What you need to know:

• S4 Capital boss Sir Martin Sorrell suggests attempts to regulate platforms may prove futile – they are already bigger than many of the companies trying to rein them in.
• Per the former WPP chief, they are only going to get bigger and closer to paying clients than agencies can, with better data, tech and tools.
• He agrees – partially – with former UM privacy chief Arielle Garcia that some of the data that underpins digital advertising is “garbage”, but thinks agencies’ role will be “to validate those black boxes”.
• But he predicts major headcount reductions within three years – “it’s going to be uncomfortable” – and the rise of new breed black box planning and buying systems to penetrate at enterprise level.
• Meanwhile, Sorrell suggests S4 will reclaim it’s rightful value within “a couple of years”. Right now, he says, “We’re not charging enough for what we do”.
• Get the full download via the podcast – and catch-up on part one here.

Tube mogul

If there was any clearer metaphor of where Sir Martin Sorrell sees the future, it was the sight of the former WPP boss at a private client dinner in Sydney earlier this month sporting a YouTube crew jacket, a hefty logo bestride his back.

Sorrell thinks the biggest platforms are already countries in their own right, given their GDP is bigger than Australia’s, along with many other countries, and will only get larger. As such, regulators acting individually can’t touch them – and whatever patchwork of fines and measures they dish out are simply “the penalty of success”.

If you can't beat 'em, join 'em is a survival strategy as old as human history, but does it not concern him that digital media spend is rapidly consolidating into the hands of half a dozen companies globally?

“I think that gives us strength … Our defence capability, our national security depends on the strength of our tech sector,” offers Sorrell.

“You can argue it also depends on the vibrancy of that sector, and that if you have companies that are too big and  they get lazy … But who do I think are going to be the winners? Just run through them, Alphabet, Meta, Amazon, Alibaba, Tencent, Bytedance, Apple, Microsoft, Nvidia, the software companies, Salesforce, Adobe and Oracle, I think IBM and SAP maybe…. those, to my mind, are going to be the winners,” Sorrell suggests.

“The amounts of money that you need to make the [necessary] investments are so big that I think those companies will continue to dominate.”

Data dump

Alongside money, tech incumbents have two advantages, per Sorrell. “One is data, the other is distribution … so they have some huge advantages to develop their positions.”

But what if the data underpinning the digital ad market is demonstrably crap, as suggested recently by former UM chief privacy officer Arielle Garcia? She accessed her own profile from an adtech vendor and found she was bucketed within 500 laughably contradictory audience segments where she is simultaneously woman and man, below and above the poverty line and works in food service and defence contracting.

(Meanwhile, even Oracle, which earlier this year decided to exit the ads business, has warned Australia’s lawmakers that the likes of Alphabet, Apple, Amazon, Meta, and Microsoft “collect vast quantities of personal information, significantly more than needed to deliver their services” and that “consumers do not and cannot know the true extent of the personal information collection they are “agreeing” to, rendering consent invalid". The firm last year offered the Attorney General a detailed list of the rules being skirted and how to close them, perhaps indicating its decision to exit advertising was already made.)

Blackbox watch

But Sorrell thinks Garcia is only half right. He asks from which vendor she got her profile. Garcia has only disclosed that it is one of the adtech firms from whom accessing a profile is possible. Sorrell scoffs that is akin to a journalist citing unnamed sources, “Come on out front and tell us who it was.” But he agrees “garbage in, garbage out … so you are [she is] right, there are bad sources. But the people we are talking about [i.e. the dominant big tech firms], it is not [garbage they are peddling]. It could always be improved and with AI and other technologies it will improve even further and they won’t make the mistakes,” per Sorrell.

Either way, he says the money is accelerating into the channels that provide more data-based targeting, hence CTV and retail media rapidly eating traditional media owners' lunch.

“It’s very clear what's happening. It's very simple. Agencies love to complicate it, love to make it more complex for clients. I think we have a duty to try and simplify it. So Arielle is right. There are bum sources, to put it crudely, but that's the fault of the person who's buying the data. They should buy the stuff that's more accurate. They should do more Arielle-type investigation … that is our role, to validate those black boxes,” adds Sorrell.

“I’m in the homeland of Rupert Murdoch. No client would say to Rupert, ‘here’s all my money, go ahead and spend it on your media’. They will always want a validator to say that Rupert’s spending it in the right way. Exactly the same thing here. You’re not going to go to Google and say, 'here's all my money' – or Meta, or Amazon or Alibaba or Tencent – you will want somebody to work with those platforms and with the client to make sure that the data has veracity and there isn't bad data … that’s our role,” Sorrell suggests.

