Digital growth will be fuelled organically says Sorrell

by Staff, Brand Republic 23-Jan-07, 09:00

LONDON - Sir Martin Sorrell, chief executive of the WPP Group, has indicated that growth of digital agencies within global marketing services networks will be more successful through organic growth than acquisition.

Making reference to the purchase of digital full service agency Digitas by Publicis Groupe last month in a $1.3bn (£660m) deal that will see the group expanding in the digital communications market globally, Sorrell, speaking exclusively to mediaweek.tv, said: "I think there is an argument that the pricing is so high, particularly in the States, that you're better off building from scratch."

However, in a dig at Publicis, Sorrell said that some networks will be tempted to use digital agency acquisitions for the sake of brevity, with organic growth taking a back seat in the move towards a digital future.

He said: "On the other hand you get greater speed by making acquisitions, and the speed of change in the marketplace you know, which we've seen for example in the UK is so great that if you're behind, which I think Publicis were, they basically had nothing in that digital area, you know they have to move quickly to do it and that's why I think, probably, that's why you summarise as being smart but expensive, so you pay the price."

A report by by Marketing Services Financial Intelligence last May, found that buyers are paying in excess of 10 times pre-tax profit for digital firms.

Recognising the irony of recommending organic growth as a move forward in the digital space, from a man who started by buying a company that made wire baskets and moved on to acquire, among others, creative network Cordiant for £266m and Grey Global for $1.7bn (£850m), Sorrell said: "Now are acquisitions better than organic growth or equal? I don't think so, I think you may find it strange coming from me but I think that organic growth is stronger.

"The traditional agencies, if they want to survive, will have to move into the digital."

The move to acquire digital agencies has gathered pace over the past few years, and includes the high-profile purchase of UK digital agency Glue by the Aegis network in a £14.1m deal in August 2005.

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