Britain should be more welcoming to big tech because of their growing importance to small and medium-sized businesses, according to serial entrepreneur Sir Martin Sorrell.
The founder and executive chairman of S4 Capital, the fast-growing advertising agency, acknowledged concerns over the market dominance of the likes of Facebook, Apple and Google. However, he said their significance to helping SMEs generate sales was still not recognised. S4’s top five clients by revenue include Google and Facebook.
“The country needs to be a more welcoming place for tech,” he said. “I know there is concern about privacy, about control of data, about the size of Apple, Google and Amazon. But these companies are extremely important. People just don’t understand, still, how important Google, Facebook and Amazon are for generating sales for small and medium-sized enterprises.
“SMEs are the engines of growth for employment in the economy. During the pandemic, the way companies generated sales was through the tech platforms. The tech platforms get too bad a rap. One does want a competitive landscape — I don’t diminish that — but they are really important. We estimate it is around 60 to 70 per cent of their revenues . . . come from SMEs.
“I know from a political point of view they are an easy target, but I think we have to give them a more welcoming environment. Should they pay their fair whack of tax? Sure. But they do create employment.”
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Sorrell was speaking to Times Enterprise Network in a wide-ranging interview where he also questioned whether the government respected the role played by business in society.
“That has frankly got to change,” he said. “If we are going to rise to the post-Brexit challenge we are going to have to do much more to stimulate commercial activity both at home and abroad, if we want to remain relevant on the international stage.”
The entrepreneur, aged 76, set up S4 in 2018, months after his messy departure from WPP, which he turned from a cash shell into the world’s largest advertising and marketing group over three decades. He remains a significant shareholder of WPP, while S4 has a market value of £3.8 billion and employs almost 6,000 people globally.
Sorrell said that with the economy forecast to continue to grow strongly this year and next, it was a “good time” for entrepreneurs to be setting up new ventures, particularly those focused on digital. He credited the government’s “huge” response to the pandemic for protecting businesses. “I worry a little bit about what is going to happen in 2023 when we are going to have to pay for all this stuff. But to start a business now with that as a backdrop is pretty good,” he said.
Post-Brexit business owners with overseas operations or looking to expand internationally would have to adopt a different approach, he said. “Brexit poses tremendous opportunities but also threats to the UK economy. If we want to remain relevant, UK-based businesses have to be built in a different way to the way they were before. We are going to switch our trade patterns away from continental Europe and to North and South America, and Asia Pacific and the Middle East and Africa. To do that people are going to have to get on their bikes.”
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Sorrell defined entrepreneurship as “risk-taking with your own money and not just someone else’s” and said just under half of S4’s shares were owned by people “within the business”.
Of the 24 businesses it has acquired so far, each had owners who wanted to remain within the larger group, rather than looking for an immediate exit. They were paid half in cash and half in shares. To get the best out of them he has learnt to “create space” for them to operate and not be smothered by the bureaucracy of a large, international structure.
That said, having a common identity across its various agencies to create a sense of belonging among staff and reduce complexity for clients, which include Mondelez and BMW, has become more important. His management team has just agreed to rebrand the individual agencies under the MediaMonks brand.
It is also adopting a hybrid working model, with Sorrell’s favoured mix being three days in the office and two at home. He agreed with Rishi Sunak, the chancellor, who highlighted the importance of young people working in an office environment to build relationships with mentors. “But I think people underestimate the advances that technology will make,” he said. “Zoom today is very different to a year ago, or two years ago. And stand by for what is going to happen in the future.”
He said one silver lining from the restrictions to normal business caused by the pandemic has been the inability for executives of larger companies to travel. “I think it has resulted in companies being better run,” he said. “The bureaucrats at head office have been unable to interfere in local affairs, have given more autonomy to country and city managers, regional managers and functional managers. It has devolved responsibility down and I think that has been a good thing.
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“And a lot of companies have become more efficient and their margins have improved because they have had less office and travel cost. I think that is going to force people to think carefully about their costs in the future. I am going to ration my time more carefully than I did before, and will not at the drop of a hat go to willy nilly anywhere. You do waste a lot of time travelling and add a lot of expense.”
S4 Capital’s business is to monitor what tech platforms across the world are doing and to advise its clients on where they should plan and distribute their advertising budgets. Sorrell said SMEs should be mindful that last year digital marketing made up half of the $550 billion to $600 billion global media spend, and that six big tech platforms — Google, Facebook, Amazon, Tencent, Alibaba and Tik Tok — had the lion’s share of that spend.
“Google this year looks like it’ll be $220 billion of revenues, from $180 billion; Facebook will go from $80 billion to $120 billion; and Amazon will go from $25 billion to $35 billion. That means an incremental $100 billion from those three platforms alone,” he said.
In Asia, Tencent and Alibaba are the dominant players, with Tik Tok growing quickly as an effective advertising platform for SMEs. “Tiktok is on the rise. Bytedance, its parent did $32 billion last year, against $9 billion two years ago,” he said, adding that companies should also explore using Snap, the US instant messaging app, and Zynn, owned by China’s Kuaishou, which is the second most popular video platform in China.
https://www.thetimes.com/article/advertising-agency-s4-capital-predicts-surge-in-profits-23rqsh3f9 https://www.thetimes.com/article/advertising-agency-s4-capital-predicts-surge-in-profits-23rqsh3f9
