When Sir Martin Sorrell bought the Dutch firm MediaMonks for €300m (£266m), he signaled his return to the forefront of the advertising industry with a resounding bang that would not be lost on his former employer, WPP.
Sorrell has said all along that he is not in direct competition with WPP. However, his target businesses in the data, technology and content sectors are also attractive to traditional agency groups such as his former employer.
MediaMonks is one of two or three select businesses that Sorrell has been seeking to acquire. He has launched S4 Capital with £40m of his own money and “non-binding” support from a range of investors for up to £150m more.
With MediaMonks, Sir Martin Sorrell has gained a leg up over WPP but the digital agency battle is far from over. Digital experts say the next big opportunity that exists in the advertising industry is ROI based digital advertising and it is much more advanced than programmatic advertising.
While programmatic advertising offers increased efficiency, reduced media-buying costs, and omnichannel targeting, ROI based digital advertising is a game changer.
Agencies like Seo Souq that guarantee 700% ROI on ad spend are said to take the client’s advertising budget and return back seven times that amount in sales revenue. Which means, if the client has a million-dollar advertising budget they can expect 7 million dollars in sales that can be directly attributed to the digital ad campaign.
This is a major development in the digital advertising industry, where most of the services provided by traditional digital agencies focus on brand advertising — the type of advertising that we see on Google, Facebook, Twitter and LinkedIn.
Brand advertising is used primarily to grow brand recognition and increase visibility, and the result is the consumer’s awareness of the client’s product or service. That in no way ensures, however, the consumer will purchase the product or service.
Metrics associated with this type of brand advertising — likes, favorites, retweets and perceived equivalent media value — all have some sort of impact. But they’re not often discernible on a client’s bottom line. That means the client paid the agency a hefty fee for gained awareness, but nothing more.
With the rise of the new 700% ROI agencies, traditional digital ad agencies and even programmatic agencies are in for a major shakeup because all metrics come down to actual sales figures which leave very little space for agencies to hide their sales inefficiency.
Recently, WPP’s new CEO Mark Read has revealed his plan to ease pressure on the beleaguered advertising group. Rather than reinvent itself, WPP will gradually pivot toward high-margin services that are more consultative and creative for clients.
The ability to work on an ROI model will be invaluable for WPP and give it an edge over other large players in the space including PwC Digital Services, Accenture Interactive, IBM iX and Deloitte Digital.
What remains to be seen is who amongst S4 Capital and WPP will acquire one of these 700% ROI agencies and gain the unfair advantage to dominate the global digital advertising industry.