0% found this document useful (0 votes)
246 views20 pages

S4 Capital

Uploaded by

parth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
246 views20 pages

S4 Capital

Uploaded by

parth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 20

t

os
SMU090

S4CAPITAL: DISRUPTING THE ADVERTISING INDUSTRY


We're very much disruptors trying to change the status quo, because we think the status quo is

rP
inadequate, and that the holding company model which has actually been in existence for about
70 years ... is past its sell-by date — not fit for purpose.
- Martin Sorrell, founder, S4Capital1

In May 2018, 73-year-old Sir Martin Sorrell launched S4Capital, a digital-first advertising and
marketing services company. He wanted to prove that the traditional, analogue, holding company
model of advertising networks was no longer relevant when the new era demanded a technology-

yo
driven disruptive approach that delivered on agility, digital prowess, flexibility, and efficiency
through integrated systems. S4Capital’s remarkable rise in less than three years was nothing short of
a testament to his insight.

In the fiscal year 2020, S4Capital’s net revenues grew at 19.4% (like-for-like, year-on-year),
followed by 49% in the first half of 2021(like-for-like increase during the same period in 2020). Its
client base nearly doubled in the six months to exceed 320.2 While its erstwhile competitors, the tech
op
companies and digital platforms, became its core clients, its roster also grew to include healthcare,
financial, and fast-moving consumer goods (FMCG) companies. Focused on top line growth,
S4Capital pursued the strategy of gaining ‘Whopper’ accounts3, either by growing existing clients or
winning new ones. By September 2021, on completing its third year as a listed company, the group
comprised more than 26 companies, and had a market capitalisation of around US$6.5 billion.4
tC

S4Capital’s unique business model – purely digital play (comprising digital content, data, and media
– dubbed as the “holy trinity” in the company), faster, better and cost-efficient value proposition, and
a unitary integrated structure – was the key factor behind its gaining traction in the industry.
Furthermore, its unconventional approach to mergers and acquisitions ensured there was no
separation between ownership and control. It was characterised by a zero earn-out model5, upfront

Chris Kelly, “Martin Sorrell on How S4 Capital is Disrupting the Legacy Agency Model”, Marketing Dive, 7 June 2021,
No

https://www.marketingdive.com/news/martin-sorrell-interview-s4-capital-disrupting-legacy-agency-model/600956/, accessed December


2021.
2
Sam Bradley, “S4 Capital Revises 2021 Profit Growth Prediction to 40% in First Half Results”, The Drum, 13 September 2021,
https://www.thedrum.com/news/2021/09/13/s4-capital-revises-2021-profit-prediction-40-first-half-results, accessed December 2021.
3
Accounts which contributed gross revenues of over US$20 million.
4
S4 Capital, “Results for the Six Months Ended 30 June 2021”, https://www.s4capital.com/data/production/2021-
09/13.9.21%20INTERIMS%20S4CAPITAL.pdf?VersionId=CBtUfgACQFhcD_kqaZ9SmmP.ulQ9l4Yf, accessed December 2021.
5
An earnout was a contractual arrangement between a buyer and seller in which a portion or all of the purchase price was paid out
contingent upon the target firm achieving pre-defined financial thresholds and/or operating milestones post-transaction. For more details
refer to Javier Enrile, “Earnouts: Structures for Breaking Negotiation Deadlocks”, available at https://www.toptal.com/finance/mergers-
and-acquisitions/structuring-earnouts.
Do

This case was written by Professor Kapil Tuli, Dr Sheetal Mittal and Dr Wee-Kiat Lim at the Singapore Management
University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other
identifying information to protect confidentiality.

Copyright © 2022, Singapore Management University Version: 2022-07-29

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
full payment, share for founders in the group’s equity, and incentives to retain the senior management
of the firms being merged into S4Capital.

os
These practices led the group to be coveted as a service provider by forward-thinking brands looking
for real-time digital solutions to their marketing needs, and as a partner by like-minded
technologically-savvy companies in the domain. In addition, the COVID-19 pandemic expedited the
rise in demand for digital advertising as consumers increasingly switched to online platforms for
most of their needs.

rP
However, S4Capital faced an uphill task in acquiring and retaining talent in some of its markets. In
Asia Pacific, where it was focusing on growth, the availability of suitably qualified tech-savvy
manpower was inadequate. While in the US, its largest market, the pandemic had unleashed a wave
of ‘Great Resignation’ in the corporate world, resulting in high staff turnover as people increasingly
opted out of their current jobs.

yo
Furthermore, treading a path less travelled came with its share of challenges. S4Capital’s adoption
of unitary branding was an unheard-of approach in the advertising industry. On the one hand, it
provided a platform for seamless integration of talent and capabilities across offices and geographies
globally. On the other hand, it required constituent agencies to give up their individual, and often
highly iconic, identities, and build a collaborative mindset for the collective good. “Would S4Capital
continue to be as attractive a proposition as earlier to the upcoming entrepreneurial agencies?”,
Sorrell mused.
op
In addition, the group’s merger with Zemoga, a digital transformation company, had enabled
S4Capital to plug a crucial gap in its menu and offer tech services besides content and media
solutions. While Sorrell was upbeat that the full range of services would allow the group to gain a
firmer foothold against the bigwigs like Accenture, would the inclusion of a new practice area as the
third pillar, and its integration, entail having a more complex and invariably an unwieldy structure?
tC

How should S4Capital move ahead?

The Great Digital Disruption

During the 1970s to 2000s, the global advertising industry evolved from a commission-based to
service-based payment method, from a full-service model to segregation of media buying and
No

creative, and consolidation of independent agencies to creation of dedicated entities as separate


networks within the holding company structure (refer to Appendix for details).

Over 2010-2020, online advertising was on an accelerated path, growing at over 20% per annum,
more than five times the growth rate of the traditional media. By end-2017, the global penetration of
the internet and social media had risen to 49% and 30% respectively, with two thirds of the industry
growth coming from paid search on online portals and social media ads. In 2020, digital advertising
expenditure clocked US$290 billion, and was predicted to become 70% of the market by 2025.6,7
Do

The advent of digital media disrupted the agency landscape as new competition comprising tech
giants and platforms emerged. Sorrell pointed out,

6
S4Capital Annual Report 2020.
7
Vincent Letang and Luke Stillman, “Global Advertising Forecast”, MAGNA, 7 December 2020,
https://s3.amazonaws.com/media.mediapost.com/uploads/MagnaYearEnd2020Forecast.pdf, accessed December 2021.

