Sir Martin Sorrell needs no introduction to anyone in the marketing world. Founder of WPP, the media and communications conglomerate, he is now focused on S4 Capital, a digital-only marketing services company. Meeta Malhotra, Founder, The Hard Copy was one of two partners at Ray+Keshavan, a brand and design consultancy that was acquired by WPP, while Sir Martin was its Chairman.

The text of the interview below has been edited for clarity. For the full experience, listen to the audio file above.

Why is S4 only focused on digital?

So the answer to your question is, we’re interested in growth. We focused on digital because that’s where the growth is globally. Digital is 50% at the moment, or was 50% of the media market and that’s about $500 to $550 billion last year. It will be more than 50% this year and will grow by about 20%, whereas traditional media will probably grow by only 5%-7%. By 2024, people say digital will be 70%.

We didn’t want to get involved in this zero sum game that you see going on in traditional media. The big accounts rotate between the holding companies on the traditional media side, they rotate in ever-diminishing circles, and the talent does as well. It’s common for the holding companies to try and poach talent from one another, so you have this zero sum game, where accounts bid against one another with procurement and talent is bid for by the talent teams.

The best way to put it is, we wanted to work with companies that look at the sky not look at their boots. The advertising holding companies look at their boots.

In less than three years, S4 has a market cap of $3 billion, which would indicate that your model is working. Do you think it’s time for a new way of looking at marketing and marketing services?


We wanted to create a new age, new era, advertising, marketing services model because we think the traditional model, which has been in place since Marion Harper in the 1950s, has been around for too long. It is 70 years old so it is natural that it needs to be changed and replaced.

We wanted to create a new model and we see ourselves as disrupters. To use grand examples, we are trying to do what Amazon did in the retail business or Tesla in the automotive industry.

We’re really a royalty on the growth of digital. Warren Buffett said in the 1970s and 80s, that holding companies (like Interpublic) were royalty on the growth of multinationals through globalisation. What we are doing is exactly the same, but in the digital world. S4 is really a royalty on the growth of digital companies like Google, Facebook, Amazon, Alibaba, Tencent, Tik Tok, Twitter, Pinterest, Snap… with the continued growth of these platforms and the growth of hardware and software companies like Apple or Microsoft or Adobe or Salesforce or Oracle…So we’re really a royalty on their growth.

How has COVID changed things?


Probably the most significant thing is that we’re seeing companies, adjust and accelerate the digital transformation and digital disruption, whereas before COVID they were somewhat hesitant to disturb the status quo.

The status quo has been disrupted.

And so companies are now giving much more oxygen to ‘change agents.’ Before COVID they said, why disturb something that’s going reasonably well. There is no argument now against significant structural change, because COVID-19, particularly in the second quarter of 2020, blew a hole in the P&L and balance sheets of major companies. And so all the arguments to maintain the status quo and carry on steadily were blown apart.

What do you think of large tech companies like Accenture, who are snapping up so many marketing and design companies?


Accenture is a formidable force.

I listened to their second quarter call and Accenture Interactive has done mid to high single digits, sounds like it grew 7%-8%. I must say I don’t understand their strategy in our area. They bought all these creative digital shops, and they haven’t brought them together.

I mean they all sit there as individual units. They’ve got Monkeys & Maud, Sinner Schrader, Shackleton, Kolle Rebbe, Karmaarama…. probably the most famous of them is Droga5, it certainly was the most expensive one, probably paid about a half a billion dollars for it. Yet they leave them sitting there individually.

We compete very effectively against them. Victor Knapp, one of the founders of Media Monks, our content practice, keeps a running record of our pitches against them and he reckons we are 4:nil up, but it’s only the first quarter of the year and let’s hope we counted correctly.

(Accenture) is just a machine, I mean it’s a $50 billion dollar revenue, $175 billion market cap machine. They spend a billion and a half or $2 billion a year on acquisitions. Not sure they spend very much time on integration, which sort of surprises me but it’s a great business and it’s done a fantastic job. So it’s to be applauded.

But I think it (Accenture) is an aircraft carrier, and we are a torpedo boat

On to some recent trends, What do you think of cryptocurrency and digital collectibles? We’re seeing all this hype about NFT’s, where do you think it will go?

I don’t understand bitcoin. There are people who do understand it, and people who don’t. And I side with those who don’t. With digital collectibles, I guess we’re seeing the start of a market that may well develop legs, but my view on the whole area is I’d rather focus on the blockchain instead of the bitcoin area.

With the development of systems like GPT3 and DALL-E, do you think it’s possible that artificial intelligence will take over creative jobs?


I think that is clearly going to come for the mechanical functions. Maybe for even more sophisticated functions, that will be the case.

I see it as an aid to what we are doing. To my mind, it is like the debate around data, which becomes quite emotional. Many people say data can’t inspire or improve creativity and I think it can. Having deep data insights into how consumers are behaving or thinking, can actually inform creativity. So I think we will see the automation of various functions, and will have to wait and see how AI continues to develop.

