Former WPP chief Martin Sorrell said he was “extremely optimistic” about the economic recovery and the outlook for the advertising market this year and next as the Covid pandemic abates and programs stimulus went into effect, but later expressed caution when governments impose higher taxes to pay off their emergency borrowing.
As he increased the 2021 revenue and gross margin target for his digital advertising business S4 Capital after strong customer demand in the first quarter, Sorrell said that a rebound in global GDP growth in 2021 and 2022 would result in 20% annual gains in digital advertising as the pandemic accelerates media transformation.
“We are extremely optimistic about our outlook for this year and next, given the huge global fiscal and monetary stimulus introduced to counter the impact of the pandemic and the resulting increase in consumer savings ratios. and the stagnation of business capital investment, ”he said.
“The chickens may well return home to roost in 2023, given the debt burden most countries will have and the tax increases that will need to be implemented. But, digital marketing spend remains robust even in times of recession, as our results last year show, given its secular growth trend.
The company aims to double its size, excluding acquisitions, over the next three years.
The advertising mogul said there is a strong correlation between GDP growth and digital ad spending. After last year’s decline, the global economy is estimated to rebound 5-6% this year and 4-5% next. “When was the last time we saw two years in a row where GDP growth was at these levels and with low levels of inflation, at least for now?”
Sorrell believes there will be a permanent switch to working from home or hybrid between home and office. On average, offices will be occupied three days a week, although the trends may differ geographically, he predicted. His firm will continue to merge his two practices in each city into one location and change the layout of the offices, which can vary between spaces for clients, areas where staff work together and places where privacy is assured.
S4 Capital posted a 71% increase in revenues to £ 121.6million and gross margin to £ 104million. The growth rate of the gross margin at constant scope fell from 27% in the fourth quarter of 2020 to 33% in the first quarter of this year. All regions posted strong performances.
The digital advertising group will aim for 30% organic growth in revenue and gross profit, up from 25% previously. It employs nearly 5,000 people in 31 countries after hiring 2,500 in the past year. Sorrell founded the company just months after resigning from WPP after an investigation of alleged personal misconduct in 2018.