2/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
The Seven Sisters (Amazon, Apple, Meta, Google, Microsoft, Alibaba, and Tencent) or Eight
Immortals (including ByteDance/TikTok) showed no signs of slowing down... In advertising

os
terms, Google had about US$160 billion of ad revenues, Meta had about US$65 billion, Amazon
had US$15-20 billion and ByteDance had US$20 billion, of which TikTok was US$7 billion [in
2018].8

In 2020, more than 50% of US advertising spend went to Google and Meta.9 Michel de Rijk, CEO –
Asia Pacific at S4Capital, explained,

rP
Strong and exclusive client relationships have always been the advertising agencies’ key hold
over the market. However, all of a sudden, these relationships began to weaken as the technology
platforms provided greater expertise in digital, better services (due to higher spending) and lower
costs (due to their higher margins). The online ads are cheaper, target consumers better, and can
be easily evaluated. Moreover, an average advertiser has more trust in what Google has to say
because it is considered a specialist in data and technology… Now, the traditional agencies are
in a limbo: do we partner up with these technology titans, the Googles and Metas of the world?

yo
Or do we compete with them?

Another and more formidable threat to the traditional set up was from management consultancies
such as Accenture, Deloitte, KPMG, IBM, McKinsey, and PwC. These companies, with their end-
to-end comprehensive digital platforms that included awareness to sales, order fulfilment, and
customer satisfaction, were better positioned to drive the digital agenda of their clients.
op
In 2017, for the first time, Accenture Interactive at US$4.4 billion in revenue, PwC Digital Services
at US$3.3 billion, IBM iX at US$3 billion, and Deloitte Digital at US$2.6 billion, made it to the Ad
Age’s top ten largest advertising agencies.10 The chase of digital dollars led to widespread
consolidation and restructuring, as consultancies edged into the creative space and went on a
spending spree to acquire one-stop shops. Of these, Accenture’s Interactive was the most active with
some notable additions to its network being UK’s Karmarama in 2016, Ireland-based Rothco in 2018
and New York’s creative powerhouse Droga5 in 2019.11 Deloitte followed. Some of its acquisitions
tC

were San Francisco’s Heat in 2016, Swedish creative shop Acne in 2017, London-based Market
Gravity in 2017, Belgium-based design agency Brandfirst in 2018, and online digital agency Pervorm
in 2019.12

This new breed of agencies that blended business consultancy, creative agency, and technology with
their deep financial pockets were a power to reckon with. By 2020, Accenture Interactive had been
ranked the world’s largest digital agency network for five years in a row and had reported US$10.6
No

billion in annual revenues, the highest worldwide revenue of any digital agency network.13 According
to Sorrell,

There are several layers of competition in the industry. While the specialists like Oliver or
Jellyfish and some holding companies occupy the lower levels, it is the companies like Accenture

8
S4Capital Annual Report 2019.
Do

9
S4Capital Annual Report 2020.
10
Josh Sternberg, “The Continued Rise of the Consultancies”, The Media Nut, 20 August 2020, https://medianut.substack.com/p/the-
continued-rise-of-the-consultancies, accessed December 2021.
11
The Drum, “Expect More Agency Acquisitions as Consultancies Battle to Keep up with Each Other”, 10 May 2019,
https://www.thedrum.com/opinion/2019/05/10/expect-more-agency-acquisitions-consultancies-try-keep-up-with-each-other, accessed
December 2021.
12
Ibid.
13
Kyle O’Brien, “Timeline: How Accenture Interactive Grew to a $10 Billion Behemoth Under CEO Brian Whipple”, Adweek, 19
August 2021, https://www.adweek.com/agencies/timeline-how-accenture-interactive-grew-to-a-10-billion-behemoth-under-ceo-brian-
whipple/, accessed December 2021.

3/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
that are at the topmost level, and most relevant to S4Capital for comparison. They are the real
competition.

os
Over the years, some of the leading traditional agencies aligned with the trends of digital marketing
and data consultancy through acquisitions, for example, Publicis’ buyout of digital consultancy
Sapient and data tech platform Epsilon, Interpublic’s takeover of Acxiom, and WPP’s purchase of
DTI Digital and leading AI technology company Satalia.14 By September 2021, they also managed
to recover from the initial shock of the pandemic, with WPP recording US$16.4 billion, Publicis

rP
US$16.6 billion, Omnicom US$15.8 billion and Interpublic US$14.6 billion in market capitalisation,
and continued to be the top four most valuable advertising groups (refer to Exhibit 1 for the
revenues).15,16

S4Capital: Building Pillars of Success

yo
S4Capital, the brainchild of Sorrell, the founder and former Chief Executive of WPP, aimed to disrupt
the traditional model of advertising agencies. For starters, S4Capital raised US$68 million in equity,
of which Sorrell contributed US$53 million, and the remaining was from investment firms Schroders,
Miton Group and Lombard Odier, and the financier Lord Rothschild.17 In early July 2018, the
business further raised US$174 million in an equity placing and secured a US$58 million loan from
HSBC, and in September it was listed on the London stock exchange.18
op
Within two months of its inception, S4Capital bought its first firm, MediaMonks, a Dutch digital
agency for US$355 million. MediaMonks made about US$128 million in revenues and employed
750 people – known as ‘Monks’ – in 11 offices around the world.19 Taking on the title of ‘Senior
Monk’, Sorrell committed to building upon the firm’s media, data, content and technology-based
platform. Five months later, S4Capital made its second acquisition for US$150 million, MightyHive,
a San-Francisco based programmatic media planning and buying company that specialised in
tC

automation of buying and selling digital advertising space.20 MightyHive made US$41 million in
revenue and US$11 million in profits and employed 200 people. Post the two mergers, S4Capital had
a workforce of 1,100 employees globally.21

These newly acquired assets formed the core of S4Capital, enabling it to offer full-service digital
marketing through two pillars, or foci of practice: Content pillar (built around MediaMonks) and data
& digital media (DDM) pillar (built around MightyHive). The group strengthened the two pillars by
continuing to merge and acquire complementary disruptive businesses that would help broaden and
No

deepen its expertise, services, geographical coverage, and client pipeline globally.

