Prominent Exit From Ad Industry Sets Off Questions About Future

But that has changed in the past decade, Mr. Doctoroff said, as digital platforms and publishers have expanded, which “called into question the utility of the holding company as the entry plank into brand-building.” He added: “The fundamental question is not if holding companies are going to survive. The question is what reforms and structure are necessary in order for them to thrive in the future.”

As ad holding companies like WPP have focused on managing the costs of the myriad agencies they own around the world, some industry experts say talented people have been jettisoned. And, they say, the sheer size and complexity of the companies has been a particular challenge when trying to be responsive to clients’ needs in an era of profound change.

In the past 15 years, chief executives at agencies have struggled with pricing pressure, bigger workloads and defending their relationships with major brands, as the rise of digital and social media has pitted them against an ever-increasing number of specialized firms, said Michael Farmer, a consultant for agencies and the author of a book about the industry’s changes called “Madison Avenue Manslaughter.”

“What they have done is say, ‘how high’ when asked to jump by holding company owners,” Mr. Farmer said. “They’ve downsized when they could not make profits any other way, which was most of the time. They shed their most expensive, valuable people.” As a result, he said, “they are weak and they can’t deliver decent advice.”

But Brian Wieser, a media analyst at Pivotal Research, said that he did not see a larger message about the state of holding companies in Mr. Sorrell’s exit.

“I would argue that if WPP were an American company with a more subservient board like many American companies, you probably wouldn’t have seen meaningful traction around the idea of Martin losing his job, for better or for worse,” he said.

Still, he said that WPP has had issues with managing its sprawling resources, pointing to the company’s loss of ATT to its rival Omnicom. Omnicom presented a better case for how several pieces of its business would work seamlessly for the telecommunications giant, he said.

Article source: https://www.nytimes.com/2018/04/22/business/media/martin-sorrell-advertising-wpp.html?partner=rss&emc=rss