Credit: Sean Benesh via Unsplash
S4 Capital, created by WPP founder Martin Sorrell to mine the ever growing rich vein of digital advertising, is a victim of its biggest clients, the global technology companies.
Part of the problem is that ex-COVID, the tech companies aggressively cut costs, including rounds of redundancies, and set their sights on throwing money at AI.
Meta’s called 2023 its “year of efficiency”.
“Others followed suit,” said Scott Spirit, S4’s chief growth officer. “Sales and marketing expenditures were reduced across the board, having historically posted strong double-digit growth.
“This approach to cost discipline continued in 2024, driven by their strategy to invest significantly in CapEx, primarily hardware and software related to artificial intelligence.”
Google, Meta, Amazon and Microsoft increased capital expenditure investment 56% to almost $250 billion.
“And this meant further pressure on operating and marketing budgets in '24 with Amazon flat and Google and Meta both down,” Spirit told market analysts in a briefing.
“This affected our competitors, too, but given we have almost 50% of our revenues in technology, it had an outsized impact on our ability to grow.”
High interest rates and economic uncertainty led to client caution, which impacted S4’s project-based business and its ability to win new accounts.
Earlier this month S4 Capital, citing market uncertainty and significant volatility from US tariffs, downgraded its outlook again, now expecting full year like-for-like net revenue to drop by mid-single digits.
The company reported tech platforms reducing operating expenses leading to cuts in sales and marketing spend.
And there's less project work, fewer pitches and shrinking new business opportunities at a local level.
And the company’s depressed share price, down by about half over 12 months, has put M&A on hold. S4’s acquisition model is based on a 50% equity 50% cash deal structure, making a weak share price unattractive to potential targets.
This has brought on a tight grub on costs. The company has reduced staff by 9% to 6,900.
Key functions such as finance, legal, HR and IT have been centralised and the business around marketing and technology services simplified.
Spirit sees some change ahead.
“The pace of tech client spend cuts has slowed,” he told the analysts.
“Whilst the investments in CapEx continue to grow at a significant pace, the operating expense cuts … have stabilised with the declines in sales and marketing expenditures moderating towards the end of 2024 and stabilising so far in 2025, particularly at Google, our largest client, as they start to invest in differentiation for their AI products in a highly competitive market.”
And S4 continues to innovate in product.
“We originally launched our AI platform, Monks.Flow at CES in January 2024. And over the course of the past 2 years, we've continued to innovate, win awards, bring onboard partners such as NVIDIA, Adobe and Runway and implement at scale with existing clients such as Google, BMW, SC Johnson and Amazon,” he said.
“We've also developed and started to convert a specific AI-focused sales pipeline.”
And client wins. Spirit said S4 has had a stronger pipeline and new business performance recently, starting with General Motors a year ago.
“We've had a regular cadence of significant wins, including T-Mobile, Amazon, PIF and more recently, a leading US-based FMCG, which we will announce soon,” he said.
“Whilst the overall number of months has declined, we have continued to hire and increase talent across country regional management, capabilities growth and client leadership, talent who are now driving those new business wins.
“And we've also made hires with an operational focus on the optimisation of pricing, utilization, billability and improving our margins and getting staff cost ratios in line.”
Spirit expects an improved performance in the current half year to December.
From a client perspective, we have a really compelling client list with some of the world's leading and most innovative companies,”
“In 2024, nine of them are what we call whoppers, that's with revenues of $20 million plus, which is a differentiator for a company of our scale.
“Most of our direct competitors have a much more fragmented client list with smaller relationships.
“As you can see, we continue to have a significant presence in the technology industry. You can also see the GM win has positively impacted our auto share and other recent wins have been in telco, financial services and FMCG. These are strong relationships that help us attract and retain talent to work on them.”
And the softness in revenue from technology clients is primarily driven by reductions in spend rather than lost business.
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