14
Avi Dan, “Who’s On First: Publicis Groupe Has Just Surpassed WPP As No.1 Among The Agency Groups”, Forbes, 3 November
2021, https://www.forbes.com/sites/avidan/2021/11/03/whos-on-first-publicis-groupe-has-just-surpassed-wpp-as-no1-among-the-
agency-groups/?sh=77ea2146592e, accessed January 2022.
15
“Companies Market Capitalisation on 3 September 2021”, https://companiesmarketcap.com, accessed January 2022.
16
Gideon Spanier, “A Four-way Fight? Race to be Most Valuable Agency Group Heats up”, Campaign Asia, 17 November 2021,
Do

https://www.campaignasia.com/article/a-four-way-fight-race-to-be-most-valuable-agency-group-heats-up/474067, accessed January


2022.
17
GBP 1 = US$1.3349, Euro 1 = US$1.1629, Average exchange rates in 2018.
18
Mark Sweney, “Martin Sorrell Beats WPP to £266m MediaMonks Deal”, The Guardian, 10 July 2018,
https://www.theguardian.com/media/2018/jul/10/martin-sorrell-wpp-mediamonks-s4-capital, accessed December 2021.
19
Ibid.
20
Omar Oakes, “Sorrell’s S4 Capital Confirms 150m Mightyhive Acquisition”, PRWeek, 4 December 2018,
https://www.prweek.com/article/1520357/sorrells-s4-capital-confirms-150m-mightyhive-acquisition, accessed December 2021.
21
Mark Sweney, “Martin Sorrell Beats WPP to £266m MediaMonks Deal”, The Guardian, 10 July 2018,
https://www.theguardian.com/media/2018/jul/10/martin-sorrell-wpp-mediamonks-s4-capital, accessed December 2021.

4/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
Unique Acquisition Strategy

os
Unlike the holding companies, S4Capital’s strategy towards M&As was markedly distinct. It targeted
like-minded companies that embodied an entrepreneurial spirit in line with S4Capital’s vision, and
met the following criteria: top line growth, good margins, no or limited susceptibility to technological
change, and the management that owned a significant chunk of the company.22 Sorrell added,

Most of the companies we look at are not big, say from US$25 million to US$100 million in terms

rP
of revenue. So, they're not huge in the context of what we do but they're important strategically
as they add tremendously to our knowledge and make us more effective in a geographic region.

S4Capital structured these deals as half stock and half cash, up front with zero earnout model.23 This
was a sharp diversion from the usual practice (payment contingent on earnout agreement), which
helped to incentivise the principals of a company under consideration to favour S4 over other bidders.
Sorrell revealed,

yo
In the case of MediaMonks, the digital production company passed on a 1.5 billion euro deal
from WPP for a 300 million euro deal from S4 — a half shares, half cash deal acquisition… In
the case of MightyHive, S4 was perhaps the fourth highest offer.24

Moreover, S4Capital considered its takeovers as mergers or combinations instead of acquisitions and
was interested in only ‘buy-ins’ and not ‘sell outs’. Rijk added,
op
When we consider potential target companies for a merger, our number one question to the
founders is, ‘Do you believe in our vision and are you in it for the long run? Or do you intend
this acquisition to be the end of your journey with the company?’ If they have the mindset to take
the money and walk away, then that is not a company for us to merge with.

This strategy ensured that the businesses continued to be run by the entrepreneur-founders. S4Capital
tC

further secured their long-term employment by incentivising them through significant equity
ownership in the enterprise. The advertising group’s approach allowed it to not only rapidly grow its
capability, scale, and reach to compete with established players, but also capitalise on the digital-led
disruption of the industry. Furthermore, it ensured that, from day one, everyone was on the same
page and worked together towards the common objective of growing the group’s revenue and market
value.

Becoming a Unicorn
No

By March 2021, S4Capital had brought 26 companies into its fold and integrated them across its two
pillars (refer to Exhibit 2 for details). During 2020 and early 2021, it had added four content
companies and six DDM companies to its portfolio, including Latin America-based Circus
Marketing, Silicon Valley-based digital agency Firewood and Shanghai-based creative agency
Tomorrow. The group’s pipeline multiplied, with new additions to its client roster as well as building
scale with its existing ones. Its key clients were Procter & Gamble, Nestlé, Avon, Shiseido,
Mondelez, BMW/MINI, Google, Meta, Amazon, Netflix, T-Mobile, Bayer, HP, Cisco, Embibe,
Do

22
Chris Kelly, “Martin Sorrell on how S4 Capital is Disrupting the Legacy Agency Model”, Marketing Dive, 7 June 2021,
https://www.marketingdive.com/news/martin-sorrell-interview-s4-capital-disrupting-legacy-agency-model/600956/, accessed December
2021.
23
An earnout is a contractual arrangement between a buyer and seller in which a portion or all of the purchase price is paid out
contingent upon the target firm achieving pre-defined financial thresholds and/or operating milestones post-transaction. For more details
refer to Javier Enrile, “Earnouts: Structures for Breaking Negotiation Deadlocks”, available at https://www.toptal.com/finance/mergers-
and-acquisitions/structuring-earnouts
24
Ibid.

5/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
Harley Davidson, PayPal, Shopify and Verizon amongst others, with the tech companies accounting
for 55% of the gross revenue.

os
For the fiscal year 2020, S4Capital reported revenue of US$473 million, gross profit of US$407
million and delivered an EBITDA of US$86 million (refer to Exhibit 3 for data on selected statistics
of key players).25,26 Its Content practice had grown 26% over the previous year, contributing 71.7%
of its revenue, while DDM had grown 18.3% and accounted for 28.3% of its revenue. S4’s operations
spanned 31 countries and employed a workforce of more than 4,400 people across 57 locations

rP
globally. In addition, the advertising group achieved double US dollar and British pound unicorn
status in just two full years of operation, with its share price rocketing from GBP 1.19 in January
2019 to GBP 5 in December 2020.27

Transformative Business Model

yo
Sorrell’s vision for S4Capital was driven by two key observations: First, the business environment
had undergone a radical transformation after the 2008 global financial crisis. Companies were
looking to reclaim control over their processes and data. Moreover, in the digitised ‘24 by 7’ world,
agility had become an imperative. He pointed out,

The existing analogue and hierarchical agency models such as that of WPP were inadequate to
cater to the needs of these new age businesses.
op
Second, top-line growth was critical to survival. It was important to identify and target the growth
segments in the media industry rather than follow the conventional approach of doing everything.
These insights led S4Capital to adopt the following four principles as core to its business model.

1. Purely Digital Play


tC

Sorrell commented,

There are two planets – the ex-growth or no growth planet and the growth planet. Analog is the
first one, while digital is the second one.

The industry had clearly crossed over to a point where the “digital tail” wagged the dog.28 Digital
was by far the fastest-growing segment of the advertising market, and according to Sorrell, it was
No

important to draw a line separating digital from analogue in order to shift the management thinking
as well.

2. Holy Trinity

S4Capital identified data, digital content, and data-driven media buying as the three key growth areas
for the venture to focus upon.
Do

First Party Data

25
S4Capital Annual Report 2020
26
GBP 1 = US$1.3784 on 31 March 2021
27
Simply Wall St, “How has S4 Capital Performed over the Past 5 Years?”, https://simplywall.st/stocks/gb/media/lse-sfor/s4-capital-
shares#past, accessed December 2021.
28
Chris Kelly, “Martin Sorrell on How S4 Capital is Disrupting the Legacy Agency Model”, Marketing Dive, 7 June 2021,
https://www.marketingdive.com/news/martin-sorrell-interview-s4-capital-disrupting-legacy-agency-model/600956/, accessed December
2021.

