- 2 giorni fa
Il fondatore di S4 Capital intervistato da Engage con Giuseppe Azzone (Monks Milan) analizza automazione, nuove metriche e il ruolo delle agenzie nell’era degli algoritmi
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00:00Buongiorno a tutti da Engage. Oggi siamo qui nella sede milanese di Monks. Accanto a noi ci
00:10sono Sir Martin Sorrell, fondatore di S4 Capital e Giuseppe Azzone, Managing Director di Monks
00:16Milan. Con loro analizzeremo alcuni dei grandi topics che stanno segnando il futuro della
00:23comunicazione. Sir Martin, Giuseppe, welcome and thanks for joining us. I'm the senior monk. The old monk.
00:34So today I've outlined the three topics in the industry that I'd like to analyze with you,
00:41starting from the impact of artificial intelligence. Sir Martin, is AI adoption just a cultural choice
00:50or also a competitive need nowadays? Hardly a cultural choice. It probably is a cultural
00:57non-choice to most, which is one of the problems. So it's inevitable. So it's a revolution. The
01:05question is how quick the revolution will be. Consumers are probably adapting ironically faster
01:13to AI and using AI faster than companies. And in our experience, and we may not be the market,
01:22but I think actually we in that area, I mean, if there's one thing we do well, we have deep
01:27technological skill and experience, which really differentiates us. And our technological
01:34abilities are very strong. So we're very much on the forefront of AI. I mean, our biggest
01:39partner, biggest client partner is Google Alphabet, which is about 20% of our revenues.
01:48And we're one of probably two or three major AI companies and a front runner in AI development. So
01:58it's something that we really understand. And the two verticals that we've seen the most significant
02:06AI adoption, automobiles and financial services. The reason why I think is they are both
02:16verticals that are challenged by new entrants. In the case of automobiles, you have Chinese EVs and AVs.
02:24And you see Musk sort of withdraw a little bit from, not a little bit, significantly from EVs,
02:31focusing on robotics. And partly behind that is the fact that BYD can produce an EV
02:38for $25,000 or an AV with God's eye, which is their technology for autonomous vehicles,
02:45for $10,000. Now Musk could produce an EV for $35,000. So, and then of course, BYD are going up the
02:53the market too. So that's a competitive threat to the fossil fuel classic automotive. So the work
03:01we've done with BMW here in Europe, the work we're doing with General Motors in America and around the
03:07world, are really probably two of the best examples and case studies where we're seeing significant
03:14adoption. And the reason is an economic threat. And in financial services, for example, we work in
03:19in Brazil for NewBank, which is a fintech platform, which threatens the traditional branch banking
03:27business. And you see companies like Santander or HSBC adopting them, adapting their model because
03:34of the threat from the fintech platforms, which are much more agile, low cost, less bureaucratic,
03:41less hidebound by convention, and by regulation. So we see categories under threat. So I don't think
03:50we will get significant AI adoption until the chill economic winds blow. And the fact is,
04:00whatever you think of President Trump, and he's a controversial figure, but whatever you think,
04:07he is good for US business, good for American business. And that's why he gets support from the
04:15business community. And companies are doing very well, you know, the S&P 500. Last year, Q3 up 12% EPS,
04:24Q4 probably be at least 10%. This year, probably 12% again. And even if you exclude the hyperscalers,
04:32which have done extremely well, they're probably doing 9% or 10%. So that's strong growth, weak dollar
04:38helps, but strong growth. And in that environment, there's no need to change. So coming back to your
04:43question about cultural, the problem here is that AI is not about technology. It's about workflow. Now,
04:52we have a thing, 10 products around AI called Monk's Flow, different products like Persona Flow,
05:00which is a real time research and audience analysis. These products are about simplifying workflow.
