WPP keynote: Mobile advertising has not reached full potential
By Dan Butcher
November 5, 2009
Sir Martin Sorrell is founder/CEO of WPP
NEW YORK - The keynote address kicking off the first day of the ad:tech New York conference proclaimed that ad agencies and their brand clients are still waiting for mobile advertising to reach its full potential.
Drew Ianni, advisory board chairman of expositions programming at ad:tech, introduced the keynote speaker, Sir Martin Sorrell, founder/CEO of WPP Group plc, London. In addition to discussing the shift in power to Asia and Latin America and the need for sophisticated consumer information and analytics, the knight’s keynote focused on the rise of new media and the impact it is having on the marketing and media ecosystems.
“Our company specializes in advertising, marketing and communications services, and we’re still waiting for mobile advertising to reach its full potential,” Mr. Sorrell said. “One of our biggest disappointments is that mobile advertising hasn’t been as successful as quickly as we’d like to see it.”
However, Mr. Sorrell did say that there have been many innovative, successful mobile advertising campaigns. He cited a joint BMW/Michelin initiative in Germany designed to sell snow tires that targeted mobile advertising to consumers in areas where it was currently snowing.
“Snow-tire sales went through the roof,” Mr. Sorrell said. “There have been some wonderful mobile campaigns that are very impressive and innovation, but it doesn’t gain any traction.
“Mobile advertising still represents less than 1 percent of brands’ spend,” he said. “The development of smartphones is encouraging and the consumer use of mobile is up considerably.
“There will continue to be a lot of innovation in the space and further advancements of mobile technology, as well as improvements in wireless networks and digital advertising platforms.”
One barrier that Mr. Sorrell said is preventing mobile advertising from reaching the scale he is hoping for is fragmentation of the industry.
“Carriers haven’t seen the common interest to get this going,” Mr. Sorrell said. “Also, there has to be a shift in brands’ mobile budgets—our clients will have to experiment much more significantly and invest in mobile campaigns.
“The great news about new media is it’s one-to-one, and the bad news is that it’s one to one, because there’s total fragmentation,” he said. “The old models don’t work, so in addition to the free ad-supported model, we need to find where people will pay for content.”
Getting priorities straight
Mr. Sorrell discussed three major trends—one geographical, two functional—guiding the way WPP’s clients think about their business and thus affecting the company’s strategic priorities.
Mr. Sorrell summed up his company’s primary areas of focus as “new markets, new media and consumer insight.”
The first trend he mentioned was the ascendance of China and Latin America as increasingly important markets.
“I still don’t think we fully understand, standing here in New York, the shift in power from the West to the East and South,” Mr. Sorrell said. “Latin America is approaching a decade where the world will be increasingly focused on it, and China Mobile in all its iterations is the most valuable brand in the world outside the U.S. and is ranked five, six or seven worldwide.”
China’s total population is around 1.5 billion people. China Mobile has approximately 500 million subcribers out of a total of 700 million wireless subscribers in China. Its subscribers have been increasing by 8 million a month.
India has 425 million wireless subscribers, and that number has been increasing by 12 million a month.
“Geography is increasingly important, and every client of ours is focusing on those parts of the world for growth,” Mr. Sorrell said. “The last couple of years have been quite remarkable for two things—it’s all about China and the Internet.
“The most important piece is that 100 percent of the growth in our industry in 2007 and 2008 came from growth in China and growth in the Internet, and in 2009 the growth in China and the growth in the Internet has accounted for more than 100 percent because everything else has gone backward,” he said.
“The growth is coming from new markets and new media such as the Internet and mobile.”
In addition to discussing his company’s increased focus on collecting and analyzing consumer data, citing WPP’s acquisition of TNS, Mr. Sorrell talked about the impact of new media.
“The rise of new media is significant, and I mean the PC, I mean mobile and I mean video content—those are the most powerful parts of it,” Mr. Sorrell said. “New media already represents 25 percent of our $14 billion in revenues, and its growth will continue to be significant for a number of reasons.
“Currently our clients spend about 12 or 13 percent of their worldwide budgets on online and new media in one way, shape or form, while consumers are spending about 20 percent of their time online, up to 28 percent for the U.S., but certainly more than 12 or 13 percent,” he said. “There will be a natural gravitational pull to 25 percent over the next five years.”
So why has the shift in brand spending not happened already?
“The reason is, people who run brands and agencies tend to be of an older vintage, and they tend to be resistant to change,” Mr. Sorrell said. “Last year was the first time that a generation had gone to university in the U.S. that grew up totally exposed to the Internet.
“There’s a generational change that has to take place and when it does it will be quite significant—very significant,” he said. “We’ll continue to see more diverse geography, more new media and better consumer data, and the brands will come around.”
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