‘India has done a good job in branding itself as the world’s fastest growing democracy’

Sir Martin Sorrell: It doesn’t apply to India. People in India,and people generally,thought nothing could happen to disturb the growth pattern in India. This would be about a year-and-a half to two years ago…Our people and people around the world last year were budgeting minus two in terms of reduction in revenue. And we have come out suddenly in the first nine months minus eight. Why was that? I think we were over-optimistic generally. But I think in India,to be fair,and indeed in China,people were over-optimistic given what had been happening and they thought it could never end. Of course,it didn’t end. It just slowed down.

To be frank,in the UK,we would give our right arm and probably our right leg for the opportunity for flat. Flat is the new up. Yahoo said minus thirteen is the new up at Yahoo. So,life has changed,and in India,I don’t think we acknowledge that. We do acknowledge it now,but having said that,I would say India is in a strong shape as far as the WPP is concerned and as far as the industry is concerned. It is definitely much stronger than it was even a few months ago. So we feel pretty good about our operations there. We have very strong brands in India…be it Ogilvy or JWT or Y&R…

Shekhar Gupta: You talk about advertising,markets etc. And I read that you started out making shopping baskets.

Sir Martin Sorrell: Shopping baskets,yes. Not trolleys. Some people said trolleys.

Shekhar Gupta: You made your fame in advertising but you are the master of brand building. You are a master of brands.

Sir Martin Sorrell: I wouldn’t call myself a master of brands. I try and bring together the strongest brands in our business. When we started in 1985,we were basket manufacturers. Pots and pans as well. I still have them. Then in ’87,we acquired JWT.

Shekhar Gupta: You are particularly sceptical,I notice,of Europe. The cost of restructuring a business is much higher in Europe.

Sir Martin Sorrell: Exactly. But basically,I am a big believer in cycles. India was on the wrong side of history and China was on the wrong side of history for a couple of hundred years. You are on the right side now. And I think Western Europe is on the wrong side now. America—the jury is still out—is a 14 trillion dollar economy.

Shekhar Gupta: But America can also reinvent itself because of immigration,of its openness.

Sir Martin Sorrell: Size,openness,immigrants,culture,human resources,natural resources,America is in a totally different space. America’s economy is 14 trillion dollars. We talk about China being a big economy. Now it is about 4.5 trillion. The Japanese are 4.9 but the Chinese will overtake Japan this year. Japan is very depressed. Japan is the toughest economy in the world. America is still three times bigger than China. It is a long way ahead but China will catch up eventually,according to Goldman.

Shekhar Gupta: Let’s go back to the issue of brands. With technologies now,the cost of starting a new thing—a TV channel,even a newspaper—is much less. You can do it at a fraction of the cost of the past.

Sir Martin Sorrell: Well,it’s a bit more complicated,I think. Not so much in India,because the demand for press,the old-style press—felling trees and distributing newsprint—is still growing,readerships are still developing. But the issue you are raising is not so much about what you just said. I think it’s got more to do with the fragmentation of media. Simply put,if you’ve got 100 dollars of advertising and 10 channels,they get 10 each. If you’ve got a 100 dollars and 100 channels,you get one each. That’s fragmentation.

Shekhar Gupta: But Martin Sorrell runs the business where there are 10 channels and 100 dollars are spent,they get five each.

Sir Martin Sorrell: Now that’s the problem. The fragmentation. The good news is that with technology,there’s a one-to-one relationship between our client and the consumer. The bad news is the highly fragmented relationship. So all the advertising revenue that used to stick to free-to-air television,for example,is not going to stick there any more because you have the development of PC,the development of the mobile,the development of video content. It’s all fragmenting what’s there. Now you see a very interesting phenomenon. Rupert Murdoch says we’re going to charge for content. Why does he do that? This was being proposed for the past many years—even The New York Times is going to do it. And I think this was obvious. So this is one thing that happens. The second thing that happens is,we get major consolidation in the free-to-air television market. And the third thing is,the governments,particularly in the West,have to decide whether we’re prepared to have a consolidated press,for example,magazines and newspapers,or whether we get subsided either privately or governmentally.

Shekhar Gupta: Martin,having bought all these agencies,you are now buying media.

Sir Martin Sorrell: Wait a minute. We have not only acquired these agencies,we have also grown them.

Shekhar Gupta: Yes,fine. But you have also commoditised media buying—you know,buying the media as a commodity. You have a small market. Media depends only on advertising. Are you strangling the goose that lays any eggs,forget golden eggs?

Sir Martin Sorrell: That’s very unfair. Let’s try to generalise this. Different markets behave in different ways but broadly what’s happening is the following. Clients are under tremendous pressure. There is very little growth,particularly in the Western markets. They have little pricing power. They are trying to legitimately and understandably reduce their cost base. They look at their media purchases. They look at the gross media costs and they say this is a very big cost. And what the clients have done is brought their buying power together with agencies and the agencies have brought their buying power together to negotiate more effectively on pricing. This,in the last couple of years,has hit at the same time as there has been a recession. So there’s an over-supply. So you have a cyclical phenomenon and a structural phenomenon and it results in a very tough media market.