05:11That's one thing. And then the other aspect is about change management. It's about changing
05:16the way that you work. Turkeys don't vote for Christmas. And so there's resistance to change,
05:23particularly when things are going well. So when the economic screw tightens,
05:27I think you will see greater, greater thing. And one other point, the agent of change is probably not the CMO
05:38and probably not the CIO. The agent of a change in that scenario is the CFO. And where we do see
05:48significant push is the need for efficiency and effectiveness. And in the world, you know,
05:56given all the geopolitical stuff, US, China, Russia, Iran, two things are happening. Clients are looking
06:03very carefully at where they do things, you know, geographically. And Europe is tough in relation
06:10to that because other parts of the world are growing faster. And the second thing is, in a world where
06:15growth is probably going to be more difficult, inflation higher than we would like, and interest rates
06:20higher. It means efficiency, AI, blockchain, quantum, which is coming down the pike. That's another
06:28revolution, which I think will be even more significant than AI in many respects. But it demands
06:34change and people to change. And that's difficult.
06:38Well, that's very interesting. Giuseppe, how are you working on the AI front in Italy?
06:44Okay, this is a very good question also related to what Sam Martin just said, because I think in this
06:52moment of time, the change management is what is super important for our clients. And we have a very good
07:00go to market strategy on this that is called orchestration partner. So the goal of this approach is exactly
07:07to help our clients to understand the best way to adopt this new technology that is AI. And I'm not
07:15talking about the generative AI, because the generative AI is our, you know, daily based routine. We use it
07:24every day. And it's like, you know, I like using the email. What now we have to look for is the agentic
07:31approach. So the agentic AI. And this is a step forward that is super important. So the first step
07:36for us is to help clients to adopt correctly the generative AI. The second step is to work together
07:44to set up a proper system that is based on people and agents. That will be the goal for 2026.
07:52All right. Now, the second topic is new metrics. Customer journeys aren't linear anymore.
08:00And AI agents manage touch points and decisions in real time. So instead of just looking at ROI,
08:11should brand focus on new different metrics?
08:19Well, I think brands have got to focus on the basics. I mean, there are a couple of things.
08:25there are three things to my mind that clients should really think about. And you're referring
08:34to KPIs and metrics. The first is around agility, what the world demands, partly because of the
08:42technological developments that we're talking about, but also because of the geopolitical stuff
08:46is very, very strong agility. Every CEO you interview or CMO you interview will say that their
08:55companies are agile. We will say that our agency is agile and they're agile until you have to deal
09:01with them. And you find out that they're not agile. So agility in a world that is as complex as it is and
09:09is fragmented geographically and technologically pressured is really super important. The second
09:16thing is, and this is an odd thing for me to say, being in the agency business, but I'll say it,
09:23somewhat controversial, is that clients have to take back control. After the great financial crisis,
09:30because the CFOs inside the businesses, the client businesses said, we have to get rid of the head
09:34count, move them out, you know, the cost, take the cost out. They switched a lot of the functions
09:41outside. You know, we have three models at Monks. We have the classic model where you outsource to us.
09:48We have the embedded model, for example, the work we do with Alphabet, where we put people
09:54into the Googleplex, into Mountain View and their offices. And then we have the in-house model,
09:59such as we did for T-Mobile and the mergers that T-Mobile have done over the years. All of those models
10:13mean that probably, or two of them, the client is certainly getting more control. And that's
10:20particularly important in the third point, which is first party data. So everybody talks about first
10:27party data and control of it. But very few companies have fully integrated their first party data. Now
10:35we're in the home, Milan, the home of fashion, or one of the homes of fashion. I can think of two,
10:44without naming them, two major luxury companies that have taken diametrically opposite
10:50approaches to first party data. One has multiple brands and has decided not to pool the data,
11:02even though it probably would have one of, if not the richest database of luxury purchases.
11:09The other, equally strong, has decided to integrate its four databases into one.
