Martin Sorrell on S4’s hiring pause and profit warning—plus his metaversal mood

Martin Sorrell on S4's hiring pause and profit warning—plus his metaversal mood

Do you foresee staff reductions in the future?

We have to match our expenses with our income. We have to see how things develop over the rest of the year, but I think every organization will [slowing down hiring]. Google has slowed its hiring pace, as has Microsoft. You will see and hear more about it [agency layoffs]especially in agencies that are exposed to traditional media.

What does Media.Monks’ first appearance in Forrester’s Wave report (which included Media.Monks as one of 13 “significant” creative and content providers alongside Accenture, BBDO, Deloitte, Ogilvy and others) mean to you?

This shows that the model works, at least in terms of building relationships with clients. Our mission is to create a new model and disrupt the old one. We now have more than 9,000 people in 32 countries and strive to deliver flawlessly to our employees and customers. So I think what Forester is doing signals that we’re moving forward in the content space, in the analytics and digital media space, and last but not least, in the technology services space; it’s only 10% of our revenue, but it’s the fastest growing in our business. The problems we faced were more in the substantive part of the operation. Technology services and data and analytics continued to grow strongly.

Meta saw ad revenue fall in the second quarter, and e-commerce companies including Shopify saw layoffs. How do you view the digital landscape right now?

I think there is some dynamic at work. There are clients who believe that the worst thing you can do is cut back on brand spending or advertising in a recession. What we’ve seen are two things: clients generally go downstream and look very carefully at media mix modeling, look very carefully at measurement, ROI, and look at performance. Now, all these things should work for us in theory. That’s one bucket. Another segment we saw is that there is a bit more delay in decision-making.

As for the cuts, no [I haven’t seen any], but to be brutally honest, clients like to keep agencies motivated and don’t really tell the agency until one minute before midnight or even after midnight. I think realistically looking at it, I think we’ve seen people go down the drain. So that would explain, for example, why you saw problems in Snap or problems in Facebook. They work more on the upper part of the funnel.

In terms of the impact, you saw the holding companies in the second quarter…they are forecasting six or seven percent [revenue growth] for the year and we say we will do more than 25% for the year so there is still a very significant gap in revenue generation between the digital part of the market and the traditional.

What do you think of other holding companies that have increased their guidance this year?

All their guidance points to lower growth in the second half. Mathematically, Publicis may have pushed up to 6% or 7%, but what they did in the first half implies that they will slow down in the second half. Now, whether that’s because they really believe they’re going to slow down or they’re just cautious and not inviting enough is another question. Analysts say they either think it will, but most of them think they’re just trying to be overly cautious.

Are you still in the mood for the advancement of the metaverse and Web3?

[Revenue from metaverse work] is relatively small, but growing rapidly. If you look at it as a percentage of the whole [revenue], it is only about three or four percent of the whole. So, they are yet to achieve a significant increase in income, but they will. So we remain very optimistic about that. We’re still very bullish on things like Apple TV, Microsoft’s current position in advertising given their relationship with Netflix, given what they’ve done with Xander and AT&T, all of those things Microsoft will do with strength alongside Apple TV. They [Microsoft] they used to be a minor force in advertising, but now they are about to become a real force.

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