There was a client whom I was speaking with, about six months ago, and he said that the results that he got from his AI-developed copy were more effective than the human copy.

You have such a long history with India. What are your plans here?

India is a market that is still ‘influenced’ by media rebates and fees, but I think there is a need also to have transparency. The Indian market will continue for the foreseeable future, I think, to have very important roots in TV and print, radio and outdoor, just by the nature of the country. But 5G will escalate the penetration and market share of smartphones and the use of online, so I think it’s inevitable.

I think we’ve got about 250 people in India now, out of 4,400 worldwide.

You will see an announcement shortly about how we’re embracing new technology in India, which is really exciting. We’re building a new studio in New Delhi. We’ve taken over the old CNBC TV18 studio and we’re building that into an exciting global hub for content creation, production and distribution. I anticipate we will double our headcount in India, excluding anything we do on the deal front, by the end of the year.

But you know, I do hanker after more significant scale in India. We’re still in the context of the Indian market, relatively small.

With WPP, we had about 16,000 people in India including Kantar. That is probably about 12,000 now. The traditional industry has been having a rough time as we’ve discussed. So in the advertising industry it is doom and gloom. And they are cutting back on headcount, they are firing people.

I think there is significant opportunity in the Indian market. You will see for yourself when we announce our numbers. Our Asia Pacific Business Group has grown the fastest of three regions, the Americas, EMEA and Asia Pacific, but it’s from a smaller base. It will continue to grow the fastest, but it’s not fast enough for me. I really want to build a big business and there are two markets, obviously that are critically important from an Asian point of view. The first is China and the second is India.

What kind of agencies are you acquiring in India?

1. No acquisitions, only mergers

We don’t acquire, we merge. We said to Robbie (Note: Robert Godinho is Founder, White Balance, a company that merged with S4 in 2019) and his team, if you want to sell out, you’ve got to do it with Dentsu or whatever. If you want to build a business with us, it’s half shares, half cash. We respect the fact that you’re an entrepreneur who has built a good business. Wanting to capitalise on it is perfectly legitimate, but we want you to take shares in the whole, to have an equity interest, in the whole company.

We are looking for people who want to buy in to our philosophy of creating a new age, new era advertising and marketing services model.

2. Areas of interest

We’re looking for like-minded people in the areas of content, digital advertising, data and analytics and digital media. In all those areas, India is really good.

3. Transparent operations

We want open-book companies, no hanky panky.

4. Strong top-line growth

We’re looking for good records of top line growth. That’s quintessentially important, that the top line growth should be strong.

Our aim is to double our size of our company, organically, without deals, in three years, which means mathematically we grow at a 24% compound growth rate. So we’re looking for companies that are growing at say 20%+ top line, consistently, not just one year. What’s interesting, most of the companies we look at, their COVID growth rates have been slower, but they haven’t gone backwards and they’ve grown, just like we did last year.

5. Margins of 20+%

Our margins are EBITDA margins. Our net revenues are 20% plus, we’re about 22 to 23% at the operating level, and then central costs are about 1% or 2%, so we do just over 20%.

6. Services companies only

We are not an adtech company or a martech company, we’re a services company. And so we are only interested in companies that are part of the service layer.

We don’t want to be vulnerable to shifts in technology, because we benefit from shifts in technology. It moves the needle from one hardware provider, or software provider or platform, as opposed to another. So if Tik Tok is restricted, like it is in India, then there are alternatives and we advise our clients to shift budgets to the other areas.

8. Management shareholding

Finally, the management should have a significant shareholding. Some of the private equity companies have got into this space and what happens is the management gets squeezed out.

We saw one very good company recently, which we really liked. One of the concerns we had was the management only had 5%. We’re looking for very strong management ownership, so probably the best companies are the bootstrapped ones that have not gone to the outside for money.

So, if they fit the criteria, should agencies write to you directly?

Absolutely. Martin@S4capital.com. I’m expecting a torrent of emails!

Why aren’t you on social media?

I’m on LinkedIn and Clubhouse. The honest answer is I like to funnel my activity so having multi-platform activity is something that I have difficulty managing.

How do you manage to reply to every email so quickly?

I have nothing else to do. There’s no Sorrell bot, if that’s what you are thinking. Otherwise it would reply in nano seconds.

Did you just make a note to build a Sorrell bot?

I did, actually (laughs)

6 COMMENTS

  1. Royalty on the growth of digital – very interesting framing. What else is a royalty on the growth of digital? It’s a good way to think about what businesses will grow

  2. As an agency founder this is a massive revelation. I have to start thinking about CAGR and EBITDA. jokes apart, too few of us focus on what brings valuation. Thanks. Meeta & Team THC, very useful for the agency ecosystem to hear this

  3. So what’s the outlook for visual design agencies? Should we be acquiring digital capabilities. I wish Meeta had asked that

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