The 10 Trends Shaping the Global Ad Business

Sir Martin SorrellInfluencer

Founder and CEO of WPP

As we plan for the future of our business, looking across the 110 countries in which we operate, we try to identify the trends that we think are shaping the global marketing services industry. Here’s our top ten: 

1. Power is shifting South, East and South EastNew York is still very much the centre of the world, but power (economic, political and social) is becoming more widely distributed, marching South, East and South East: to Latin America, India, China, Russia, Africa and the Middle East, and Central and Eastern Europe.

Although growth rates in these markets have slowed, the underlying trends persist as economic development lifts countless millions into lives of greater prosperity, aspiration and consumption.

2. Supply exceeds demand – except in talentDespite the events that followed the collapse of Lehman Brothers in 2008, manufacturing production still generally outstrips consumer demand. This is good news for marketing companies, because manufacturers need to invest in branding in order to differentiate their products from the competition.

Meanwhile, the war for talent, particularly in traditional Western companies, has only just begun. The squeeze is coming from two directions: declining birth rates and smaller family sizes; and the relentless rise of the web and associated digital technologies.

Simply, there will be fewer entrants to the jobs market and, when they do enter it, young people expect to work for tech-focused, more networked, less bureaucratic companies. It is hard now; it will be harder in 20 years.

3. Disintermediation (and a post-digital world)An ugly word, with even uglier consequences for those who fail to manage it. It’s the name of the game for web giants like Apple, Google and Amazon, which have removed large chunks of the supply chain (think music retailers, business directories and bookshops) in order to deliver goods and services to consumers more simply and at lower cost.

Take our “frienemy” Google: our biggest trading partner (as the largest recipient of our clients’ media investment) and one of our main rivals, too. It’s a formidable competitor that has grown very big indeed by – some say – eating everyone else’s lunch, but marketing services businesses have a crucial advantage.

Google (like Facebook, Twitter, LinkedIn and others) is not a neutral intermediary, but a media owner. Google sells Google, Facebook sells Facebook and Twitter sells Twitter.

We, however, are independent, meaning we can give disinterested, platform-agnostic advice to clients. You wouldn’t hand your media plan to News Corporation or Viacom and let them tell you where to spend your advertising dollars and pounds, so why hand it to Google and co?

Taking a broader view of our increasingly tech-based world, words like “digital”, “programmatic” and “data” will soon feel out-dated and obsolete as, enmeshed with so many aspects of our daily lives, network-based technologies, automation and the large-scale analysis of information become the norm.

The internet has been a tremendous net positive for the advertising and communications services business, allowing us to reach consumers more efficiently, more usefully and often more creatively on behalf of clients. But it won’t be long before those clients stop asking our agencies for a “digital” marketing strategy (many already have). It will simply be an inherent part of what we’re expected to offer.

4. Changing power dynamics in retailFor the last 20 years or so the big retailers like Walmart, Tesco and Carrefour have had a lot more power than manufacturers because they deal directly with consumers who are accustomed to visiting their stores.

This won’t change overnight, but manufacturers can now have direct relationships with consumers via the web and e-commerce platforms in particular. Amazon is the example we all think of in the West, but watch out for Alibaba, the Chinese behemoth due to list on the New York Stock Exchange later this summer in what could be the largest IPO in corporate history (and heading a capitalisation of around $200 billion).

5. The growing reputation of internal communications

Once an unloved adjunct to the HR department, internal comms has moved up the food chain and enlightened leaders now see it as critical to business success.

One of the biggest challenges facing any chairman or CEO is how to communicate strategic and structural change within their own organisations. The prestige has traditionally been attached to external communications, but getting internal constituencies on board is at least as important, and arguably more than half of our business.

6. Global and local on the up, regional downThe way our clients structure and organise their businesses is changing. Globalisation continues apace, making the need for a strong corporate centre even more important.
Increasingly, though, what CEOs want is a nimble, much more networked centre, with direct connections to local markets. This hands greater responsibility and accountability to local managers, and puts pressure on regional management layers that act as a buffer, preventing information from flowing and things from happening.

7. Finance and procurement have too much clout, but this will changeSome companies seem to think they can cost-cut their way to growth. This misconception is a post-Lehman phenomenon: corporates still bear the mental scars of the crash, and conservatism rules.

But there’s hope: the accountants will only hold sway over the chief marketing officers in the short-term. There’s a limit to how much you can cut, but top-line growth (driven by investment in marketing) is infinite, at least until you reach 100% market share.

8. Bigger government
Governments are becoming ever more important – as regulators, investors and clients. Following the global financial crisis and ensuing recession, governments have had to step in and assert themselves – just as they did during and after the Great Depression in the 1930s and 1940s. And they’re not going to retreat any time soon.

Administrations need to communicate public policy to citizens, drive health initiatives, recruit people, promote their countries abroad, encourage tourism and foreign investment, and build their digital government capabilities. All of which require the services of our industry.

9. Sustainability is no longer “soft”The days when companies regarded sustainability as a bit of window-dressing (or, worse, a profit-sapping distraction) are, happily, long gone. Today’s business leaders understand that social responsibility goes hand-in-hand with sustained growth and profitability.

Business needs permission from society to operate, and virtually every CEO recognises that you ignore stakeholders at your peril – if you’re trying to build brands for the long term.

10. Merger flops won’t put others offDespite the failure of one or two recent high-profile mega-mergers, we expect consolidation to continue – among clients, media owners and marketing services agencies. Bigger companies will have the advantages of scale, technology and investment, while those that remain small will have flexibility and a more entrepreneurial spirit on their side.

