs to be done is to focus on investment in marketing to try and maintain or increase volumes significantly,” he said.

Sourced from WPP; additional content by WARC staff