REVENUES: $6.92 billion (2002) AGENCY BRANDS: Ogilvy & Mather Worldwide (Global), J. Walter Thompson, Bates Asia, Young & Rubicam Advertising, Red Cell (among other) MARKETING SERVICES BRANDS: 141 Worldwide, OgilvyOne Worldwide, ThompsonConnect Worldwide, Concept! Wunderman (among others) EMPLOYEES: 69,000

At 58, Martin Sorrell is one of the most powerful men in advertising (he'd like us to call it marketing services, we're sure) today. It's easy to see why. We spend the first five minutes of our meeting with him fielding questions on the state of the Indian economy, down to details about the current inflation and interest rate. He speaks faster that most global CEOs we've met, crunching numbers in his head, raising and lowering his voice to make a point or offer an aside, laughs easily at himself and his companies-Sample: "When we acquired JWT, I read an analyst quote that said 'JWT has problems in most places than other agencies have places'; I think it is still true"-and is convinced that Asia is the place to be for an advertising multinational. Excerpts:

How was the advertising market in 2003?

Things got better in 2003; 2002 was difficult; 2001 was probably the most difficult. Things aren't brilliant, but they haven't gone back to where they were before 2000 and thank god for that. We haven't got the South Sea bubble or tulipmania that we had around the internet boom.

What's happened-and this is a difficult thing to say because it's been so painful-is quite healthy. I feel much better about the prospects of WPP now than I did, say, in 2000. (Today) The drivers (of growth) are the US and Asia. Frankly, if we were to start a multinational today we'd probably just focus on the US and Asia.

How much of your business comes from the US? Around 45 per cent?

Well, the US is 45 per cent; Europe is 35; Asia Pacific, Latin America, Africa, and the Middle East is 20-it is actually a bit more than 20 if you include associates. The four lead markets in Asia Pacific are: Japan, which is clearly the lead market although it has been asleep for 13 years, South Korea, China, and India.

What about 2004?

I think 2004 will be better. I think this is because of the political cycle. President Bush wants to be re-elected. The US government is spending very heavily. You've got Keynesian deficit funding and it's 35 years since the government has been spending so rapidly in the US. (There's) The Olympic games in Athens and then (there is) the European football championships in Portugal. I think all these events will help.

So, I think we will see a growth in the world advertising economy by 3-4 per cent, led by America and Asia. Latin America is recovering fast. There are three drivers in Latin America: Brazil, Mexico, and Argentina.

You had those terrible events in Argentina. (But) The thing you learn is that it never pays to pull out of high population concentration markets. In 1997, if you had pulled out of Asia because of the Asian squeeze, it would have been a mistake. We pulled out of Russia in 1997: big mistake; 50 million people; and the Russian economy is one of the fast growing economies...

When you say pull out...

I don't mean pull out, I mean pull back. For example, if there is a softening in the Chinese economy that I think there is for good reason-it was probably getting overheated- I see that as an opportunity to get more involved. Our Indian business is about $100 million (Rs 460 crore) of revenue; our Chinese business, if you include Taiwan and Hong Kong is $250 million (Rs 1,150 crore). And India would be about 2.5 per cent of our revenue.

When an economy gets into a loop like the Asian squeeze, isn't it easier for a multinational like WPP to tackle it than it would be for a more homogeneous global company?

I think a diversified portfolio helps. There's a wave phenomenon that happens in a recession. I think the thing that gets affected first is advertising and media management; then, public relations and public affairs, next; branding The tribal spread, or the functional spread, gives us a little bit of insularity.

This is not rocket science: the argument for India and the argument for China is very much a demographic argument, but it is a simplistic one. Which is that there are a billion people in India and a billion three (1.3 billion) in China and I am not arguing that it is one country. People say there are only 100-150 million that can afford the goods and services of your clients. That's not a problem. It's a dynamic argument. I am not interested in WPP only being successful today; I am interested in it being successful in 5, 10, 15 years time.

There's this BRIC (Brazil, Russia, India, and China) document that Goldman (Sachs) put out that I sent around the company as required reading. The interesting thing is that if we take our BRIC revenues today, it is about 6.5-7 per cent of our revenues. If we explode that to 2015 at the growth rates in the Goldman document and we make the assumption that advertising as a proportion of GMP will be 2 per cent in 2015, which is where it is for the developed economies today, with WPP just growing at the market rate the Asia, Latin America, Africa and the Middle East, and Central and Eastern Europe will be 37 per cent of our revenues. Now our strategic objective is for that to be a third.

"If we were to start a multinational today we'd probably just focus on the US and Asia"

When advertisers pull back is research affected?

Not as much. Research is one-sixth of our business; and direct and interactive, internet another one sixth. About a third of our business is in those two areas. Another one of our strategic objectives is for that to be one half of our business. That's in the context of marketing services moving from a half of our business today to two-thirds.

Would the proportion of advertising and marketing services be similar across markets? What's it in India and China, for instance?