6/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
There was a rising demand from the brand owners to gain control over their databases and build
relationships directly with their consumers rather than mediate through tech giants such as Amazon,

os
Google, Meta, or Tencent. S4Capital catered to this need by facilitating sourcing, analysing, and
delivering aggregated, high quality and relevant data. It developed proprietary tools and frameworks
for data analytics and used the insights to inform and drive client’s decision-making regarding
creative content, digital media planning and budgeting.

Create and Develop Digital Content

rP
Unlike the traditional ‘tent-pole’ approach, which was about creating iconic campaigns for specific
events and could take weeks and even months to deliver, S4Capital’s digital approach was dynamic.
It generated a constant flow of content using analytics and sweated the budget hard by producing fit-
for-format versions of campaigns for a wide range of formats targeting different types of consumers,
user touch points and markets across the world. In addition, it ensured high speed to market. For
example, MediaMonks shot an entire range of 127 individual assets for IKEA in only three days.
And, in one single shoot it created tailored content for Meta, Instagram, television commercial

yo
(TVC), out of home advertising (OOH), Display, and YouTube pre-roll.29 In contrast, a traditional
campaign typically began with agency briefing followed by one big idea, storyboarding and a few
weeks of production time. Any data collected sat in disjoint sets and did not inform new creatives.
With MediaMonks having access to technology that connected different customer touchpoints,
S4Capital was able to deliver richer content in varied formats to clients such as Mondelez.

Data-Driven Media Buying and Planning


op
S4Capital mined relevant data to derive insights that enabled its clients to plan and micro-target their
customers at the right time with the right content and deliver focused campaigns. MightyHive
allowed brands to observe their consumers’ interests and media consumption behaviour live, and
then deliver the appropriately tailored creatives in real time – as quickly as a nanosecond. Sorrell
shared an example,

If you’re on WSJ.com, Netflix will serve you a business-oriented ad to watch the Mexican drug-
tC

trade series Narcos 3; if you’re surfing gyms and sport centres, you’ll get a Narcos 3 ad that’s
tailored towards fitness.30

MightHive’s analytical capabilities also offered campaign auditing and cost-analysis services.

The holy trinity model equipped S4Capital for following a data-led iterative process for creation,
production, and distribution of digital ad content. Sorrell explained,
No

It is like being at the heart of a political election campaign. You’re putting out messages,
evaluating the response, then reforming it. Data informs the content, which informs the media
buy and data you get from that, which enables you to refine the content yet again. It’s a circular
process.

3. Faster, Better, Cheaper

High velocity, high quality, and high value was S4Capital’s core value proposition to its clients.
Do

Faster

29
YouTube pre-rolls refer to video advertisements that appear before the proper videos start. They last from 15 seconds to two minutes.
30
S4Capital Annual report 2018

7/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
S4Capital offered agility and responsiveness in addressing customers’ needs by adopting a 24/7
‘chase the sun’ concept for meeting tight schedules and timelines. Andy Loo, Vice President –

os
Operations, APAC at S4Capital explained,

We literally work across three time zones. For example, we start in Asia, the work that we can’t
finish we hand over to the team in Europe, and then they hand over to the one in Latin America,
and then they hand it back to Asia and it keeps going. We operate round the clock and can respond
much faster to the client.

rP
The group’s global governance model ensured that the teams across time zones were all onboarded
and aligned on the project parameters, guidelines, quality norms, and customer expectations, and its
project management protocols enabled a smooth handover from one team to another. S4Capital also
adopted automation and developed proprietary centralised tools, such as video rendering or cloud-
based rendering engine through virtual production, which contributed to huge time savings by
making it possible to produce and edit content in real time.

yo
Better
S4Capital ensured that it understood the digital ecosystem built around the top digital companies and
had expertise in all types of technologies, whether it was artificial intelligence (AI), virtual reality
(VR), augmented reality (AR), or voice. Sorrell elaborated,

Our interest is in the growth and development of the digital marketplace and so there are about
20 or so tech companies that we follow, such as Google, Meta, Amazon, Tencent, Alibaba, TikTok,
op
Apple, Microsoft, Adobe, Oracle, IBM, Twitter, SAP, Salesforce, Snapchat, Spotify, Netflix, Epic,
Xiaomi, and Kuaishou, and we study in depth their strengths and weaknesses. It is important to
understand that at least 60% of these platform’s revenues comes from small businesses who may
not be tech savvy… Our prowess in the digital domain helps us service both non-tech clients as
well as the well-established tech giants.
tC

The group also proactively developed and acquired the latest technologies to produce higher quality
solutions. For example, S4Capital collaborated with Epic Games to use Unreal Engine in
transforming how global brands could scale creative and content production and reach local
audiences across the world. In April 2021, it opened a new studio in India, which used technology to
bring real-time filmmaking, visual effects, previsualisation, virtual production, real-time live
streaming and computer graphics animation together.31

Cheaper
No

S4Capital focused on providing clients higher efficiency and more value. Instead of making one big
campaign, it created content that could be applied in endless iterations round the clock, called ‘Assets
at Scale’. For example, for the Netflix TV show ‘Narcos’, MediaMonks used first- and third-party
data signals to identify the individual interests of the target customers. It then used a creative
framework to create 1.25 million tailored ads by cutting up the masters into little sections and
producing mini commercials in multiple different versions. This not only reduced the time to market
to only four weeks from 12 weeks, but also brought the costs down by more than 40% while
enhancing the performance of the assets by use of personalised content rather than mass messaging
Do

to Netflix’s audience.32
31
John Buzzell, “MediaMonks Helps Global Brands Scale Advertising Campaigns with Real-time Rendering”, Unreal Engine, 28 May
2021, https://www.unrealengine.com/en-US/spotlights/mediamonks-helps-global-brands-scale-advertising-campaigns-with-real-time-
rendering ; and Shawn Lim, “Agencies in Asia Pacific Build Esports and Gaming Verticals to Fuel Advertisers' Demand”, The Drum, 9
April 2021, https://www.thedrum.com/news/2021/04/09/agencies-asia-pacific-build-esports-and-gaming-verticals-fuel-advertisers-
demand, accessed December 2021.
32
Adage, “Sorrell Says 'Faster, Better, Cheaper' S4 is Resonating with Clients”, 18 March 2019,
https://adage.com/node/2123556/printable/print, accessed December 2021.

