On the sidelines of Consumer Electronics Show 2024 is advertising titan Sir Martin Sorrell, who is also the founder and executive chairman of S4 Capital. Sir Martin’s company MediaMonks launched Monks.Flow, an AI-centric professional managed service at the CES 2024. Monks.Flow will streamline how humans and machines interoperate. Monks.Flow offers intelligent solutions for marketing activities packed with pre-tested pipelines that automate processes and connect talent trained in AI, the latest AI tools, enterprise software, and microservices into efficient, automated workflows. In a conversation with Storyboard18, Sir Martin Sorrell speaks about operating his brand, AI, brand India, elections and more.
Monks.Flow is an AI service that promises to streamline how machines and humans work with each other. Could you break it down for us?
It focuses on two of five areas. There are five areas that we think AI is going to affect our industry. The first is about visualisation and copyrighting. What took us three weeks or three months to do, we literally can do in hours, and Monks.Flow is about that. It’s about hyper personalization. We thought that the web would enable us to digitise and personalise things. we’re doing it on steroids now with AI which enables us to do the work that we do for a client like Netflix. For example, we might produce one and a half million different creative executions for a Netflix Series. We can now do this on an unimaginably greater scale than we did before. So (visualisation/copyrighting and hyper personalization) those two things really are where Monks.Flow concentrates on. Therefore, a media planning and buying Network that has 10 or 15,000 people is hardly likely to say that AI is going to upend its business, but I think it will do because if digital is, let’s say 65 percent of media is about 950 billion and digital media is about 650. There are six platforms, the key ones, three Eastern and the three Western ones on their own account for 450 for the 650 so it’s a huge opportunity to put that in logarithmic form. And most of the media planning by networks still have semi-automated procedures or even manual procedures. they’re hugely inefficient from that point of view, and what’s great about it is that the people will get better outputs from the algorithms, which will enable them to make better decisions.
Your famous statement that ‘AI will cause a mass slaughter in media agencies?’
I think it will do. You protect your interests; you see it now on linear television. Last year was a pivotal year for linear TV when we saw the linear networks decline by up to 14 percent in terms of their ad revenues. It reminded me of newspapers in the UK many years ago where their ad revenues went down two years in a row by 25 percent each year. You saw a huge decline. It’s not as precipitous as that but many companies, such as Comcast-Brian Roberts would not be talking about “shall we merge?” unless they were trying to get some sort of consolidation benefit. I was reading an analysis of it actually on the plane coming here, where what’s interesting is if they were to merge it makes linear even more important from their proportion of their revenues and EBITDA so it may not. Which may not be the way to go. But the point of the story is in the case of media planning and buying networks, if they see significant change coming, which there will be and you already see it because you have Advantage with Facebook and Meta, you have GMax with Google; which are media planning and buying for the small and medium sized business. The question is whether Enterprises over time will use it as well. So, I think it’ll always change, that’s the third area. The fourth area is General efficiency, like we’re doing with Monks.Flow, like we’re doing with Nvidia around outside broadcasting with Adobe and AWS where we can reduce the cost of outside broadcasting by as much as 90 percent. Because you used to have to buy a truck for 7 or 8 million and advertise it over five years at a cost of one and a half million a year. We can produce a cloud-based solution at 20 percent of that annual cost. That’s general efficiency. And the fifth area that I think is really fascinating is that Monks.Flow is also about sharing knowledge inside companies. The 900 or so of our people who work for our biggest client, or the 300 who work for our second biggest client- if each one of those people know what the other 299 or other 799 or 899 people know, you have a much flatter organisation. And I’m sure, there’ll be one of the people who grasp the opportunity as well because they understood it at an early stage. The irony about that is if you remember the guy who left Google’s DeepMind because he thought that AI would be an existential threat, because he said if there were 5,000 bots, each bot would know immediately what the other bot knows and then ultimately, it’ll become more intelligent beings were worried about that. Hence, there are some downsides here, and the issue of employment. Will we have more employment or will we have less employment? My own view is that we’ll have less employment. There’s an interesting sort of juxtaposition between working from home and work from anywhere, because you know there are people inside the industry who think that working from home, working from anywhere is not good. So, in a way AI will balance supply and demand a little bit more effectively.
