Tough economic conditions will make it increasingly hard for independent agencies to survive or thrive, WPP chief executive Sir Martin Sorrell has told AdNews.
Although holding companies like WPP, Omnicom, IPG and Publicis have historically relied heavily on gobbling up independent shops to fuel their growth ambitions, Sorrell said last week during a visit to Australia that it was becoming increasingly tough for independent agencies as a trend to consolidation continued.
“In tough economic conditions it does make it harder,” he said. “Take the UK for example. We have seen a couple of administrations recently. Companies that looked as though they were doing well, smaller companies, have had a very tough time for all sorts of reasons, probably the wrong reasons.
"Clients are looking for efficiencies rather than effectiveness so in tough economic conditions in slow growth markets it is very difficult and smaller sized agencies are finding it more difficult. There is a natural consolidation of share among the bigger agencies in tough economic conditions."
Sorrell downplayed the impact a lack of start-ups might have on WPP and its growth targets, which means it must effectively start a $1 billion billings agency each year.
“We have done an embarrassingly large number of deals in the first seven months – 40 of them in one way or another,” Sorrell said. “There is not a shortage. All I’m saying is we are dependent on organic growth so we have to position the company in fast growth markets – geographically or functional like digital or media planning and buying.”
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