8/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
S4Capital was also quick to transition from the outsourcing model of traditional agencies in which
clients had the least control, to embedded or in-house models in which they had more say in the

os
process and could manage the costs better. For example, the group built an in-house content studio
for Avon, where the brand could produce the work on its own or use S4Capital’s team to do so. 33
S4Capital’s clients Bayer and Sprint, which engaged MightyHive to help design and build their in-
house media operations, won the 2020 AdExchanger award for it.34 MediaMonks embedded its team
at Adidas to support its weekly customer relationship management send outs, banners, and social
campaigns over 25 markets. The team not only delivered high quality, localised content on time every

rP
month, but also reduced the brand’s costs per asset by 55%. S4Capital’s digital agency Firewood had
a dedicated team of 75 people working exclusively for Google, the media group’s largest client.

While the holding companies were moving in the same direction, they were deemed to lack the same
agility. Despite the trend of in-house gathering momentum in the industry, with 32% of external
agency work having shifted to in-house teams over 2019-2020, holding companies had a limited
presence in it.35 For example, WPP had about 2,000 of its 130,000 employees co-located within client

yo
teams globally, but according to its CEO, Mark Read, “While there is a greater demand from some
clients to bring people closer, I don’t think that is at the heart of the economics for WPP… We can
address concerns around proximity while not in-housing.”36 Others like Publicis and Omnicom saw
in-housing as a complement to agency services but firmly believed the role of agency to be
indispensable.37,38

4. Unitary Structure
op
S4Capital styled itself as a tech-oriented company and steered far away from the prevalent holding
structure model of advertising agencies that was seen as rife with inefficiencies due to its inherent
complexities and rigidities. Rijk explained,

The holding companies comprise multiple entities with each having its own profit and loss
tC

account (P&L). While they tend to acquire these smaller companies that are agile enough and
can innovate at the pace that's necessary for the industry and the consumer, once acquired, these
businesses are bogged down by the multiple layered decision-making structure of the holding
company… Moreover, having individual P&Ls create commercial and geographical fiefdoms –
pushing them to compete internally for the holding company’s resources and discouraging any
potential collaborations due to the accounting challenges. In fact, it is easier for them to
collaborate with external partners as the latter do not fight for the same revenues and resources.
No

S4Capital adopted a unitary structure with ‘one firm, one P&L’ policy such that its employees across
all its companies worked within a single P&L account. The entrepreneur-founders of the acquired
entities were given ‘ownable spaces’ to operate, so that they continued to grow as dynamically as
before, in addition to having greater access to clients, resources and expertise through S4Capital’s
global platform.

33
S4 Capital Annual Report 2018
Adam Remson, “Bayer and Sprint Honored at 2020 AdExchanger Awards”, MightyHive, 29 May 2020, https://mightyhive.com/bayer-
Do

34

and-sprint-honored-2020-adexchanger-awards, accessed December 2021.


35
Omar Oakes, “WPP's Mark Read on in-housing: Clients Underestimate Agency Talent Challenges”, Campaign US, 1 March 2019,
https://www.campaignlive.com/article/wpps-mark-read-in-housing-clients-underestimate-agency-talent-challenges/1577579, accessed
February 2022.
36
Ibid.
37
OMG, “OMD’s Florian Adamski Addresses In-Housing”, 26 June 2019, https://omnicommediagroup.com/news/global-news/omds-
florian-adamski-addresses-in-housing-with-beet-tv/, accessed February 2022.
38
Claire Beale, “Publicis’ Arthur Sadoun: ‘Honestly, My Job is Tougher than I Expected’”, Campaign US, 6 February 2019,
https://www.campaignlive.com/article/publicis-arthur-sadoun-honestly-job-tougher-i-expected/1524980, accessed February 2022.

9/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
The non-competitive acquisition model enabled seamless integration of its acquired businesses,
resulting in expansion of S4Capital’s capabilities, geographical reach and volume. According to Loo,

os
Our structure allows everyone to tap into resources and expertise located anywhere. For
example, to create Netflix’s virtual reality experience for its show, Eden, S4Capital’s Singapore-
based team took the client brief and carried out the conceptualisation. However, production was
carried out in Hilversum as the expertise in Virtual Reality (VR) was there.

rP
Furthermore, it helped to create a unified and collaborative work culture across business lines and
geographies. Rijk added,

Aligning everyone’s KPIs (Key Performance Indicators), the one P&L approach has built one
team spirit in the group where anyone can join in on any project at any time, brainstorm ideas
across geographies and cultures, and integrate diverse expertise across content, data, and media.
At a scale like ours, this is unprecedented and unique; this is what gives S4 its edge and positions

yo
it as a change agent.

Most importantly, S4Capital’s clients could access a wide range of capabilities across geographies
through a single point of connection, without having to deal with multiple agencies (refer to Exhibit
4 for S4Capital’s range of services).

Operational and Growth Strategies


op
Land and Expand

S4Capital practised a ‘land and expand’ strategy to grow instead of the ‘pitching model’ of the
traditional advertising agencies. ‘Land’ meant to start with undertaking one project from a client and
develop the client relationship from that entry point, and ‘expand’ meant to add more projects along
tC

the way based on the clients’ needs. Sorrell expounded,

We tell clients to give us a project, maybe it’s the toughest thing they have to do, and we then
work on it and build on the relationship from there. That’s a far better way of developing the
business than just showing and telling [that often happens in pitches]. For pitches, clients have
little idea about what the agency can truly do…. Pitching is artificial. 39
No

The approach allowed the company to have an operational leverage as it could carry out a second-
by-second appraisal of the client’s needs, and how they could be addressed better. Moreover, pitching
was a time-consuming process, requiring a lot of focus and effort that would have stretched
S4Capital’s limited resources thin. Sorrell believed that the group’s goals were better served by
focusing its resources on delivering high quality work and strengthening its relationship with its
existing clients. Rijk pointed out, “If you look at S4Capital’s top 25 clients (except for few that were
sizable), we have only tapped 5-10% of their potential. So, there is a huge scope of growth.”

In 2019, S4Capital worked towards converting client relationships at scale and many of its big
Do

accounts, such as Google and Facebook, primarily came through this land and expand strategy. In
2020, it adopted pitching as well, to pursue the ultimate objective of ‘20 squared’, which was to have
20 clients that each generated revenue of over US$20 million annually. Called ‘Whoppers’, the group
won two such accounts in the year through pitching – The BMW group’s pan-European account for

39
Janice Tan, “Marketing Podcast: Sorrell’s ‘Land and Expand’ Strategy”, Marketing Interactive, 19 July 2021, https://www.marketing-
interactive.com/marketing-podcast-sorrells-land-and-expand-strategy, accessed December 2021.

