Interview: Sir Martin Sorrell, ceo WPP (page 1 of 4)

Q. What is the outlook for the global advertising industry in 2003 and the following years?

A. This year is going to be difficult. But better than 2002, which in turn was slightly better than 2001. I think the recessionary forces we have seen will continue, although maybe slightly less.

The US is obviously under pressure; the UK is under pressure. France, Germany, Italy and Spain are experiencing difficulties. Central and Eastern Europe and Russia were a little bit better in 2002. Asia has been difficult, with the exception of China and South Korea. Japan remains difficult, obviously. Latin America has been very difficult, starting off with Argentina and then expanding into Brazil when there were election concerns about Lula and what he would or would not do.

Generally, I think 2003 is going to continue to be a difficult year. We don't see any significant signs of a change in client attitude towards spending or advertising investment. We think it's totally the wrong approach. We think they should be spending in difficult times, but human nature being what it is and CEOs only lasting on average for four years, it is difficult. 2004 will be different.

I should say that obviously an Iraqi invasion or hostilities, or the length of those hostilities, would have an impact on 2003. If the conflict is short and sharp, which many commentators believe it will be, maybe that would reduce levels of uncertainty, but obviously the uncertainty surrounding the Gulf is causing a lot of concern.

Longer term, it is not just concern about the conflict itself, but what happens afterwards. It is an issue of 'hearts and minds' rather than military conflict. So I think those are the prospects, or lack of them, for 2003. I think 2004 will be better.

The American presidential election and the fact that George Bush will seek or want to be re-elected for a second term; the fact that political advertising tends to squeeze the media markets and drive prices higher; the fact that we will have an Olympic Games in Athens, albeit not as powerful as the Olympic Games in Beijing in 2008. If you want to have a boom, let's wait for that one with the Chinese government investing or committing $45 billion to infrastructure investment alone.

I think the general environment in 2004 will be better. These are what we call quadrennial factors, which affect our business every four years. Every four years, we have an Olympic Games, we have a presidential election, and no president wants to go to the country without the economy in decent shape.

Q. What are the prospects for WPP?

A. I think we are very much dependent upon forthcoming events. Now, having said that, people still tend to think of us as being an advertising business, but we aren't. We are more outside advertising than inside. Outside advertising means public relations and public affairs. It means information and consultancy, which is basically market research.

It also means direct and interactives for specialist communications: healthcare communications; branding and identity, things like that. Our strategic objectives are very much to increase that part of our business by two-thirds.

The second objective is to increase the role of Asia Pacific, Latin America, Africa and the Middle East from about 22 percent of our business to about one-third. The US currently makes up 45 percent of our business, which we foresee dropping to one-third. Europe is about 35 percent, and we see it remaining at about that level.