Sorrell plans for new world order

punctuates conversations with self-deprecatory references to his
intelligence.

For example, on the problems facing traditional media brands like The
Economist, he says: "'Cos I'm thick, I want somebody to give me
indications or ideas or analysis on key events instantly." He can't mean
it. As the architect of global ad network WPP, he is the most
influential man in advertising. At the last count, in February, WPP made
annual sales of £5.4 billion and boasted 84,000 employees in 106
countries.

But if it's not off-the-scale intelligence nor a brilliant approach to
advertising - he doesn't pretend to be from the 'creative' end of the
industry - what has made Sir Martin and the company he built so
powerful?

One clue might lie in our meeting to discuss the rise of digital. We
wait for an hour while he hosts a WPP board meeting, presumably to
discuss the group's annual results announcement, due two days later.
Mobile calls interrupt at regular intervals and there may be other
things on his mind, including a law suit from his former country manager
in Italy.

But, when conversation finally turns to digital media and its obvious
potential impact on the ad industry, he becomes the very model of
concentration. He clearly has the ability to be focused on the matter in
hand. He is also a renowned trend-spotter. Compared with Omnicom and
Interpublic, Sir Martin's WPP was the first of the ad networks to
realise that clients might want combined propositions from its
agencies.

He is now demonstrating the same prescience in digital and, along with
China, he picks the growth of internet consumption as the major
challenge facing businesses.

Perfect market

Sir Martin believes the web has changed the rules for everybody: "I
always remember when I struggled through economics that, in supply and
demand models, there were always these assumptions and one of these was
no barriers to free trade and no barriers to information; this is the
closest we've got to perfect information."

He tells a story of how a 200-year argument about the author of six
lines of poetry was resolved in just a few seconds when a student
finally thought to conduct a Google search. "We've broken what I call
the tyranny of geography," he adds. "In the old days, when you wanted to
book a hotel in New York you needed to know the names of the hotels in
New York and ring them up. Now you just press a button and it's
free."

Free competition means a more level playing field. But, the problem for
agencies, advertisers and media owners, is working out how, in a perfect
market, they can tip the balance in their favour. It's a problem to
which Sir Martin says there is no real answer, except to try to get to
grips with the new world order as best they can.

He explains: "I think, for all three communities, it's very difficult to
find the balance. The reason it's difficult is that, if you have a
traditional media owner, if you have a traditional client approach, if
you have a traditional agency approach, because there are new structures
out there, what do you do?"

He points to Craig's List, the online local information service that
offers free classified ads, as a key example of the threat to
traditional models. "If you own a newspaper that depends on classified
advertising, what do you do? If you reproduce your own Craig's List, you
completely destroy your revenue source, so you have to find another way
of getting revenue back." E

"What the internet has done, in my view, is to permanently reduce the
prices consumers are paying, but the squeeze is on the traditional,
legacy deliverers of that service," he adds. "That could be a client or
media owner, or it could be us. All those three communities are being
disintermediated and have to respond with a new model. The painful thing
is that the new model may be totally different and may be less
profitable."

For these 'legacy' businesses, it is a bleak picture. A recent spate of
acquisitions suggests a new attempt by traditional businesses to get to
grips with the web. These include ITV's acquisition of Friends Reunited,
Aegis' buy of glue London, and News Corp's takeover of Easynet and
MySpace.

But Sir Martin is convinced that the old guard is in no position to
react properly: "No traditional business in our industry will adapt
rapidly enough because the people who run those companies, like me, tend
to be at the older end of the age spectrum and they tend not to be
'geeks'.

The way I use media is very different to the way my kids use media or
the way my grand-kids will use media."

Nonetheless, blue-chip bosses must try to adapt and WPP has made
inroads.

More than 20 of its companies ply their trade specifically in
interactive, contributing to the five per cent of sales that came from
"narrowly defined, internet-related revenues" last year. On Sir Martin's
own broader scale, 'measurable media' produced 15 per cent. This
combines the sales of his digital businesses, such as interactive agency
Goodtechnology, with market research companies like Millward Brown and
direct agencies, including Wunderman and OgilvyOne.

Even so, networks and above-the-line agencies, of which WPP owns many of
the biggest, have been attacked for their failure to come to terms with
digital. So, even if he may be the wrong man for the job, how does Sir
Martin get all the agencies under his rule to respond?

New ventures

"You have to do two things," he says. "You have to encourage the
traditional verticals to embrace the new technologies - and that can be
mobile, VOIP, the internet, a whole range of things - as rapidly as
possible. But, because I fundamentally believe it's very difficult for a
company that has grown in a traditional way to react fast enough, I
think you have to have a separate vertical within the organisation -
let's call it WPP.com - which is the vertical that you encourage
experimentation with. You invest in new ventures, you make acquisitions,
you attract new people."

The mention of acquisitions sends the antennae racing, chiefly on behalf
of independent digital agencies. Many are hoping to cash in, having
missed out after the dotcom crash put a gigantic spanner in the works of
their original exit plans. For them, Sir Martin has some promising news:
WPP.com, the vehicle for its digital investments, is getting a new
strategy.