10/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
BMW/MINI, and Mondelez International’s account for tech infrastructure, websites and content
production – and to them it added more assignments through its land and expand approach.40,41 By

os
end-2020, S4Capital had secured five Whopper accounts.42

Asia Pacific as a Growth Engine

S4Capital’s focus on geographical expansion, particularly in Asia Pacific, was driven by the group’s
small presence in the region despite it being a fast-growing area particularly on account of China and

rP
India. In 2018, APAC’s share in the group’s gross profit was only 4%, while Americas accounted
for 72%, and Europe, Middle East, and Africa (EMEA) contributed the remaining 24%. The group’s
long-term objective was to achieve a geographic distribution of its gross profit such that APAC
contributed 40%, same as Americas, followed by EMEA at 20%.

In May 2019, S4Capital established the region’s headquarters in Singapore. Singapore was selected
over other contenders such as Shanghai and Hong Kong because of the city-state’s geo-political

yo
stability, governance model, financial and legal structure, and central location. These factors made
Singapore an ideal gateway to the rest of the continent. Moreover, the regional headquarters of many
of S4Capital’s big tech clients, such as the FAANGs (Facebook, Apple, Amazon, Netflix, and
Google), were based in Singapore as well, enabling the media group to collaborate with them in the
region more effectively. For the fiscal year 2020, the highest growth in S4Capital’s gross profits
came from APAC, at 43.7% (over 2019) and the region’s share in the group’s gross profits increased
to 9%.
op
Media.Monks: Singular Branding

In August 2021, the company took its unitary structure one step forward by announcing the merger
of its two pillars, MediaMonks and MightyHive, with Singapore as the first regional office where the
two entities would be physically merged, to be followed by EMEA and the Americas. The name
‘Media.Monks’ was chosen as the group’s primary customer-facing brand, as it was well established
tC

and well known in the industry. The network-wide rebranding required all its constituent agencies,
which so far had operated under their own individual brands, to adopt new names within the singular
identity. For example, MightyHive was renamed as Data.Monks.

Rijk shared that the dot in the brand name was fundamental: “What it does is to give ownable space
for the different departments and the different teams to make it their own”. The brand’s hexagon
shaped logo, previously the symbol of MightyHive, was representative of the company’s API-
No

inspired organisation structure that facilitated collaboration and innovation across its six operational
components: countries, core, client, categories, capabilities and corporate (refer to Exhibit 5 for
further details).

The unitary brand offered seamless unification of S4Capital’s content, DDM, and technology
services globally (refer to Exhibit 6 for the new logo). Wesley ter Haar, co-founder of Media.Monks,
pointed out,
Do

For our people, this means they’re all colleagues and can build amazing careers across the globe
and keep going and growing. For our clients, it means they keep the same team and the day-to-

40
ADgully, “MediaMonks (S4 Capital) wins Mondelez International account”, 25 November 2020,
https://www.adgully.com/mediamonks-s4-capital-wins-mondelez-international-account-98563.html, accessed December 2021.
41
In Practise, “From WPP to S4 Capital: Rewriting the Advertising Industry”, 16 December 2020, https://inpractise.com/articles/wpp-
sfor-advertising-agencies, accessed December 2021.
42
S4Capital Annual Report 2020.

11/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
day they love—but now have even simpler access to an amazingly deep pool of specialist talent.
Consolidation is an engine to innovate, and this makes it easier to help our clients show up better

os
for theirs.43

The unified culture and structure at S4Capital were a big enabler for cross-selling across its content
and DDM pillars, and the rebranding further strengthened it. As Kris Biti, head of growth operations-
APAC at S4Capital exclaimed,

rP
We can always love each other a bit more! See, Mondelez was a MightyHive client to begin with.
However, the relationship has evolved over time, especially with the merging of the practices into
Media.Monks, such that Mondelez is now an embedded client for the creative as well.

Riding the Pandemic

yo
S4Capital’s digital only, technology-oriented, and entrepreneurial work culture was more than
equipped to deal with the fallout from the COVID-19 crisis. Its workforce included trained digital
natives used to working with online tools, managing projects virtually, and collaborating online with
their counterparts world-wide (across time zones), long before the pandemic struck in early 2020.
The first thing S4Capital did was to set up Coronavirus Crisis Group (CCG) to stay on top of market
developments and ensure quick decision making at the senior management level across its markets.
The top eight executives, including Sorrell in London, Rijk in Singapore, three in Amsterdam, one
op
in Denver, one in Boulder and one in Australia, had daily scheduled online meetings, which were
supplemented by calls with various regional and office leaders. According to Tobias Wilson, Chief
Growth Officer for Asia-Pacific at S4Capital,
CCG immediately went into a huddle globally, looking at market opportunities, vertical
opportunities, horizontal service opportunities, etc… And that continued daily for three months.
So, every week, the entire company world-wide received emails with updates on measures being
taken, impact on business, and ideas on new content, new verticals, and new clients to go after.
tC

It took S4Capital less than two months to pivot from building on-ground physical events to creating
virtual experiences, and it soon built its own proprietary digital event platform comprising a 3D
environment with a RSVP desk and central hall that attendees could walk through and discover
different paths, conference halls, hangout groups, and breakout rooms. Loo pointed out, “As a
participant you are like an avatar on the screen, who can literally walk around, explore, sit down and
watch a keynote”. The group successfully produced virtual events for several brands, including NBA,
No

Cisco, HP, Harley Davidson, and Webex One. Wilson explained,

In the case of Webex One, our team of 235 people worldwide worked around the clock to produce
a full-fledged virtual event in just seven weeks. We took content from the US, translated it into
nine languages, created 450 pieces of local content on top of it (on our digital event platform),
and then streamed it live over four days for more than 100,000 attendees across multiple time
zones in APAC and AMEA.

With the pandemic-imposed lockdowns, it was no longer possible to shoot films and campaigns by
Do

flying the shooting gear, crew, actors, and directors to one location and manually recording it.
S4Capital hence switched to using robotics and animation to develop virtual production, unlocking
a new revenue stream for the group. Loo pointed out, “With 3D tools and software, we can compose
3D sets and simply sit in front of a screen to direct and edit.” Moreover, unlike traditional shoots

Editorial, “S4Capital Merges MediaMonks and MightyHive Hexagon to Launch Unitary Brand Media.Monks”, Media News 4u, 3
43

August 2021, https://www.medianews4u.com/s4capital-merges-mediamonks-and-mightyhive-hexagon-to-launch-unitary-brand-media-


monks/, accessed December 2021.

12/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
which were time consuming, logistically complex, and expensive, digital shoots were quicker,
simpler to manage, and less costly. In addition, they allowed most elements of the film to be tweaked

os
or even completely altered for different target audiences.