“The platforms are going to get closer to the clients. In the old days, the agency’s protection was the labour-intensity of what they do. Google I think is 170,000 people” – Alphabet is circa 182,500 – “WPP when I was there was 133,000 people” (it now has 114,000). “Look at the relative sizes, even back then … they’re a capital intensive business that enables them to get close to the clients, because they can do more now with capital, and they don't have to rely on people as much as we used to. The inevitable result of that is the platforms are going to get closer to the clients, and we as agencies and advisors, have a very important role to do exactly what Arielle talked about – to make sure the data is right and make sure that the planning and the buying is right.”

Yet Arielle Garcia also called out that the backroom deals agencies are cutting with platforms are distorting precisely that objectivity.

“I don’t disagree, so you have to have transparency … There are various parts of the world where you didn’t have [it] but where transparency is improved,” suggests Sorrell.  “There are some murky parts of the market, but that's our role to expose that, not to be a part of it … So let her [Garcia, now at ad watchdog Check My Ads] look at the murky parts, but the parts that we're talking about, people are being much more open about it.”

Either way, Sorrell thinks that the tools some complain are black boxes – like Meta’s Advantage+ and Google’s P-Max automated buying systems – will quickly move upwards from their current deployment of media planning and buying for smaller businesses. “It's only a question of time before they do that for enterprises.”

AImageddon incoming

Across the piste, he sees the impact of AI and automation coming at advertising fast, with five core areas of disruption: “Personalisation at scale – Netflix on steroids, which I think is the biggest thing that we’re seeing – visualisation and copywriting, media planning and buying and general efficiency”, per Sorrell.

“I think we’re going to have a tremendous increase in the amount of personalisation at scale. I was on a call where the CEO of a major global company … said with personalisation, you're going to have such intense barrage, maybe the consumer will be flummoxed by it and confused by it and overpowered by it. So therefore the need for creativity is going to get greater … So the [David] Ogilvys, the [William] Bernbachs, the Raymond Rubicams … they were the greats of our industry, those types of people would become even more important, not less important,” Sorrell adds.

“There may be fewer of them … If you look at those five areas I mentioned, there are some areas where you will get increases in employment and there are some areas where we get reductions. Net, I think there will be a reduction in the number of [advertising] jobs – if it's 300,000, 350,000, 400,000 whatever it is – worldwide there will be less in three years,” says Sorrell.

“I think the timeframe is three years. The percentage I don’t know. [OpenAI CEO] Sam Altman says 95 per cent of advertising jobs will go. He says it to make effect, but directionally, I think he's right … So it’s going to be uncomfortable,” states Sorrell. For S4 Capital, “with 7,500 people, it won’t be easy, but it will be less difficult for us  – and we are disruptors by nature.”

Might vs rights

Sorrell reckons “first party data is technically consented data, where consumers have said ‘I consent to you doing what the agreement says’. Making sure people understand [what they are consenting to] I think is the critical issue – and I think the tech platforms have a responsibility to make sure that consumers do understand what they're letting themselves in for.”

While lawmakers around the world – with Australia next off the rank – are starting to look seriously at how to rein-in unfettered use of personal data, Sorrell is unconvinced it can be done in piecemeal fashion, because the platforms are already bigger than many of the countries attempting to reset the rules.

“If you think a $3 trillion market cap is big – which is bigger than some countries. It's bigger than Australian GDP, it's almost bigger than UK GDP, it's bigger than France … and if you think that's big, standby … These are not companies anymore, they are countries. AI is going to make [them] even more important, therefore self-regulation is going to be absolutely key,” Sorrell suggests.

Some may argue big tech’s track record on self-regulation augurs poorly for the future of humanity, but Sorrell attempts a defence.

“They do make strenuous efforts ... maybe after they have been put under some pressure … but Meta does have, I don't know, 30,000 people, 40,000 people looking at editorial content and trying to get it right … If you you talk to people at the platforms and ask them, what percentage of their time do they spend on dealing with the regulators, it's huge. Do they wish to do that? It's the penalty of success … if you become as big as a country, what do you expect?”

Size matters

If not country-sized, Sorrell would have hoped his own venture would be significantly larger by now.

How long will it take S4 to get back to that £800m-£1.8bn range he thinks is the correct market capitalisation for a business that once nudged £5bn but as of this week stood at £376m?

“It's going to take us a couple of years,” reckons Sorrell, who admits watching a rapid collapse in value “is always disappointing”. But the 79-year-old is relatively sanguine.

“You'd rather be going in the other way, but that's life. We have our ups and downs.”

So how is he going to rebuild that value? There’s a clue in one of Sorrell’s earlier answers.

“We’re not charging enough for what we do.”

The receptivity of S4’s clients to their incoming new rate card may prove instructive.