Sorrell: The real impact of AI will be felt in media
The biggest impact of AI is not on creative but on media. That is the message Sir Martin Sorrell brings to DMEXCO in Cologne. Algorithmic planning and buying will expose the entire media supply chain, including the discounts the large holding groups rely on.
Sorrell is founder and executive chairman of S4 Capital, which he started in 2018 after 33 years at the helm of WPP. On stage in Cologne he first marks his own homework, running through the predictions he made a year ago.
Three predictions revisited
Sir Martin Sorrell, founder and executive chairman, S4 Capital: "Visualisation and copywriting have been totally turned upside down. It compresses time and materials and therefore revenues. So the model has to change."
Prediction two, personalisation at scale, is happening as well. It depends on two things: signals from the large platforms and first-party data held by the advertiser.
"That is where the rubber hits the road, because there are very few clients that have fully integrated data platforms. They talk a lot about it but when you have grown through acquisition, or had different CMOs and CIOs over long periods who all chose different systems, it is quite difficult. One luxury company has one global database, which is formidable when you think about luxury purchasing on a global basis. Another very successful multi-brand luxury company has not done that."
Media is next
The third prediction, algorithmic media planning, is where the conversation lands. Around 250,000 people still work in media planning worldwide.
"That is going to be drastically reduced. Cannes Lions focused on the wrong thing this year: the impact of AI on creative. The real impact of AI is on media, certainly in the short to medium term."
"All the frictions in the system are coming under extreme microscopic evaluation: the spam, the cat fight between Publicis and The Trade Desk, the leaked audit report which was not leaked, the take rates The Trade Desk were taking. Algorithmic media buying and planning will focus laser light on the media supply chain, on all the frictions that Publicis, WPP, Omnicom and Dentsu rely on. Frictions is a polite way of saying discounts. Those are going to go."
What replaces them, in his view, is a model in which agencies charge fees and pass discounts and kickbacks back to the client. "A totally transparent and open process."
The platforms have already started
That shift is already visible at the platforms themselves. Google is retiring Dynamic Search Ads and replacing them with AI Max, which decides for itself which queries an advertiser competes for, adapts ad text and expands landing pages. Advertisers could upgrade voluntarily from April. This month the automatic migration begins and no new campaigns of the old type can be created.
At Meta, partnership ads became available through the Meta Ads MCP connector in September, so agencies can have AI agents build campaigns instead of doing the work by hand. At the same time Meta is putting the advice of its Business Agent behind paid subscriptions, running from about 15 to 499 dollars a month.
The wrong fifteen percent
Advertisers have been looking at the wrong part of their budget for years, Sorrell argues.
"I do not understand why procurement departments are so focused on the 10 or 15 or 20 percent creative fees, or what they call non-working media, which drives me crazy because we work hard for that. They do not focus on the 80, 85 or 90 percent that is the media cost."
The proportions in that market are stark, he tells the room. Digital media will cross 1 trillion dollars this year, in a total market of roughly 1.35 trillion. Google accounts for about 350 billion dollars of that, Meta for 250 billion, Amazon for 80 to 85 billion and TikTok outside China for 50 to 60 billion. Those four platforms take more than half of the total market and two-thirds of the digital market.
Pricing per asset instead of per hour
If creative work and soon media are largely produced and bought by machines, the basis for the hourly rate disappears. Sorrell wants pricing based on outcomes, on assets or on licence fees.
"We are selling software. Marketing departments get it. Procurement departments are very slow and loath to move to a pricing model they do not understand. They want protection on the upside. When you say they also get protection on the downside, it does not follow."
Who changes and when
Companies only change when they are pushed, is his position. The numbers give them little reason right now. Earnings per share in the S&P 500 rose 50 percent in the second quarter, the seventh consecutive quarter of double-digit growth. Stripping out one-time gains leaves about 30 percent and stripping out the hyperscalers 14 percent.
Where the pressure is felt, change comes quickly. In the car industry he points to BYD as the driver, with S4 working on AI transformation with General Motors, BMW and Honda among others. In financial services he names Revolut and Nubank, both now holding American banking licences, against JPMorgan Chase, Santander and HSBC. In packaged goods, with clients including SC Johnson and General Mills, price competition is biting because consumers no longer accept price increases.
The hyperscaler bill
The spending of the large platforms is the biggest open risk, in his reading. Alphabet, Meta, Amazon and Microsoft will together spend roughly 1.1 trillion dollars next year on AI, data centres and capacity, of which 530 billion is borrowed. Between 2025 and 2030 analyst forecasts put the total at 5 trillion dollars. The second quarter was the first in which Meta and Google went cash flow negative.
"They are moving from a capital light model to a capital heavy model. It will come to an end at some point. My guess is another year or two. It reminds me of the railways. There were failures but they built out the network. That is what is happening here."
Europe regulates
On Europe he is gloomy. "The Americans innovate, the Chinese imitate and the Europeans regulate. We positioned the United Kingdom as the regulator, not the innovator and not even the imitator. That fills me with horror."
Beyond the United States and China he sees one third force: the Middle East, with energy as its base and players such as Humain, the AI company owned by Saudi sovereign fund PIF, and G42 from Abu Dhabi, which is building the Stargate UAE data centre with OpenAI and Oracle.
The human dimension
He rejects the idea that generative AI makes everybody's work look the same. Through its venture fund S4 has invested in video platforms including Runway.
"These tools raise the average level of everybody. Until machines become more powerful than people, the human dimension becomes more important. It brings that extra spark, the strategic insight and the creative insight that makes the difference."
Sorrell closed with a demonstration of Monks.Flow, the AI platform S4 sells for marketing transformation, which the company says cuts marketing costs by 45 percent.
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