To minimise the adverse financial impact of COVID-19, S4Capital cut down on non-essential costs,
controlled hiring and reduced the compensation of the leadership team; by August 2020, the
advertising group was back to where it had been before the pandemic in terms of top line growth.
S4Capital also benefitted from the pandemic-triggered acceleration in the adoption of digital content

rP
and media at the consumer and enterprise levels. With consumers moving online for most of their
needs from shopping to education, financial services, entertainment and healthcare, most traditional
brands were under pressure to revisit their digital strategy and hasten their digital transformation. By
end-2020, S4Capital gained many FMCG, retail and healthcare companies, such as Nestle, The Coca
Cola Company, Merck, Akzo Nobel, and Shiseido.

yo
Going Forward

S4Capital’s ambitious growth plans, which were centred on driving conversions at scale and winning
Whopper accounts, demanded a high intake rate of talent from the tech industry and not the traditional
agency environment. However, the group found it challenging to find qualified candidates, including
in Singapore, for its fast-growing business in the APAC region, and in the US, its largest market.
Loo commented,
op
We’re winning business, but it’s hard to find the people to put on it. Most digitally-savvy
candidates prefer to work in a tech company over an advertising one, as the latter is still
perceived to be traditionally run. In the US, the pandemic has changed people’s priorities,
resulting in high turnover.

Furthermore, as a disruptor, S4Capital had undertaken many firsts, a key one being the adoption of
tC

unitary branding. Sorrel knew that the unusual move required a difficult trade-off from the
constituent agencies – to give up their individual brand identities in return for access to talent, capital,
and clients across geographies. This made it even more contingent on the advertising group to ensure
that its entrepreneur-founders continued to enjoy ‘ownable space’ within the unified, singular brand
environment.

Another feather in the group’s cap was the acquisition of Zemoga in September 2021, enabling it to
No

add technology services as its third practice area alongside content and media.44 Sorrell explained,

Marketing digital transformation involves at least three corporate functions – marketing, sales,
and IT. Entry into the technology services sector through Zemoga gives us the full capability to
talk to the Chief Technology or Information Officer, as well as the Chief Marketing and Chief
Sales Officer. We now have the full set, so we can address a much bigger market.

The merger would also equip the advertising group to compete with the likes of Accenture and
Globant in offering its clients tech services such as digitalisation of their internal and customer-facing
Do

operations besides the digital advertising solutions. However, would it be an uphill task to integrate
Zemoga’s workforce of more than 400 employees and delivery centres spread across Colombia

44
Reuters, “Martin Sorrell's S4 Capital Acquires Tech Services Group Zemoga”, US News, 17 September 2021,
https://money.usnews.com/investing/news/articles/2021-09-17/martin-sorrells-s4-capital-acquires-tech-services-group-zemoga, accessed
December 2021.

13/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
(Bogota, Cali, Medellin, and Barranquilla) and the US (Los Angeles, New York, Wilton, and
Connecticut) as S4Capital’s new pillar and into its singular brand structure?45

os
More importantly, what should S4Capital do to continue to grow and compete effectively with the
existing giants of the advertising industry? As immediate next steps, Sorrell planned to continue the
hunt for Whopper accounts and declared, “We have already identified another ten potential
Whoppers; we have to identify a further five.”46 Though there were challenges, S4Capital model was
fast gaining traction, and Sorrell believed that the company would seize the next decade by outpacing

rP
others.

yo
op
tC
No
Do

45
Narayan Ammachchi, “S4 Capital Acquires Colombia’s Nearshoring Firm Zemoga”, Nearshore Americas, September 2021,
https://nearshoreamericas.com/s4-capital-nearshoring-zemoga/, accessed December 2021.
46
S4Capital Annual Report 2020.

14/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

APPENDIX: THE EVOLUTION OF THE ADVERTISING INDUSTRY

t
os
The consolidation of the advertising industry that began in the 1970s gained momentum through the
1980s. The advertising companies sought economies of scale, and by the end of the 1980s, eight of
the top ten agencies globally were no longer independent. The remaining two, Young & Rubicam
and Grey, were later acquired by WPP in 2000 and 2004, respectively.47 Size conferred many
advantages such as leverage over prices, reduced costs, global reach, and synergies across

rP
geographies and functions. More importantly, it increased profitability, as the newly acquired assets
were required to generate earn-out revenues for the parent company.48 Swept by the wave of mergers
and acquisitions, by 2002, the industry was dominated by four holding companies – Omnicom Group,
Interpublic Group of Companies, WPP, and Publicis. Together, these megacompanies controlled
more than 50% of the industry’s revenue and were bigger than some of the companies they served.49

Additionally, the late 1990s saw a growing demand from big global brands to have dedicated
agencies across their markets to maintain consistency and avoid duplication of efforts and resources.

yo
This led to the creation of vertical agencies as separate networks within a holding company, dedicated
to managing individual multinational clients.50 This reverse trend of unbundling caught on, with WPP
pioneering it and other most media giants like Publicis following suit.

This structure got corrected over the next couple of decades due to two reasons. First, the clients
refused to continue with the flat commission-based method of payment and instead opted for a
negotiated, service-based fees model, which was less lucrative for the agencies. Second, the media
op
buying and planning gained complexity with increasing fragmentation of the media due to the
proliferation of cable and digital channels. These developments led the agencies to separate media
buying from creative instead of pursuing the full-service model. While the number of separate
agencies did increase, ownership of these agencies was still concentrated among the few, leading to
the formation of a small group of major holding companies.51 Each holding company controlled many
agencies and did not play an active role in their day-to-day operations.
tC

The holding company model continued to strengthen its hold over the industry. In 2016, the largest
group was WPP, with US$19 billion as revenues. It employed 205,000 people worldwide and owned
some of the largest advertising, public relations, and media research agencies/networks in the world,
including Grey, JWT, Ogilvy & Mather, and Young & Rubicam. Omnicom Group was the second
largest, at US$15 billion and 75,000 employees. Its network included leading creative agencies such
as BBDO Worldwide, DDB Worldwide, and TBWA Worldwide. Publicis Group, the owner of
No

stalwarts like Leo Burnett Worldwide and Sapient Corporation, followed with US$9.6 billion in
revenue, and operations in over 200 cities across 105 countries. Interpublic Group retained its fourth
position, with revenue of US$7.6 billion. It owned networks such as McCann Worldgroup, FCB and
Lowe & Partners, and employed 50,000 people globally.52

47
Marsha Appel, “Defining Moments in Agency History | Decade of Agency Mergers, the Foreign Invasion, and the Rise of Holding
Companies”, A’s, 5 March 2018, https://www.aaaa.org/defining-moments-agency-history-decade-agency-mergers-foreign-invasion-rise-
Do

holding-companies/?cn-reloaded=1, accessed December 2021.


