WPP chief executive Sir Martin Sorrell was one of the key delegates at Dmexco 2016, taking to the stage of both days of the proceedings. In the interim he spoke to The Drum, sharing his thoughts on some of the dynamics of the digital media sector. These include: Snapchat’s potential to break up the ‘duopoly’ of Google and Facebook the shifting spending patterns of WPP, and the pressing need for improved digital measurement.

WPP founder and chief executive Sir Martin Sorrell is the most prominent person in the advertising industry to urge caution over the increasing concentration of media investment within Facebook and Google (currently the two-biggest digital media owners by market share).

Undoubtedly, the pair offer great potential for advertisers given their reach, plus vast swathes of audience data. However, it is the ‘walled garden’ nature of their digital platforms that proves a thorn in the claw for many, as their professed safeguarding of their audience data is construed by some as a purposeful means of ‘locking in spend’.

WPP's spending patterns

Speaking with The Drum, Sir Martin explains that WPP is on course to spend in excess of $7bn a year with both Facebook and Google on behalf of its clients, making them the two biggest online media owners it invests with.

“If you piece together the spending that we as a group do this year, that’s about £$75bn – of that about $750m goes to Verizon/AOL/Yahoo. About $1.7bn this year should go to Facebook, and about $5.6bn to Google,” he says.

“Last year it was $4bn to Google, and about $1bn to Facebook. Google is a clear leader in terms of our investment,” adds Sir Martin, also pointing out that a number of “traditional legacy media owners” also rank in the $1.7bn mark, with News Corp a clear leading in this subcategory, garnering approximately $2.25bn a year.

Potential rivals

However, the advertising veteran speaks candidly about the potential contenders to the leaders in the digital media landscape, with mobile video-sharing app Snapchat a particular area of interest.

“It is probably the most coherent and threatening [platform] to the duopoly. At lunchtime [during day one of Dmexco] I was talking to one of the Google people, and they were admiring of the flexibility of Snapchat, and what they’ve done on mobile video,” he reveals.

“It has been very innovative and quick to respond. I remember when they launched their over-the-top channels, and I think they wanted $750,000 a pop. It was quite difficult to sell the idea to clients, as there was no data, but they learnt very quickly, and became much more flexible. They’ve become much more focused on insight and data,” he says. “So I think they will give Google and Facebook a run for their money.”

This would be a welcome development, even if Snapchat too is a walled garden. “There’s more coming, there are a lot of walled gardens, and I suppose the more the merrier. I look at Alibaba, Flipkart, and obviously Apple, Amazon, Facebook, Google,” he explains.

"In a way (I suppose) the more there are, the better it is as it provides more balance, as – in a way – digital spending is increasingly concentrated in Google and Facebook … They have a duopoly really. So I suppose the question really is: who’s going to be the third force?”

More walled gardens

Citing other potential rivals to the leading pair, Sir Martin raises GroupM’s own adtech unit Xaxis, as well as AppNexus (the programmatic behemoth which WPP invested $25m into two years ago), in addition to the Verizon Wireless stable of AOL and Yahoo as a potential third force.

Until such a force emerges the likelihood is that Facebook and Google will remain the clear leading duo when it comes to online media spend, with Sir Martin additionally pointing to the continued rise of the social network.

“Next year, Facebook will be about number three, or maybe even number two [in terms of the single biggest online media owner it spends with], and certainly in 2018 I’d expect Facebook to be number two to Google,” he explains, adding that the purchase intent of search data possessed by Google means it is likely to continue its clear leadership in terms of online spend.

The pressing need for better measurement

Those familiar with the online media investment space are always quick to highlight that the nature of walled gardens makes the measurement of comparable media performance, a logistical chore, i.e. how well does every dollar spent with Google compare to every dollar spent with Facebook, etc.?

Such inadequacies in measurement can lead to wasted media investment, as it makes campaigns prone to elementary errors, such as insufficient frequency capping, etc. This is a pressing need in the industry, particularly as marketers come under evermore scrutiny when it comes to justifying their media investments, which is made all the more pertinent now many companies are moving toward econometric modelling when devising their media budgets.

“We’re hearing from the Proctor & Gambles, and Unilevers – from Marc Pritchard and Keith Weed – about the inadequacies of measurement, such as Facebook’s three-second view, with 50 per cent of the time the sound is turned off, equating to a 15, or 30 second view,” he explains.

This is an issue further compounded by the increased usage of online ad blockers, reports of online ad fraud, with advertising agencies across the board stressing the need for universal measurement.

“All of which is putting the microscope on digital spending, which is now about almost 30 per cent of spend,” adds Sorrell. “So procurement departments and CFOs are starting to say ‘show me the money’, and ‘where’s the beef?’. So measurement is critical.”

The evolution of the agency model

Discussing the rising tide of adtech and martech, which many claim poses the potential for disintermediation of traditional media agencies, Sir Martin points to WPP’s own investment in such companies. For instance, its purchase of the Exchange Lab last year, investment in AppNexus, as well as ongoing investments in the Xaxis stable – a series of moves that Sorrell believes will offset any such potential threat.

“I’m not worried about that, as long as the pie expands, which it has for 31 years,” he calmly states. “As long as we can get access to that growing cake, and we’re not cut off, and we don’t have the likes of walled gardens that shut us out, then I think we’re well positioned.”

Sir Martin Sorrell was speaking at Dmexco 2016, click here to read more of The Drum’s coverage of the event