As part of its plan to double revenues and profits during the next three years, Sir Martin Sorrell’s “new-era” ad network S4 Capital is in the market for a first-party data business. And although he’s been tipped as a likely bidder for Kantar (of which former firm WPP is looking to offload a majority stake), it doesn't look like he's going to bite.
“Not the whole of it,” he tells The Drum when asked if he's interested in the potential acquisition. “If WPP was willing to sell parts of it, yes – but not the whole.”
Sorrell is explicit in that the “parts” he is referring to are Kantar’s first-party data properties, which include digital data collection firm Lightspeed, consumer research arm Kantar Worldpanel and media monitoring business Kantar Media.
Given that it’s just consolidated Kantar’s individual brands into the one umbrella group, it’s highly unlikely WPP would chop up the research firm’s portfolio for buyers. The Drum also understands that Sorrell is not engaged in any official conversations with the group either.
Still, the search continues for both parties since Sorrell has emphatically expressed interest in S4 “laying hands on sources of first-party data” – a play that would make it more attractive to clients in a world where ad budgets are increasingly funnelled into walled gardens.
The ad titan has also been critical of what he sees as his ex-employer’s inability to “lock together” first-party data and media buying, something he wants to do differently at S4.
Kantar’s has been valued in the region of $3.5 bn, making its buying price high. In March too, WPP announced plans to consolidate the research firm's operations into a single entity to make it “easier for clients to understand”, a sign it wouldn’t unbundle anything for interested parties. WPP chief exec Mark Read has also hinted at WPP retaining a 25 to 40% share in Kantar’s assets.
Alternative buyers are reportedly circling Kantar, including private equity firms TPG, Apax Partners, Bain Capital and Cinven. None have gone on the record to confirm if they are in talks with the holding group.
Sorrell’s interest in bulking up S4’s data capabilities with an acquisition coincides with old adversary Publicis Groupe's $4bn purchase of data business Epsilon.
Although Epilson will be integrated into the wider Publicis Groupe, Sorrell personally doesn’t rate the deal, claiming it won’t solve Publicis’ revenue growth problem.
“It’s a tired data asset dependent on big contracts or relationships, which have shifted recently. I think it’s being done more for defensive reasons. With a market capitalisation of €11bn, Publicis is vulnerable,” he says.
Overcoming 'agency incumbency'
This week marks one year since Sorrell’s acrimonious departure from WPP, which was swiftly followed by the launch of his own pure digital model which offers brands creative, content and production.
S4 Capital has already posted its full-year results for 2018, reporting pre-tax profits of £7.6m and a revenue bump of 58% to £135.9m.
Acquisitions so far have included digital production outfit MediaMonks and programmatic consultancy MightyHive, which has since picked up business from the likes of EA.
In February, MediaMonks won Avon’s global content business and MightyHive helped Sprint bring media in-house – giving a flavour of the different services S4 is pitching to clients, in a manner Sorrell would say is “faster, better, and cheaper”.
He notes that helping clients in-house different services – from programmatic to creative – is becoming a bigger part of S4’s remit.
“Agency incumbency is a problem; clients are concerned that agencies are doing things in their own interest and not in the clients’. [S4] isn’t concerned about that. We want to do the best thing given the circumstances. That could mean a co-located model, it could be an outsourced model, an insourced model, it’s across the spectrum.”
He acknowledges that no matter the in-housing model, talent retention and keeping pace with technology are both issues brands need to consider before diving in.
When MightyHive in-housed Sprint’s media business via its internal ‘Hive’, Sorrell says the agency worked with the advertiser on hiring and training elements. The brand’s chief digital officer, Rob Roy, has claimed it helped the brand save $150m of media spend.
It has to be done right, though, Sorrell notes.
“There are models agencies claim to be in-house models, but they’re not – it’s just out-house people sitting with the clients’ t-shirt on but effectively they are out-house.”
While he didn’t offer any examples of which brands are investing in these kinds of structures, he did take aim at the concept of bespoke agency models, of which he orchestrated several of at WPP including Global Team Blue (GTB): the bespoke agency built to service Ford which lost the brand’s creative business to Omincom last year.
“Although well-intentioned, the law of unintended consequences is that clients feel insecure or threatened by [these models],” he explains, saying that in a world where Facebook and Google take hold of around 80% of marketing budgets in return for little data, clients are increasingly reviewing their own abilities to build connections with customers.
“In this environment of lower growth, no pricing power, and the walled gardens getting bigger, [clients] are saying, ‘OK, we've got to try and build more internally before we go for in-housing on creative content, and media'.”