The advertising (marketing services) break is approximately 50:50; it's 48 per cent advertising and 52 per cent (marketing services). In Asia, it has gone from 79 per cent advertising five years ago to 73 per cent. So, we could say instead of being half: half, we are three quarters: one quarter. But the non-advertising quarter in Asia is growing rapidly. Advertising and media management are more important in faster growing economies.

Does it make sense for huge advertising multinationals such as WPP to take the sourcing route that a lot of other companies do?

We are already doing it in research. (But) maybe the pendulum has swung too far towards globalisation, for political reasons as well (apart from) social and economic reasons. We probably have to be a little bit more sensitive. The West really has made no great effort to understand Islam. So, I would argue, that there is a greater need for sensitivity now.

The second point is that given what has happened politically and socially and economically and demographically, what may be necessary is not global. I think what we have to do is develop our businesses to be more sensitive. And sensitively means, sensitively in management policies.

All our businesses, our advertising agencies, our media businesses, our research businesses, our pr businesses, our interactive businesses, our direct businesses, our internet businesses, all have exceptional people running them. There is no need to have expatriate management. Expatriate management isn't a model that I think, is long term for the health of the company or the health of its people .

So, how would you define a global agency?

I think you have to go with the flow. You have to regard yourself as working in a global environment. There are lower cost opportunities wherever they may be.

Let's carry that argument forward. We all assume that advertising is a local business: that a person who creates advertising for the American market needs to have grown up in the same cultural milieu. Do you think it would be possible to outsource advertising itself?

I think advertising is a local, regional, and global business. There are good examples of people from South Africa who have gone to London (and succeeded there); there are very few people who have gone from the UK or from any other market to the US and been successful. David Ogilvy is probably the best example of somebody who did this and he did it when he was 40 years old.

But by and large, it is not easy. Advertising is the most global of our businesses, closely followed by research and by branding and identity. I think pr probably is very much a local business. There is stuff that is local, there is stuff that is regional, and there is stuff that is global.

"The successful national companies will be the multinationals of the future"

I think you should build an organisation that can do all these things. For example, if our business in India is going to continue to be as successful as it has been, it has to service multinational business here, it has to service national business here, it has to service regional business here. After all, the successful national companies will be the multinationals of the future. Of our top 40 clients, only one is Asian, Sony. I would anticipate, in the next five to 10 years, at least five, six, seven of them would be (Asian).

The current obsession with politicians and other people in India is building Brand India. Is that something that can be done?

I think countries are just like companies. There are good attributes for a country and there are bad attributes. India will not be the first country to try and build a country brand.

What are the trends you see in the advertising business? Are we going to see more consolidation?

There are two trends in addition to the geographic one that I mentioned. There is a fundamental change in the balance of economic power. The great thing about China, if I were sitting in Asia, is that it has made Asia more independent of the US economy.

The second thing is the shift from advertising to other things. The rise in the cost of network television is huge. The cost per thousand, particularly in the US and Western Europe, is rising faster than inflation. The third thing is the growth of quantitative aids to decision making.

Clients are consolidating; the rise of the procurement function in our clients has been driven by this and it has meant tremendous cost pressure. And over time, there will be more consolidation in our business. Is that irreversible? Nothing is. I think it is a healthy Darwinian process.

What about fragmentation of media? Is that a trend?

If I look at my media consumption habits they have changed vastly in the past two years. I consume much less weekly media: I used to read The Economist from cover to cover; I used to read Fortune, BusinessWeek. Now, I have to have things much more immediately. So, The Wall Street Journal and Financial Times are doing much more in depth stuff. And I also get it from CNBC, CNN, Bloomberg. I think life is changing. See what a four-year-old will do with a pc. The problem is that the decisions that are being made at clients, at agencies, are being not by four year olds or 15 year olds or 25 year olds . They are being made by 55 year olds.

Well, there aren't too many young people running your agencies here...

Ummmmmm. You are going to get me into trouble now.

And there has been talk of succession planning, rather the lack of it.

I would disagree with you. They have excellent succession planning. It's (Succession planning's) got to be thought through. In O&M, for example we have Piyush Pandey and John Goodman taking over. But I agree. The distance between generations is getting greater.

Piyush isn't young either.

(Lowers his voice to a stage whisper) He's young at heart.

You run a conglomerate that has several large companies headed by strong people. How do you manage their egos?

The better the people, the stronger they are, the more difficult they are to manage. You get extremes in our business. Neil French (former worldwide creative director of O&M) was an absolutely impossible bloke. (Australian ad maven) John Singleton was absolutely impossible. Ian Batey (Batey Ads) is a very difficult guy. But I think in their way, they have all done very exceptional things. So, you have to put up with them. I don't know whether it is like running a film studio or an investment bank. But other businesses are becoming like that too. There is a shortage of human capital. How companies manage people will be the difference between those who win and those who lose.

If you look at the last three to four years that were bad for most businesses...

Fine, but look at the 10 years before. Don't knock it.

Most businesses used this period to restructure, cut costs, and increase efficiencies. Do you think the ad industry has done enough of that?

No, we've singularly remained (profligate).