Sorrell says 2009 is the year to worry about
LONDON - As talk of a recession heightens, Sir Martin Sorrell said today that this year is set to be a good one for the advertising industry and it is 2009 that is of concern.
Speaking on the 'Today Programme' on BBC Radio 4 this morning in the wake of the .75% US Federal Reserve rate cut yesterday, the WPP chief executive said that he sees 2008 as being another good year for the industry with the bonus of the quadrennial affect in full play, better he said than 2007, but 2009 was of concern.
Sorrell said: "We see 08 as still being a pretty good year, in fact better than 07, Beijing Olympics, fantastic Olympic Games in China, US Presidential election political adspend of £3bn, European football championships. We think the issue is more about 09, there is a political cycle kicking in now and in 09."
After 2008, Sorrell said that he expected to see a dip in China as the glow of the Olympics fade and as an incoming US President made some tough economic decisions at the start of a possible eight-year stint in office.
"The new president in the United States will have eight years and will do anything unpleasant in that first year of that cycle and we think there might be a slowdown in China after the Beijing Olympics.
"We think the financial markets are signalling these things in advance, whether there will be a recession or not, I'm not quite sure, I think there will be a slowing down... I think the issue will now be about inflation.
"The Fed cut yesterday, which was out of cycle, and severe, much more severe than people thought and will indicate that inflation will grow and that will push the problem into 09 and I think that's when the rubber will hit the road."
However, Sorrell said that despite a dip in China, it still offered the prospect of great rewards in terms of growth. He pointed to China and India as where the advertising industry would make headway in terms of new growth in 2009 and beyond.
He said: "This year will mark the first time that growth in our industry [the advertising industry] in China will offer a bigger prospect and in fact that is the case, the IMF World Bank statistics growth outside of the United States will be greater and a bigger opportunity for our clients. I mean the reason we grow in China, the reason we have 9,000 in China and a 15% market share, and 50% market share in India and 6,000 people there is that our clients are growing there.
"What we are witnessing is a major power shift, and it is very uncomfortable for people in the United States and in western Europe, including the UK, to come to terms with this. If India and China have been on the wrong side of history for 200 years they will be on the right side for the next 200 years.
"We are betting WPP's future on that 85% of our business comes from outside of the UK, 25% is now coming from Asia, Latin America, Africa, Middle East, Central and Eastern Europe. These are the growth drivers for our clients' businesses and therefore our own business and it is very difficult for the establishment in the west to get their minds around it."
His comments follow WPP's acquisition yesterday of Hong Kong-based digital network Agenda Group and a string of other Asian acquisitions it made last year, including four Chinese companies alone in 2007, with agencies MeThinks, Dawson Integrated Marketing Communications and Star Echo, as well as China Broadband Capital Partners, the venture capital outfit behind the launch of MySpace in China.
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