Last year, which was 2023, was all about experimentation with AI for the advertising and the media industry. Will 2024 be the year where we will see the actual application of AI across the industry?
It’s being applied, but the scale is not yet huge. And it’s a great conversation starter. You can get in front of clients along this sort of conversation stream, but it’s really in my mind part of technological transformation. So, there are two things going on, one is geographical transformation India becoming more important for example. North and South America, Middle East, Asia, maybe not China because of Taiwan. If you’re big in China, do you really want to take the risk there? That’s why Indonesia, Vietnam and most importantly India benefits, but along with Thailand and Philippines and Malaysia and Singapore. So that’s one thing and then the second thing is, I didn’t mention Europe because Europe has seen an increase in our clients I think as a cost issue and taking cost out. And therefore, AI as a part of digital transformation along with the metaverse, the much malign metaverse, which I still think is really important. Along with blockchain which eliminates frictions in the system and middlemen or middle women that are causing friction and inefficiencies, and then Quantum Computing. Hence, putting all that together in the area of digital transformation means that organisations become much more efficient and much more flexible. And the key attribute is that you have to be agile, you have to take back control. So, you know in the same way you know we’re talking about AI in relation to media planning and buying, in-housing is not our enemy, it’s something we should work on with clients where it is appropriate and with deprecation of third-party cookies which Google now will introduce by the end of this year.
In-housing is not the enemy; isn’t it weird for an agency person to say that?
On the media planning and buying side with AI, the clients will always want somebody to adjudicate what’s going on. Would you give your Media budget to the media owner, whether they be linear or whether they be digital. And the answer is no. You will always want somebody to help advise you on that decision, to make you know that the algorithms are working effectively, and in the right way and that the data has veracity. There’s always a role, but it would be a different role.
AI is the story of CES this year, but apart from that one of the interesting things at CES, which used to be dominated by tech companies in the past, the scope of it has expanded to marketers, advertising agencies are present in a big way at CES. Tell us more about your thoughts on this.
Well, I think when you go down to the CES you will see it’s dominated by tech companies. But you look at the industry, it’s 650 billion digital advertising out of 950 and Google’s probably about 225 of that, Amazon’s 50 and Meta is about 125. So, between the three of them you’ve got about 400 billion out of 650 billion. And then throw in Alibaba, Tencent and Binance that’s pretty much it. I mean then you go to, not to diminish the importance of Snapchat at five and a half or six, or Pinterest at four, or Walmart at three or Apple at probably around 7 and Microsoft around 11, Twitter or X was 5 billion and is now probably around two billion, but it shows you where the strength is. The other thing about AI is that those companies will become stronger. The six platforms- the three Western, the three Eastern, Apple, Microsoft, Nvidia, Musk, Oracle, Salesforce, Adobe there will be others. But those companies are going to be the players and despite the frustrations of the regulators they’re going to find it-, self-regulation is going to become increasingly important.
Tell us about your economic outlook for the year 2024, also an election year for the US and for India.
There are seventy elections and it’s going to affect about four billion people and the Olympics. It’s better than last year but it’s still not full throttle. There’s still so many geopolitical risks, the latest one being the terrible events of October the 7th and the implication of that, the conflict in the Middle East metastasizing into something bigger, how long will Ukraine issue go on for, and also what is going to happen around Taiwan; we have an important election coming up in Taiwan in a week’s time and if the KMT don’t gain ground or don’t have heavy ground, then it’s going to be an issue. If you read president Xi’s speech and New Year Speech clearly, Taiwan is at the top of the agenda. US-China relations, Russia and Ukraine, the Middle East, climate change continues to be a problem. I was in South America over the holidays and the weather pattern was certainly very different to anything I’ve experienced over the last 10 years. There’s a cocktail of risk, but this time last year, clients were worried about interest rates going up. This year they’re not worried, they think the interest will go down. So I think their demeanour and their general feelings are better.
