• WPP CEO Sir Martin Sorrell is not worried about consulting firms encroaching on advertising agencies’ business.
  • Speaking at UBS’s Annual Global Media and Communications Conference, he said that head-to-head on digital, ad agencies were ahead of consulting firms.
  • But, consulting firms’ reputation for cost-savings remains an “extremely seductive proposition.”

Sir Martin Sorrell is not worried about consulting firms encroaching on advertising agencies’ business – at least not yet.

Speaking at UBS’s Annual Global Media and Communications Conference in New York on Monday, the CEO of WPP, the world’s largest advertising holding company, said that consulting firms can’t compete when it comes to digital advertising – the fastest growing part of the ad business in terms of media spending.

“I don’t think that head-to-head on digital, the consultants currently win,” he said. “You can’t buy creativity, you can’t buy digital capabilities.”

Huge consulting firms including Deloitte, Accenture and IBM, among others, see an opportunity in advertising, and have been moving into the sector. But according to Sorrell, these firms do not pose a threat to ad agencies. This, he said, was because they still focus primarily on offering consulting services, “fashioning” creativity into the mix as an added competency.

But he did acknowledge that consulting firms were successful in pitching themselves as more strategic and tech-savvy advisors.

"Where I do think the consultants have made headway is on the general proposition that if you're the CEO of a company, you're currently spending too much," he said. "And in a low growth world where there is no inflation, there is no pricing power, and there is a focus on costs, that is an extremely seductive proposition."

Later in the talk, Sorrell said that innovation and focus on brand were key areas that agencies needed to zero in on moving forward, both areas where holding companies were well-positioned to help with. But he warned that the days of market share growth by multiple brands are gone.

"You need an organization that functions as one," he said, pointing at the ongoing effort at WPP's agency Ogilvy, where CEO John Seifert is trying to create "one Ogilvy." He also pointed at the merger of WPP agencies MEC and Maxus as another example, saying that "thoughtful consolidation, not an irrational rush" were key.

Sorrell also added that linking data with media was critical. Agencies that could do that in meaningful ways for clients, he said, would eventually win.