11:21My own view is we are going to see more in-housing. You know, for example, just last week,
11:27Home Depot in-house their operation, which was at BBDO. And whether the agency business like it or not,
11:36we are going to see clients taking back more control because they outsource too much after the great
11:43financial crisis. And with first party data, they need to do it. So with the sort of things that Beppe
11:48just mentioned, you know, the sort of developments that we see in visualization and copywriting,
11:55that we see in personalization at scale, what I call Netflix on steroids, that we see in media
12:00planning and buying and buying, it's going to change. Now we're in the Italian market. And the
12:06Italian market is very similar to the Brazilian market or the Mexican market, or even the Japanese
12:12market. There is a degree of opacity in the media markets here, which has to disappear. The nature of
12:23the industry is changing. And it's not something that if there's anybody watching this,
12:29particularly from the holding companies that they are going to like, but it's going to change.
12:35You know, the one market in the world where you have a heavy discount structure is Brazil.
12:40Given that of the 1.2 trillion of ad spend this year, 900 billion is in the digital platforms,
12:52300 billion in Google, 200 billion in Meta, and 70, 75 billion in Amazon, and probably 50,
12:5960 billion in TikTok outside China. So that's really the game, given that it can be done algorithmically.
13:07And we have 250,000 people in the media planning and buying industry. It's too much, it's too many,
13:15and it won't be needed. And if you look at the analogy to the investment industry, BlackRock alone
13:25manages 14 trillion of assets. So 14 times roughly the size of our industry. Do they do anything manually?
13:34No. Or semi-manually? No, it's all algorithmically done. So the point is, it's going to become
13:41super efficient. And I think another thing, so coming back to the KPIs, the other thing that's
13:47going to happen, and this is something that agencies have to get their minds around,
13:53if you look at Google with Performance Max, or if you look at Meta with Advantage Plus,
14:00which are media planning and buying tools, algorithmically AI driven for small and medium
14:07sized business, which is the bulk of Alphabet and Meta's and Amazon's business, probably 60,
14:1370% of revenues. And you put that together with Gemini, and you put that together with VO3,
14:21and Nano Banana. You have an end-to-end integrated creation, production, distribution, planning, buying
14:33system. Agents are going to get closer, in my view, like monks, to clients, and closer to the platforms.
14:42And there are really six platforms. I mean, I know people like to, you like to complicate things,
14:47because it sells, sells more, more media. But the CMO's task really is trying to figure out what
14:56they do with six platforms. So those are the, that's where the bulk of the business is. I mean,
15:02there are alternatives like retail media, connected media, etc. But the bulk of it,
15:08and you look at the numbers, the 900 billion digital, two thirds of it, 70% of it is in the
15:14platform, the three Western and the three Eastern platforms. So what does the client have to do? I
15:20think it has to be much more agile. The client has to take back a lot of control, which is difficult
15:27for the agencies to get their minds around. And the importance of first party data is, that is crucial.
15:33That's the fuel. It's the fuel for the LLMs. And it's the fuel for the signals and the platforms.
15:40And in this, in this environment that you just described, what is the role of agency?
15:47It's a, it's a validation role, right? So we're just before CAN, Mark Zuckerberg said, you know,
15:54send me your credit card, and I'll give you creative. Well, if, if Meta this year is 200 billion,
16:01it's approaching 200 billion of ad revenues. And the total is 1.2. That's one sixth, call it 15%.
16:09Or of digital, you know, it's 209, let's call it 20%. Okay, there's another 80% that is in other
16:19platforms. So he doesn't dominate. It would be a bit like in the old days, you're giving all your money
16:25to Berlusconi. Maybe that was a good idea to Berlusconi or to Murdoch, right? And you wouldn't do that
16:33because they would put it into Mediaset or they will put it into, into News Corp or whatever.
16:39So there has to be a distribution. So the agency's role, in my view, is validating
16:48the algorithm. I mean, it's putting it very simply. And it's something that the agents are
16:53going to have to, going to find it very difficult to get their minds around. And because now at the
16:59moment, you know, what are the engines of the holding companies? You know, there are five now,
17:03one of them having succumbed, you know, I've said that if two drunks propping up a light lamppost,
17:11but maybe the better analogy would be when the chill wind blows, that you huddle together,
17:17two huddle together. But that all of the holding companies are driven by the profitability of their
17:25media operations. Here in Italy, the holding companies do not make money out of their creative.