What are the conversations that you’re picking up from CES when you’re meeting marketers, when you’re meeting clients?
Yeah, I think people are remaining cautious, but not at the level that we saw last year. Last year we saw delays on budgets, not just marketing budgets, I mean corporate budgets going well into 2023 and that’s not the case this year. And I think Q4 was a little bit more confident.
Q4 was confident but still the Indian marketer was very cautious. Q4 was probably driven by the cocktail of Diwali coming along with the ICC ODI men’s World Cup but having said that tell us how your Indian business is faring.
Well, it’s good, but we want to be bigger. Asia is only 10 percent of our business, North and South America is 60-70 percent and 20 percent. And really, we would like Asia Pacific to be double the size where it is and on the functional side content is about 60 percent data and digital media is about 30, and tech services is about 10 and I would say the same thing is true for tech Services- we’d like that to be double too.
Your ex-organization WPP is placing all its bets on India, the leaders are visiting the country very often. When do we see you in the India market? How does the ‘India Outlook’ look for S4 Capital going forward?
India has benefited from the geopolitical uncertainty. But Narendra Modi has done a superb job for brand India. On the assumption that he stays, which I think is probably going to happen in that election, India will continue the process. I was at a dinner and a very successful Indian entrepreneur was extolling the virtues of India, and an ex Russian oligarch was also at the dinner table. And the chairman asked him, “Do you share that view on India and would you invest in India?” He said no because you know the rule of law and risk. So, I don’t think I would take such an extreme view, but I would say India is well on its way. If you look at the projections for GDP for 2050, there’ll be three Asian countries in the top five. China will probably be number one by then, then America, then India, then Indonesia and then Germany. Indonesia might be fourth or fifth. But three out of the Premier League will be the IPL, or will be Asian.
What are some of the factors that will define this year’s elections?
I think Biden Vs. Trump, that’s the lineup if Trump is not off the Ballot or indicted or whatever. I think it really will depend on the economy. The markets want to go up, anticipating interest rate falls, levels of inflation have come down, but last week in Europe inflation was up, and it didn’t look very pretty in France and Germany. it was reversing- so there’s still caution on the interest rate front, but most professionals, analysts are forecasting interest rates will come down by 1 percent or more and the terminal rate could be 3 percent or low. If inflation is at 2 percent which is trending towards, and interest rates are still at five, that’s a real interest rate of three which is pretty penal. So, the FED was worried about the level of real interest rates and that’s why they were a bit more dubbish on the last call. They’re data dependent, so it depends on what the data says over the next coming months. But my expectation is that the markets will respond to that. Interestingly the S&P 500 earnings for Q4 of last year for is first quarter they will be up, the worst quarter was Q2, it got a little bit better in Q3. It still ended up being flat, they went into the season saying negative things. We’re going into the season for Q4 up 3 percent and usually people hold expectations down, so they usually do better. So, it’ be interesting to see what happens but my view would be the markets will respond this year. The real world may take a little bit longer So you may have to wait to go into 2025 to see the real world. But the Olympics and the US presidential election does help.
What according to you will shape the elections this year in India, when it comes to campaigning? There are several issues that have emerged when it comes to AI, whether it’s deepfakes or even audiofakes that have dominated the election.
To say it’s not going to have an impact is wrong. There will be dark forces that seek to influence it. I was watching a film called ‘Reality’ about a woman who leaked documents during the 16th election and unfairly went to jail for five years. I think it will have an impact. And the thing about AI, that’s why I say self-regulation is so important. The danger is that AI will be negative, there will be bad actors that use it whether it’s in the area of politics or fraud or whatever. And that’s why I think self-regulation is going to be absolutely critically important, and that’s why the industry has said, at various stages, let’s take a halt or a pause and see what’s going on.