WPP vs S4 Capital

How would you compare the assets you were purchasing at WPP in the early days to today at S4?

It’s a very different model. Both Saatchi’s, where I was previously to WPP and WPP itself, were what I call market share models. This is not a phenomenon that started in the 80s, with me or with John Wren, with Omnicom, then later on, with Publicis and Maurice Lévy or Dentsu. This is a model that started in the 1950s, so it has run its course. It has been around for 70 odd years. Marion Harper, of IPG, used to fly around in a big jet; it was amazing, really. When you read some of the books about him, he was quite funny, in a way. But it started with him. His view was, I think, primarily for conflict reasons, you had separate businesses because you couldn’t service Unilever and P&G in the same agency; they wouldn’t accept it. You had to have different channels or verticals or organizations.

The idea was that you had McCann and you added Lintas – they bought Lintas from Unilever, because it was actually Lever International Advertising Services; that’s what LINTAS stood for – and they had these separate brands. It meant that you knew, if you had competing brands or you launched a competing brand, that you would cannibalize some of your existing business. It is a bit like detergents at Procter or Unilever; you knew you would lose sales because of cannibalization but, on the other hand, you would build your market share overall. It is very much what I would call a market share model.

Whereas S4 is really about top-line growth. The biggest determinant of total shareholder return, of added value, to shareholders, is like-for-like growth. This morning, WPP has its capital markets day and it talks about accelerating growth. The growth they are accelerating to is about 3% or 4% a year, which is a modest target, to say the least, when GDP is growing at about that rate. But everybody understands that, in the market share model, margin is probably equally as important as top-line growth and you balance the two. Certainly, in our incentive plans at Saatchi’s and at WPP, it was very much about top-line growth and margin, equally weighted.

Today, at S4, I would say it’s two-thirds, three-quarters top-line growth – maybe even more than that – but with decent margins. At S4, we’re doing 20% and a bit more, after central costs. There is not much operational leverage in the business, in the classic sense. There is a bit, but it depends on where the new business comes from.