Now what happens is also,that agencies,in order to gain market share,have over-promised. There’s a case going on in Germany at the moment involving one of our competitors,where a client has sued an agency for over-promising and under-delivering. And that’s really bad. It will result ultimately in more consolidation in the industry. But what you’re saying is more consolidation among clients,more consolidation among media owners and more consolidation among agencies.

Shekhar Gupta: On my side of the fence,it’s sometimes called Sorrellisation.

Sir Martin Sorrell: That’s very unfair also.

Shekhar Gupta: I read a blog by Howard Davies,director of the LSE,where he quotes Alessandro Profumo of Unicredit that Davos is likely to accentuate whatever mood you arrived in. What mood did you come in,and in what mood are you going out of here?

Sir Martin Sorrell: I was shaken up by what happened the Thursday before last when President Obama announced about proprietary trading,when (US Democratic Congressman) Barney Frank gave his statement,the Supreme Court decision on lobbying,the lack of a coordinated approach on proprietary trading. It was clear that the British,the Germans,the French,the Italians,the Spaniards didn’t know it was coming. So I came here in a very uncertain mood; I think being here,I leave not in a dissimilar mood. I think the banks get it better now. There has been a lot of bank-bashing and regulator-bashing as well. But I think they are getting it. There was some talk today that there will be a meeting of key bankers to decide what else they should do in relation to the profitability issue and bonus issue. The essential issue here is,if you are a taxi driver,and you say to yourself,well,it was my money as a taxpayer that was invested in those banks to rescue them. Profitability is back — God knows how—and bonuses are high. But is this right? This is the way the conventional view today goes. The bankers today haven’t yet responded to that.

Shekhar Gupta: Going back to banks. Look at India. India is right now in its peak form. It has managed the economic downturn beautifully. It is growing now at 7.5 per cent. It has set many things right. Still,somehow,it doesn’t have the profile it deserves. Does it have to fix its brands?

Sir Martin Sorrell: Well,it is early days. I think it is very interesting. India has the world’s fastest growing democracy,that brand has been developed here in Davos.

Shekhar Gupta: That is Martin Sorrell. The fastest growing democracy… Fantastic.

Sir Martin Sorrell: Yeah. But that was yours. I am just picking up what people talked about here. India has done a very good job in branding itself. It has a very dynamic entrepreneurial culture. The big issue for India now is the infrastructure issue. The big contrast between India and China is,when you go to China,a lot of people say it is overbuilt. For India,I think the reverse is true. India is underbuilt.

Shekhar Gupta: Is that all it will take to build Brand India?

Sir Martin Sorrell: No. I think the other one is regulation. I hope Nandan (Nilekani) is successful with his UID project. That’s very important. So I think it’s infrastructure and bureaucracy. I shouldn’t be talking about bureaucracy because if you ask a British businessman what is the biggest issue he faces,he’ll say bureaucracy. So it’s the almost the same in different ways. But look,it is early days,and India has made fantastic and fabulous progress. I am a big believer in business in India.

Shekhar Gupta: I see you are moving a lot of your own back offices to India.

Sir Martin Sorrell: Yes,absolutely. And I’d like to move more. The big challenge for us is how do we manage a business that has got different speeds. We’d love to have the growth we’ve achieved in India everywhere. In India,they’re growing,in China they’re growing,in Brazil they’re growing…

Shekhar Gupta: You keep talking about these three speeds.

Sir Martin Sorrell: Yes,three speeds. The top speed is you,the middle speed is probably America,and the bottom speed is Western Europe.

Shekhar Gupta: What about the next eleven?

Sir Martin Sorrell: Well,the next eleven… Pakistan,Bangladesh,Vietnam,Mexico,Turkey,Sri Lanka,Cuba. Then interestingly,in the next eleven is Iran,which is quite controversial. I hope in time that choice will be opened up to us as well because I see massive opportunities there. It has a young population that is under-branded,under-advertised. So it is very important for media owners like you and for advertising agencies like us.

Shekhar Gupta: So tell us a bit about your view of the creative talent available in India.

Sir Martin Sorrell: Well,I think it’s very strong. We have certain individuals—I don’t want to name them—who are outstanding. I think there is a bit of ire against them in the West. If you have 1.1 to 1.2 billion people and China has 1.4 to 1.5 or whatever number of people,the odds are you are going to have better talent than a population of 60 million or even 300 million. As long as the economic development continues,as long as growth continues,as long as there is continued emphasis on education,infrastructure…

Shekhar Gupta: That is the most encouraging thing in India now—the emphasis on education. The voter has discovered education.

Sir Martin Sorrell: Exactly. What is the prescription for growth that David Cameron laid in Davos? Education is a part of it,technology is a part of it,infrastructure is a part of it,I think it is all very similar. These are the basic criteria for growth and competitiveness. India has it all. Some people were disappointed that India had a single digit growth. But I would be delighted with a growth like that in London.

Shekhar Gupta: Martin,there is no brand ambassador for India better than you.

Sir Martin Sorrell: That’s very sweet of you to say that. Long live India.

Transcribed by Divya Pathak

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