17:33Where do they make their money? Out of the media.
17:35And in that, what you're going to see is that media piece of it come under huge pressure
17:45because all of the opacity will disappear through the use of algorithms and blockchain.
17:54And all of the friction, which is a polite word for sticky fingers, right, will disappear.
18:01I mean, it, the clients want
18:07transparency. You know, we used to talk about transparent,
18:11lack of transparency, or transparent non-transparency.
18:17That in my view, and it's, it's a very tough message for the agents to get their mind around.
18:22But if they think
18:23that their profitability in media is going to continue, they have another, another thing,
18:31another idea coming. They need another idea.
18:35Because it's, the nature of the algorithm and the nature of the media is changing.
18:42Now, even in Italy, where you have a heavier
18:44TV presence. So it's about 60% digital worldwide, it's 75, 80.
18:52If you look at the younger age groups, you know, 35 and under,
18:57you know, YouTube, for example, has much more prominence than it does with the people over 35.
19:02So it's just a question of time.
19:05And it's going to, the transparency is going to be critically important.
19:08I mean, Japan is, we, we still have clients in Japan is another good, good example,
19:14who don't know what it is they pay for a television spot because Dentsu and Akohodo
19:19control 85% or whatever it is of the TV spots.
19:24So in this day and age,
19:27in my view, that can't survive. And I think that's the view of many other people, but it's going to be very
19:33disruptive. You see it in the stock market, you know, why are the valuations
19:38of the holding companies so low? You know, WPP is now one fifth of the valuation of Publicis
19:47and Omnicom, going through huge problems. And Publicis and Omnicom themselves are at their
19:54sort of all time low multiples. And Publicis delivered stellar results for 2025.
20:04and the stock is off eight, nine, 10%. Why is that? It's the, you know, it's the ghost of AI.
20:12It's that cloud. What's it going to do to the business?
20:16and the realization that the business has to change. You know, another good example is that we charge
20:22historically on the basis of hours done.
20:26It doesn't work anymore. When you can produce advertising,
20:30not in a nanosecond, but certainly in very short periods of time.
20:36And you can produce high quality film. And the quality is
20:40getting, you know, runway,
20:41Sora, Luma,
20:44Nano Banana. I mean, incredible, right? You saw
20:48Genie, the, the new development from, from Google in gaming.
20:52And you saw the impact that it had on gaming stocks. I mean, it's huge. These are huge technological
20:58changes. The quality of what you do in a very short period of time is you have to charge on the basis of outputs,
21:03on the basis of, of results,
21:06not the hours you spend, because the hours you spend are being reduced. So it's a very,
21:11it's going to be a very different world.
21:14And I think you'll see the industry change radically.
21:17Giuseppe, I'd like to have your opinion on that, from your agency perspective.
21:21From my local perspective.
21:23Local and agency perspective.
21:25What is, in your opinion, the most important value an agency can offer to clients today?
21:30Okay.
21:31Yeah, I agree with Sir Martin that the role is changing. The valid, to be a validator,
21:38I mean, I don't, I don't really like, to be honest, compared to the, compared to the past.
21:42But it's true. Because I mean, we need, I think we have to be validator. And that,
21:46at the same time, we have to be a good consultant for two reasons. The first one is the fact that
21:52today we cannot make a distinguish between technology and creativity. We are talking about the same thing.
21:57The two things are strictly connected. The second, the second one is the fact that this kind of
22:04consultancy is not just for the CMO or the marketing directors or the communication directors.
22:11But we have to, in a way, talk also to the CFOs and to the procurement to let them understand how
22:19the model is changing and how, and what is the impact now that is changing is having also on our
22:27selling proposition. So let's change the focus from embed the team to project, to assets. And this is
22:36not easy to understand, especially in Italy. That is, you know, let me say, I mean, we are doing some
22:41step forward, but I mean, slowly compared to United States and the UK. So this is the role.