48
Ken Auletta, “The Rise, Reign, and Fall of W.P.P.’s Martin Sorrell”, The New Yorker, 17 April 2018,
https://www.newyorker.com/news/news-desk/the-rise-reign-and-fall-of-wpps-martin-sorrell, accessed December 2021.
49
Stuart Elliot, “Advertising's Big Four: It's Their World Now”, The New York Times, 31 March 2002,
https://www.nytimes.com/2002/03/31/business/advertising-s-big-four-it-s-their-world-now.html, accessed December 2021.
50
Ibid.
51
ADBrands, “Structure of the Advertising Industry”, https://www.adbrands.net/advertising-industry-structure.htm, accessed December
2021.
52
John Misachi, “The Largest Advertising Companies In The World”, World Atlas, 7 may 2018,
https://www.worldatlas.com/articles/the-largest-advertising-companies-in-the-world.html, accessed December 2021.

15/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

t
EXHIBIT 1: REVENUES OF THE LEADING ADVERTISING AGENCIES

os
Advertising Agency/Group 2020 Revenue (US$ Billion)

WPP 16.9
Omnicom 15.0

rP
Publicis group 12.3
Accenture Interactive 10.3
Interpublic 10.2
Dentsu 9.6

yo
Deloitte Digital 7.9
PwC Digital 6.7
IBM iX 5.6
Blue Focus 4.1
op
Source: Avi Dan, “Who’s On First: Publicis Groupe Has Just Surpassed WPP As No.1 Among The Agency
Groups”, https://www.forbes.com/sites/avidan/2021/11/03/whos-on-first-publicis-groupe-has-just-surpassed-wpp-
as-no1-among-the-agency-groups/?sh=77ea2146592e, accessed January 2022.
tC
No
Do

16/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

EXHIBIT 2: M&A FOOTPRINT OF S4CAPITAL

t
os
Merged Year Company
Under (Count)
♦ Caramel Pictures (robotic food and drink studio)
♦ BizTech (Adobe specialist)
♦ IMA (influencer marketing agency)

rP
2019 (5)
♦ Firewood (largest Silicon Valley digital agency)
♦ WhiteBalance (India-based creative digital agency)
♦ Circus Marketing (Latin American digital agency)

2020 (3) ♦ Dare.Win (Paris-based digital creative agency)

yo
MediaMo
nks ♦ Decoded (NY-based creative agency)
♦ Tomorrow China (China/Shanghai-based digital creative
agency)
♦ Staud Studios (high end creative production studio that
specialised in automotive industry)
2021 (5)
♦ Jam3 (Toronto-based digital design and production
op
company)
♦ Cashmere (US/LA creative agency; first “Culture Agency
of Record” by Taco Bell53
♦ ProgMedia (Latin American data and programmatic
consultancy)
tC

2019 (2)
♦ ConversionWorks (UK-based data and analytics
consultancies)
♦ Digodat (LatAm data and analytics consultancy)
♦ Lens10 (Australian analytics company)
♦ Orca Pacific (US/Seattle full-service marketing Amazon
No

MightyHi agency
ve 2020 (5)
♦ Brightblue Consulting (UK-based data analytics and
measurement company)
♦ Metric Theory (US/San Francisco performance marketing
agency)
♦ Acquired assets of Datalicious Australia (Sydney-based
data and analytics consultancy)
Do

2021 (2)
♦ Raccoon (Brazil-based digital performance agency)
Source: S4Capital Annual Reports

53
Business Wire, “S4Capital Announces a Merger With Cashmere, Expanding Its Creative and Culture Capabilities in the USA and
Globally”, 8 September 2021, https://www.businesswire.com/news/home/20210908005301/en/S4Capital-Announces-a-Merger-With-
Cashmere-Expanding-Its-Creative-and-Culture-Capabilities-in-the-USA-and-Globally, accessed December 2021.

17/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

EXHIBIT 3A: KEY STATISTICS OF S4CAPITAL

t
os
(In million dollars) 2018* 2019 2020

Revenue 75.5 296.5 472.4


Gross Profit 51.3 236.1 407

rP
Operating expenses (62.8) (241.5) (395.6)
Profit (Loss) before (12.5) (12.7) (4.3)
income tax
Loss for the year (11.2) (13.8) (5.4)
Staff strength 1,200 2,500 4,400

yo
Location 18 locations (12 51 locations (30 57 locations (31
countries) countries) countries)
* Seven-month period, May to December 2018; 1 GBP = US$1.3784 on 31 March 2021

Source: S4Capital Annual Reports

EXHIBIT 3B: KEY STATISTICS OF COMPETITORS


op
WPP* Publicis* Omnicom

(In million dollars) 2019 2020 2019 2020 2019 2020


tC

Revenue 18,241 16,543 12,890 12,650 14,953 13,171


Gross Profit 3,321 2,781 2,632 2,530
Operating (1,534) (5,917) (10,954) (10,823) 12,831 11,572
expenses/ General
& administrative
costs
No

Profit (Loss) before 1,673 (3,846) 1,353 900 1,938 1,409


taxation
Profit (Loss) for the 1,309 (4,001) 990 670 1,436 1,021
year
Staff strength 106,000 100,000 83,235 79,051 70,000 64,100
Location (no of 112 111 100+ 100+ 100+ 70+
countries)
Do

*1 GBP = US$1.3784 on 31 March 2021; 1 Euro = US$1.1726 on 31 March 2021

Source: Companies Annual Reports

18/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

EXHIBIT 4: S4CAPITAL’S PRODUCTS AND SERVICES

t
os
rP
yo
op
Source: Company Data
tC
No
Do

19/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860
SMU-22-0025 S4Capital: Disrupting the Advertising Industry

EXHIBIT 5: API MODEL OF S4CAPITAL

t
os
Client teams nurture and manage our client
relationships to keep landing & expanding.
Client

rP
The Stories we tell & Country teams support
sell in the market. Category Country other C’s in their
They are the things markets and service
our clients buy. local clients for
revenue and relevance.

API

yo
Unitary teams that The skilled teams that
enable and empower Corporate Capability back up Categories
other C's with best in with best in class
deliverables &
class corporate
workflows.
services.
Core

Supporting local and global teams with


op
quality Creative, Design, Development and
Data talent and more.

Source: Company Data


tC

EXHIBIT 6: LOGO OF MEDIA.MONKS


No

Source: Company Data


Do

20/20

This document is authorized for educator review use only by RUSHIT DUBAL, HE OTHER until Dec 2024. Copying or posting is an infringement of copyright. [email protected]
or 617.783.7860

You might also like