As CEO of WPP, the world’s largest advertising group, there’s a lot that could keep Martin Sorrell up at night. The London-listed $27.6 billion company—home to agencies like Ogilvy & Mather and J. Walter Thompson that service the world’s biggest companies—is dealing with slowing growth, fierce agency competition, and a duopoly on digital media held by Facebook and Google that is altering the advertising landscape.
Yet it is not those two Silicon Valley giants or even his young daughter that worries Sorrell the most. It is Amazon.
“In answer to the question, my favorite question, ‘What worries you when you get to bed at night and you wake up in the morning,’ it’s not a 3-month-old child,” said Sorrell, on WPP’s fourth-quarter conference call yesterday. “It’s Amazon, which is a child still, but not 3 months.”
Currently, digital advertising, which may soon overtake TV in terms of total ad spend, is controlled mainly by Facebook and Google. The pair was estimated to account for 58% of the $72 billion in US digital-ad revenue last year, eMarketer found. Yahoo and AOL are poised to created a third player, when Yahoo’s merger with Verizon is complete, Sorrell forecasts.
By comparison, Amazon only accounted for roughly 1-2% of the 2016 US digital-ad market.
But the e-commerce company, whose fledgling advertising business is still finding its way, has troves of data on how people shop. More than that, the conglomerate has data from media platforms like Amazon Video and Amazon Music and its Alexa-powered AI devices in people’s homes on what users search for, how they watch TV and movies and listen to music, and what they shop for while doing so. All this combined could make Amazon a powerful force in the digital-advertising space in the years to come.
As Sorrell pointed out, it could even rival Google in search. Shoppers use Google to research potential purchases, but Amazon is where they buy. “Amazon’s penetration, to most, there is frightening, if not terrifying, to some,” Sorrell said.
WPP already has strong relationships with Google and Facebook, which Sorrell described playfully as “frenemies.” But he’s unsure what to expect from Amazon. He described it as the least friendly of the bunch.
Recently, Sorrell said that WPP opened up an agency in Seattle, where Amazon is based, specifically to deal with and cater to the e-commerce giant.