22:50What we try to do with our client is to have, you know, transparent discussion. We need to be much more
22:56flexible. Because we are in this transition phase, probably next year will be easier. But in this phase,
23:05I think that we need to be open to listen, the needs, understand exactly what they are looking for,
23:14because it's not just technology or creativity, but they need the results in the end, you know.
23:20And also related to the different target audience, we need to be able to shift our mind from the
23:26classical ATL approach to a new data-driven digital approach. This is on our side. And we have to explain
23:35our client the best way to have good results, because this is the most important thing.
23:41Yeah, I mean, just to add that, you know, the things that we have amongst, we're sort of digital
23:49focused, which now is 75% of the business, 80% of the business. We're data driven, which, you know, eight
23:57years ago sounded a little bit odd. But today in an AI, it's the engine, it's the fuel. We go to market
24:06as faster, better, more efficient, and more because we can do more with AI. And we're unitary. You know, WPP is
24:15going to announce its new strategy, courtesy of McKinsey, apparently, why they have to pay McKinsey, I'm not
24:21quite sure, but that's what they're going to do. What are they going to say? I will bet any money,
24:26they're going to say, we want to be one WPP. Big deal, right? Publicists are doing that and doing
24:32it effectively. Omnicom are trying to do it. I think Omnicom structure is wrong. I'll say that
24:38publicly. Now, publicists have got the right structure, as we do. Geography first, client second,
24:45third. Capability third. Putting capability at the top ain't going to work. You get intercompany
24:53rivalry and they'll be competing with one another. And then they go in their model, they go, I think,
25:00client and then geography. I think they have to invert it. And I think you'll see that happen.
25:06And so I think we have that unitary approach, the one brand approach, which is where the holding
25:15companies have to go to get the integration. You come back to what we were saying about AI. You're
25:21going to need an organization that's really fit for purpose as one company.
25:27All right. These are the days of the Winter Olympics. Milan Cortina. What is the impact of the Olympics
25:39on the advertising market? And is the Olympic one the right model in your opinion?
25:45Sure. So we always used to talk about the Winter Olympics together with the World Cup
25:53and the midterm U.S. Congressional. Those three things would drive about an extra half a percent
26:01on the growth in ad spending. So if ad spending was going to grow by five percent, which is roughly
26:07what people are saying at the moment, it'll be more than that five, six, seven percent. But digital is
26:12one that's growing and traditional is flat or down depending on whether you have live sport. Interestingly,
26:18you have live sport, you go down less. You know, NBC will go down less with live sport than if they don't.
26:26And then in a U.S. presidential year, when you have the Summer Olympics, like in 28, we'll have
26:32the U.S. presidential election. We'll have the Los Angeles Olympics. And in the old days,
26:38it used to be the European Cup, but the football will be in 28. There'll be football in the Olympics.
26:43And I think there will be a club championship. I think the women's club championship that year,
26:50whatever. That will drive one percent in those days. I'm not sure that that equation holds at the moment,
26:58but it's stimulative because, you know, for example, here in Milan, in the next couple of days, you have
27:05all their top sponsors of the Olympics. So there's a huge, you know, I was talking, we work very closely
27:13with FIFA. And all the FIFA sponsors are going to be here in Milan or potential sponsors are going to
27:21be here in Milan. And, you know, Johnny Infantino has a seat on the IOC and he's a member of the IOC. So
27:28it's a great sponsored event. We also have the Super Bowl coming up and there's a collision of all
27:36these events. And then the Munich Security Conference in Munich are following. So there's
27:41a huge number of events going on at the same time. So they are important. Having said that to the second
27:49part of your question, I think there's a sea change in the nature of sponsorship.
27:55You know, if you're the president or prime minister of a country and you want to rebrand the country,
28:01you basically have three sort of options. There's the Olympics, the World Cup and F1. You can have
28:09Expo. Milan had Expo. And actually, I think the Expo here in Milan many years ago changed the
28:17dimensions around Milan. I think that was a really important, a super important event. So there are
28:22other events, but those three are the most important. And this might be something more
28:27controversial to say, but I'll say it. I think FIFA and F1, maybe something to do with F1 and FI,
28:38are in the ascendancy. I mean, FIFA have done an incredible job.
