Mark Sweney 

Sir Martin Sorrell unconvinced that Facebook is a good advertising medium

WPP boss, speaking at Cannes Lions, says the social network provides branding opportunities, but not much more. By Mark Sweney
  
  

Sir Martin Sorrell
A different profile … Sir Martin Sorrell thinks Facebook is one of the best branding mechanisms in the world but is unconvinced by its advertising potential. Photograph: Brendan McDermid/Reuters Photograph: Brendan McDermid/Reuters

Sir Martin Sorrell has dealt Mark Zuckerberg's plan to turn Facebook into an advertising juggernaut a blow by saying that he is unconvinced the social network is a good advertising medium for clients.

The head of the world's largest marketing group said that WPP – which spends about $65bn globally annually on behalf if its advertising clients, roughly 30% of all the money spent annually through ad agencies worldwide – believed that Facebook provided branding opportunities, but not much more.

"I told them this and I don't think they liked it," said Sorrell, speaking to MediaGuardian at the Cannes International Festival of Creativity. "I believe Facebook is the best or one of the best branding mechanisms in the world but I don't think it is necessarily an advertising medium."

Sorrell added that WPP as a whole spent about $200m last year on Facebook, accounting for about 5% of the social network's estimated total revenues of about $3.7bn.

He said that this year WPP would increase this to about $400m, again accounting for roughly 5% of Facebook's total revenue. Sorrell added that WPP will increase its spend on Google in 2012 from $1.6bn to about $2bn – again roughly 5% of the internet search giant's total revenues.

"[Facebook] will be very successful no doubt, it is the third largest country on the planet [counting its 900m users], and has a good shot at being the largest, but it does have issues to deal with," he said. "Monetisation, mobile, the IPO pressure cooker. The eyes of the world are on you. We have to look at Facebook in the long term. This is a marathon not a sprint."

According to the digital business analysts comScore, potentially more than 40% of Facebook usage comes from mobile, but the social network is so far struggling to convert this into significant revenues.

"The $400m on Facebook might look big but it is pretty small change, entry level spending for WPP," said a senior WPP executive, commenting on the group's strategy. "Facebook is not brilliant for response [to advertiser campaigns] so far and there is the growing issue of the amount of usage over mobile which they can't monetise."

Facebook is starting to see signs of a slowing in its growth. In the first quarter of 2012 global revenues were about $872m, up an impressive 37% year-on-year, however well down on the staggering 87% year-on-year uplift seen in the same period of 2011.

In the UK Facebook grew its revenues from an estimated £100m in 2010 to £170m in 2011, a 70% growth rate versus a doubling of revenues experienced between 2009 and 2010.

It is thought that WPP is increasing its spend on Facebook in the UK by about 30% this year.

Sorrell's comments follow the recent statement by General Motors, one of the world's biggest advertisers, which decided to pull its $10m annual Facebook spend after deciding its ads were not delivering.

GM was the first major advertiser to question the wisdom of advertising on Facebook.

Concerns over Facebook's business plan caused the one-time internet darling's stock market debut last month to go awry, with most analysts calling it a failure after it closed a fraction above the launch price of $38.

Since then the stock has dropped to the mid-20s dollar range before building in recent days to $31, although a number of analysts believe Facebook's true value lies closer to $20.

• To contact the MediaGuardian news desk email editor@mediatheguardian.com or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly "for publication".

• To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook.

 

Leave a Comment

Required fields are marked *

*

*