FMCG and pharmaceuticals (driven by companies like 3G and Valeant) are where we anticipate the greatest consolidation, while our own industry is likely to see some activity – with IPG and Havas the subject of constant takeover rumours. At WPP we’ll continue to play our part by focusing on small- and medium-sized strategic acquisitions (31 so far this year, and counting). 

Posted by:Sir Martin Sorrell

Four Things the Private Sector Must Demand on Cyber Security

by Steven Weber 

On Friday, May 31 at the Shangri-La Security Dialogue in Singapore, US Defense Secretary Chuck Hagel said that cyber threats posed a "quiet, stealthy, insidious" danger to the United States and other nations.

Wait a minute. What exactly is quiet and stealthy about a security issue that Hagel's colleague General Keith B. Alexander, the Director of the National Security Agency, labeled just a few weeks earlier the source of the "greatest transfer of wealth in history" from US companies to foreign hackers?

For companies and organizations that allocate vast sums of money and some of their best technical talent to the challenge of trying to protect their networks from thousands of cyberattacks daily, there's nothing quiet or merely insidious about what's going on. Remember the summer of 2001 when CIA Director George Tenet said of the Al-Qaeda threat "the system was blinking red" but few around him seemed to grasp the urgency? I believe the cyber threat right now has much the same character. You don't have to be a master of the extraordinarily complicated and highly technical details of the issue to recognize this important signal: almost universally, you will find that the more an organization's technical people know about the nature of the threat-response dynamic, the more worried they are about who is going to win that race.

How did we ever let things get this bad? The first answer to this question is usually either an engineering or an economic one. Engineers point to the problems inherent in Internet protocols that were designed, from the beginning, to be more about interoperability and connectivity than security per se. Economists point to problems of collective action and misaligned liability rules that actually reduce the incentives for firms to invest sufficiently and efficiently in protecting the network. And then there's politics: every politician wants to champion the "innovation" and growth aspects of the Internet, and there's little to gain from highlighting what a dangerous place it really can be.

What seems harder to talk about, but ultimately more fundamental, is culture. Let's face it: as a society, the culture of the Internet is much more about open-ness and experimentation than about safety and security. This has deep roots in the libertarian ideologies of the personal computer movement (it really was a movement) and the techno-utopian, anti-authority mindset that made the Internet what it is — and is partly responsible for what makes it as great as it is.

But the Internet has now grown up. Our financial, military, healthcare, utilities, communications, commerce, supply chain, and just about every other essential life and business infrastructure system now depends on it. Internet culture, however, has grown up less. Consider this: You can't get on an airplane or walk into an office building in New York or buy a car without proving that you are who you say you are; but anyone can enter the Internet anonymously from almost anywhere they are on the planet and walk through the virtual equivalent of almost all the same systems.

Sometimes you need hacking tools that are easily accessible for purchase on the web; sometimes you need significant technical expertise. And much of the time you don't need anything at all other than malicious, or even just curious, intent.

On Friday of this week President Obama and Chinese president Xi Jinping will spend a good chunk of their time together talking about the cybersecurity problem. Neither was anxious to do so for political reasons, but the spate of recent media reports and public leaks have left Obama, at least, with no real choice. They may very well agree in principle on a shared interest in what governments care about the most: critical national infrastructure protection. Over time, the two governments will (hopefully) land on shared rules of the road that step away from the doomsday threat of massive cyberwar much like the Russians and the Americans found ways during the Cold War to reduce the likelihood of the thermonuclear doomsday scenario from which neither side could possibly benefit.

But they won't agree on what to do about "lesser" levels of threat, any more than the Cold War adversaries were able to during their time. That's because when it comes to things like commercial espionage and intellectual property theft — the things that matter to individual companies — the two big nation-state cyber-players are in quite different positions and have meaningfully different interests. It's a little oversimplified but basically correct to recognize that the US has much more to protect and the Chinese have much more to attack.

Here's the real insidious threat that companies need to worry about. What if Washington and Beijing do reach a common understanding on the really big stuff — the massive security risks to sovereign interests — and take steps to reduce the threat of mutually assured cyberdestruction? What will all the hackers and cybercriminals — officially sponsored and otherwise — then do with their excess time and expertise? A reasonable career move would be to specialize in "lower level" attacks like, well, corporate espionage and intellectual property theft.

For governments, most of this is a nuisance, a trade issue, and at large scale potentially a competitiveness issue, but it's not the same as a massive attack on the national power grid and it won't drive the same kind of government response.

If you wait for governments to define and solve this problem for you, you might just get thrown under the bus.

Here are four things that the private sector — and I mean CEOs, not CTOs — should be loudly and persistently demanding of Washington right now:

1. A Government funded FFRDC-type institution, to pay for basic research and early risk phase investment in commercial security systems.
2. A support system, financial and legal, for smaller and startup companies that can't afford to spend their money and time worrying about the security of their networks.
3. A national cyber-guard or cyber Peace Corps equivalent, that would spread software and practices first around the US, and then around willing allies and friends abroad.
4. A major national effort to educate the public and market a new "culture of security" for Internet behavior. It's the human link that is and almost certainly always will be the weakest link in any security system. So we need constant messaging about the basic blocking-and-tackling of online behavior to get individuals to recognize their own risky actions and their personal responsibility for security. How did Stuxnet first get into Iranian computers? Likely through a thumb drive that some unthinking Iranian engineer brought into a nuclear centrifuge control center. We don't like to admit it, but the same kind of sloppiness happens all the time in America. As long as Internet culture allows or even supports that kind of "freedom" (as, for example, a culturally acceptable extension of BYOD policies), companies are in real danger.

 

 

Steven Weber

Steven Weber is a professor of the School of Information at UC Berkeley, where he works at the intersection of technology markets, intellectual property, and international relations.