28:42You've now got, in America, you had the Club World Championship last year, which is on a four-year
28:50cycle and may go to a two-year cycle. You've got the World Cup this year. We're doing the official
29:00World Cup film with FIFA. You'll have next year the Women's World Cup in Brazil, which will have huge
29:10impact in South America and North America. And then you've got, in 28, the Olympics, which there's
29:17soccer. And I think you've got the Women's Club Championship as well. So FIFA have really
29:23dramatically increased the revenue from their cycle. Formula One, I used to be on the board many years
29:30ago before it was sold to Liberty Media when it was owned by CVC. It was run still by Bernie Eccleston.
29:36As also, Liberty have done an incredible job, largely, people say, because of the Netflix series,
29:46which is interesting, the streaming opportunity, and has driven it. So you've got two that are
29:52really in the ascendancy. The Olympics is a model which I think, I mean, we now have a new head of the
29:59Olympics, Kirsty Coventry. And she really, I think, has to look at the model that she has and the way
30:07that she goes about it, because they've lost sponsors, they lost top sponsors. They just issued
30:12their financial report for 25, which was sharply down on, in terms of revenue, on 24. Understandable,
30:21because 24 was the super successful Summer Olympics in Paris, which was fantastic, and was a real plus.
30:30Milan Cortino has been somewhat more controversial, and it is spread out. We'll have to see how it pans out.
30:37I'm sure it will be good, and the events will be good, and the sport will be good. But it brings into question
30:44whether the model works, whether sponsoring, particularly with climate change, whether you
30:50believe it or not, as some don't, whether the Winter Olympics, you know, somebody said to me yesterday,
30:58the Winter Olympics has to go back to the mountain. And, you know, having it spread as it is here,
31:05makes connection difficult. So I think there's a more limited sort of model for the Winter Olympics. The
31:13Summer Olympics are a different, different thing. The other thing that, you know, FIFA have done,
31:20which is really interesting, is that they have managed, it's no longer a quadrennial cycle, you know,
31:26every four years. It's every year. And the Olympics have tried to do that with the Youth Olympics,
31:32and I think, but I think they have to really think about the model. So sports sponsorship, really
31:38interesting. You know, football is on the ascendancy. I think F1's on the ascendancy. I think the
31:44IOC has to do a lot of hard thinking. I think Kirsty Coventry said it's time for uncomfortable
31:52conversations at the Assembly. I think she's right. Giuseppe, since we are here at Monk's
31:59office in Milan. I'd like to wrap up this conversation focusing on the agency. In a market like Italy,
32:10which balances rich tradition with an urgent need for digitalization, how can Monk's help local brands
32:18to bridge this gap? Okay. Well, the answer is pretty simple. If we look at the numbers,
32:24ATL is growing by classical ATL, let me say, and we know how Italy is in love still with classical ATL,
32:31but it's growing by 4%. What they call experiential communication that includes events,
32:38influencers, content creators, so everything that is much more related to social and digital,
32:44is growing by 13%. So that's the part where we have to, you know, push. That's the part where the
32:53client have to go. And this is what we are proposing. As we, I mean, we all know, we are digital
33:01first. We are a digital first company. Our network with one brand is super integrated at global level
33:09compared to the other groups. And what is easy for us is to have this access to infinite competencies
33:19that we have around the world at EMEA level, but not only at EMEA, also in US or in Asia. So this is key
33:27for us. This is key for us. And we can support this way, our client to produce content and communication
33:36in, you know, fast, better, and a more efficient way. Okay. Using technology and creativity. This is the,
33:45this is how we would like to approach the client, starting from Italy, but looking also outside of Italy.
33:53All right. Well, thanks a lot for your time. Thank you, L.A.
33:59Thanks a lot. Arrivederci e buone Olimpiadi. Grazie.
34:03Thank you. And you.
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