One of the big themes at the Cannes Lions International Festival is the role of artificial intelligence in advertising and marketing. In an interview with Yahoo Finance Executive Editor Brian Sozzi, advertising veteran Sir Martin Sorrell, Founder and Executive Chairman of S4 Capital, breaks down the ways he thinks AI will impact the ad industry.
– You’ll never know who you find at Cannes Lions. So I’m having a power lunch right now. A power lunch with Sir Martin Sorrell, S4 Capital Partners founder. Not many people get to have a power lunch with you, Sir Martin. So thank you for joining us. We appreciate it.
SIR MARTIN SORRELL: We haven’t had much of a lunch.
– We had lunch. We had some coffee, we have some water and nuts.
SIR MARTIN SORRELL: I’ve had water and that’s it.
– All right, we’ll get it after. We’ll get it after this interview. So talk to us. You’re a veteran of the Cannes Lion events. What do you think of all the tech companies here?
SIR MARTIN SORRELL: Well, it’s become a tech conference. And what do I think? I mean, look, you’ve got the six big platforms, the three Western and the three Eastern. So you’ve got Alphabet, you’ve got Meta, you’ve got Amazon, you’ve got Alibaba, Tencent, and TikTok or ByteDance.
Then you’ve got the smaller platforms like Twitter and Snap and Pinterest. And then, of course, you’ve got the Microsoft, Apple presence. Because that, with AI in particular, is going to become– and the metaverse. I mean, you saw Apple’s announcement around their new headwear.
So I think those eight companies, plus NVIDIA, obviously supplying the picks and shovels. And then I would add Salesforce and Adobe. I think that’s where– and interestingly, because of the regulator trying to stop Microsoft on Activision, stopping Meta on GIFE, for no good reason.
And the only reason could be that big is bad, right. There’s no logical argument about cloud gaming or scale on GIFE. I mean, you could have solved that in a heartbeat. So with the regulator putting pressure on them, it means that those companies are going to become even more focused on organic growth. So their research budgets are huge.
– Let’s go back to Apple. Made a lot of headlines with these fancy-looking glasses. Is that an opportunity for the end industry? How does that change what this industry does? How does it change media?
SIR MARTIN SORRELL: I would guess that companies like Apple are going to be coming out with– rapidly– with announcements in the AI space, just as we’ve seen from Alphabet and Microsoft. I mean, Alphabet have been working on this since 2014. I mean, they’re the father or mother of this.
So I would wrap it around three things, Blockchain, metaverse, and AI. And AI, or AGI, has already started to impact visualization and copywriting, that’s one thing. Hyper-personalization at scale. So if we thought we could produce for Netflix, you know, 1.5 million creative assets, we’re going to be able to do multiples of that.
The third area is media planning and buying. Why rely on a 25-year-old media planner or buyer when you can rely on an algorithm without checking it? You wouldn’t give your budget to Rupert Murdoch unsupervised. I’ve got nothing against Rupert or whether he would do anything wrong, but you want to have a validation. So we validate, we resell, if you like, and we watch and we monitor. So that’s the third area.
Use is a super tool for improving our own processes and client process. And then the thing, I think, which is the most important thing is knowledge sharing. So the guy who resigned from Google because he thought the bots would be an existential threat, I think, actually, it’s also the reverse. You can turn human beings into human bots because you can transfer knowledge with them.
And as long as the data that you ingest into the platform is right, and over time it gets better and better. And as long as you open it up to everybody in your organization. So all our 9,000 people will have access, God willing, to all this information.
– What’s your economic outlook? I’m assuming you met with a ton of people, you always have a good pulse on this stuff.
SIR MARTIN SORRELL: It’s tough. It’s tough. I think ’23, ’24– in the presentation I did on Monday, I finished it off with ’23, ’24 is going to be tough. I mean, the stuff in the last few days around interest rates, what Powell said, what the Bank of England have done in the UK, it looks like, well, GDP will be lower than before.
Interest rates– inflation will be higher. It’s not going to go down to 2%. And interest rates will be higher for longer. So that has not bitten into the economy. I mean, it’s quite interesting watching what’s happening about mortgage rates in the UK.
Consumers are now starting to complain bitterly as they refi their mortgages, or renew their mortgages, about the increased cost, and they’ve never really focused on it. So they didn’t have variable rate mortgages, they had fixed and had to refi them. And that’s starting to have a huge impact, I think, on consumer sentiment.
So I would say, chances of a recession, Goldman, I think, have it at 25%. The GDP growth in the US around 1.7. There was a different place. It’s much more fractious, fragmented place.
– I’ve asked a lot of big CMOs, we’ve had a lot of CEOs on Yahoo this week, how they plan to advertise and approach and lead during what could be a very polarizing– another election next year. What is your sense of this? How are companies going to advertise? Are they going to pull back, do you think, during next year?
SIR MARTIN SORRELL: Well, the geographical fragmentation means you have to select your markets much more. So North and South America, the Middle East, and Asia. And I’m going to say, not ex-China, but if you’ve got a big position in China, you’re not going to go more because of the tension around Taiwan.
If you have a small position, you know, I think Unilever has 7% of its revenues in China, for example. And it should be around 20%, because China is $18 trillion out of $100 trillion GDP. And 2050, it will be the biggest. So that’s one thing. Europe, the runes are not so good. And people are looking more from a cost base than cutting cost than revenue growth. So those will be the growth markets.
So in Asia, it’ll be India is the big gainer, Modi’s in America, and they’re playing both ends against the middle, but doing the right thing by India. And I think that’s growth. Indonesia, Vietnam, Thailand, the Philippines, Malaysia, Singapore. So that’s the sort of geographical.
On the technology side, because it’s lower growth, and therefore the focus will be on quarterly growth, like-for-like growth, and margin, that’s going to mean that the digital transformation is going to be accelerated. So I think what clients will be doing is there’ll be more activation and performance, more lower funnel– what we call lower-funnel work, less strategic work, very focused on results, very focused on performance, ROI, measurement. And then geographically, they’re going to be much more selective.
And it used to be– last 50 years, didn’t matter where you went, if the demographics were with you, you did well. Now you’re going to have to be much more selective. And so it’s a very different world to the last 50 years.
– We will leave it there, Sir Martin. You’re always gracious with your time with Yahoo Finance. We’ll let you get back to your– what? Meeting. How many meetings have you had?
SIR MARTIN SORRELL: Too many.
– Too many. We’ll leave it [INAUDIBLE].