What's going on here?
Sir Martin Sorrell, iconic CEO of the world’s largest ad agency, WPP (which works with more than half of America’s Fortune 500 companies), said on Saturday that he was stepping down, potentially heralding a new era for the marketing behemoth.
What does this mean?
Like many other advertising firms, WPP has struggled in the digital age as overall spending on advertising has declined (see below) – and it recently saw its shares hemorrhage in value as it warned investors that it wouldn’t earn as much in profit this year as it had forecasted.
On top of that, a scandal erupted in which Sorrell was accused of personal misconduct and misusing company funds. While the company officially exonerated him, the debacle hurt his standing with shareholders – and now, he’s announced that he’s resigning.
Why should I care?
For markets: This might facilitate the split-up of WPP. [tweet this]
WPP is a huge marketing conglomerate, and some shareholders have been pushing for years to have the sprawling firm divvied up into different companies, some of which could then be sold off to other ad or media firms. Sorrell was never big on the idea, apparently – who wants to see their empire split up into small fiefdoms? – but now that he’s out of the picture, this is a more likely possibility.
The bigger picture: Recent scandals have raised questions about the future of digital advertising.
One reason why traditional advertising firms are on the decline is that companies can now cheaply and more directly market their products on social media platforms. Importantly, many platforms – like Twitter and Facebook – are free because they earn a substantial chunk of their revenue from this digital advertising. In the wake of the Cambridge Analytica scandal, there was some speculation that large corporations would desert Facebook and reallocate their advertising spending – but in reality, it seems like most companies want to keep the status quo.