Mark Read, strategy director at WPP, explains: "Our view is that we have
to develop digital within our existing businesses and we are doing
that.

But digital is too important to just leave up to them, so we think we
also need the structures in place to move more quickly."

He says the group is making a new commitment to WPP.com, which will
encourage more investment in digital businesses and build its role as a
central development arm for 'new media' knowledge-sharing across the
group. A name change is also expected within the next couple of months.
"The strategy is in place - we're working on the implementation," adds
Read.

So, given this new focus, are there any particular digital holes in the
WPP line-up that Sir Martin would like to fill? A wry smile appears on
his face, accompanied by the tiniest of winks: "Lots of them - it's like
a Gruyere cheese." Then, he adds, "we've invested heavily in mobile,
we've invested in measurement," but that's as much as he'll say. E

However, for those agencies keen to join the WPP fold, there might be
concerns. The jury is still out on how far they can go as network-owned
entities since, if a key benefit of selling up is access to the massive
client base of networks, then integration with their new sister agencies
is key.

But it's clear that achieving this is difficult. As Sir Martin points
out, "eighty-five to 90 per cent of WPP is institution-led",
highlighting the power and legacy of agency brands like JWT and Young &
Rubicam.

Most powerful

Another worry might be Sir Martin's commitment to the web almost
exclusively as a medium for 'direct' advertising rather than
brand-building. "If you went back and looked at David Ogilvy's (founder
of WPP-owned Ogilvy & Mather and 'the father of modern advertising')
work 50 years ago, he talked about the importance of direct
communication and I see the internet as a subset of direct and
one-to-one communication," he says. "So, this is another medium by which
you can communicate on an individual basis.

And it's the most powerful. We have never seen a medium like this; that
is so socialistic, so 'communistic' in terms of its ability to link
people up, and, if not at zero cost, then close to zero cost."

Some might criticise the lack of consideration given to brand building
via digital, but Sir Martin counters that the acquisition of Dynamic
Logic Europe, which measures the impact of online campaigns on brand
perceptions, recognises this aspect.

He adds: "The measurability of (campaigns on the internet) is supposed
to be better, but I don't think we've got to the key measuring
variables.

I think we have to do more work on that. Millward Brown is doing a lot
of work with Dynamic Logic; it's doing a lot of work with Research
International.

We're wrestling with this issue."

As we talk, his focus is absolute. He is aware of the potential impact
of online, but also aware that its current contribution is small. His
advice in this new period of dotcom growth is to expect bumps, though
he'll view them as buying opportunities. And he is very conscious that
"no-one will get fired at the moment for investing in digital". Then
you're reminded that there are other things to be getting on with; after
half an hour someone "very important" arrives. Our time is up and his
focus - once again absolute - is somewhere else.

WPP - A BRIEF HISTORY
1985: Martin Sorrell takes stake in Wire & Plastic Products, a UK maker
of wire baskets, following his search for a public entity to build a
worldwide marketing services company
1986: Below-the-line capabilities provided by the acquisition of 10
marketing services firms in the UK and US
1987: $566m bid for JWT Group
1989: Acquires The Ogilvy Group for $864m
1990: WPP named top agency group in the world (Ad Age)
1997: Launches media planning, buying and research firm MindShare in
Europe/Asia
1998: WPP joins FTSE 100
1999: Acquires The Brand Union, including corporate identity specialist
Lambie-Nairn 2000 Buys Young & Rubicam Group
2001: Acquires Tempus Group, including Outrider
2003: Buys Cordiant Communications Group, including Bates, Fitch, 141
Worldwide and HealthWorld
2005: Acquires Grey Global Group, including MediaCom and Media.com
WPP and digital Interactive services

DIGITAL COMMUNICATIONS

WPP firms, from digital@JWT and OgilvyInteractive to Wunderman and
Outrider offer digital services; from online ads and branding to digital
TV and mobile marketing consultancy

Internet consultancy

It has taken an integrated approach with agencies like Inferentia,
Syzygy and VML

MARKET RESEARCH

WPP firms like Lightspeed, Red Sheriff and Market Tools offer online
market research

E-business enablement

This includes enterprise collaboration and knowledge management firm
Intraspect

INVESTMENTS

WPP.COM

WPP.com co-ordinates new media activities and invests in firms with
specialist technology capabilities

ALLEGIS CAPITAL

Via Allegis' MTV, MTV III, MTEP and MTEF II funds, WPP has invested in:
Bizrate, EVEO, HotU, IdeaForest, Imagicast, IronPort, LGC Wireless,
Live-World, Market Axess, mPower, rent.com, TrueSpectra, Zowi, Venier,
Visto and Z-force Soundview Ventures

Via Soundview, WPP has invested in specialists in systems management
software for distributed computing (ProactiveNet, InterSAN, Covigna,
Active Buddy's, Moreover, Xora), supply-chain improvers (Tilion,
MaterialNet, Eventra) and others (Mortgage IT, Blaze, Metapa, Tutor.com,
HNW, ITF Optical Technology and Netforensics).

ELWIN CAPITAL PARTNERS

Via Elwin, WPP has invested in early-stage European technology firms
Celltick, Congruency and Office Tiger.