Elon Musk’s Tesla data system ‘is new, disruptive, and extremely effective’: Former WPP CEO

WPP former CEO Sir Martin Sorrell joins Yahoo Finance Live to discuss earnings for S4 Capital, Twitter under Musk, and the outlook for digital advertising.

Video Transcript

JULIE HYMAN: It's a possible Twitter Musk tie-up that's being closely watched by advertisers. Musk's more freewheeling approach to speech on the platform could make brands nervous about showing ads on Twitter. Twitter, late last week, of course adopted a poison pill in an effort to thwart a possible hostile takeover from Musk.

Let's get the ad perspective now with Sir Martin Sorrell he is founder and executive chairman of S4 Capital. Sir Martin, good morning. It's good to see you. Or good morning for us, I guess. It's a bit later in the day for you.

MARTIN SORRELL: Good morning on bank holiday Monday here in the UK.

JULIE HYMAN: Well, thank you for joining us on bank holiday. We appreciate it.

Talk to us about how advertisers approach Twitter now and what you think could change under some kind of Musk changes in leadership.

MARTIN SORRELL: Well, in the context of digital advertising, Twitter is, I hesitate to say a rounding error, but it is a small part of the advertising ecosystem. That is probably about $425 billion, $450 billion last year, with Google taking the top spot at about 215 and Facebook at 115 and Amazon, for the first time, revealing 31 billion. So $3 billion at Twitter, $5 billion in total revenue.

Smaller than Snap, which I think was around 5 and 1/2 billion. So you are talking about one of the smaller platforms. That doesn't mean it's insignificant. But this, to my mind, is more of a trophy property play by Elon Musk. It will give him a strong voice.

It's a latter day or modern day Hearst or Murdoch using new media instead of old media, so no different from Bezos or Benioff flirting with "Time" or "The Washington Post," but this is just in the area of new media.

In terms of advertising impact, very small. I mean, you're talking about 1%, maybe, of the digital marketplace. Now, I know that the CEO talked about increasing revenues by 50%. But that would take the ad revenues on Twitter to around about 5 billion. So you are talking about a small platform, as I've said, and I think of minimal significance in the digital ecosystem.

If advertising came off-- Musk has made it quite clear that he doesn't appreciate advertising on Twitter, that it biases editorial policy. I'm not sure I agree with that. But that's a point of view. And if he did gain control, maybe you will see a change.

But in the context of what we see overall, both West and East, the big six platforms are Google, Meta, Amazon, Tencent, Alibaba, and TikTok, really small.

BRIAN SOZZI: Sir Martin, is it unfair to say that just because Elon Musk hasn't necessarily been all in on advertising-- I think at Tesla, they don't do much of advertising, if at all-- that he can't have success with the advertising model of Twitter, should he win the company?

MARTIN SORRELL: Well, he advertises but in a different way. I mean, I think the average auto expenditure per car, it varies from $20, $30 a car to up to $2,000, probably averages around $800, $900, $1,000 a car. He claims he doesn't spend any at all. But he does it in a very different way, using new media and his brand extremely effectively.

And Tesla has built a wonderful market position, a very strong, modern market position in a very different way. And if you link together what he's doing with Starlink from about what he's doing with his data points-- I mean, his cars are not really cars, they're computers on wheels, they're data points on wheels.

Linking that with Starlink, linking that or those two things with what he's doing in space, he has a very, very interesting data system around the world, both on Earth and in space, which is a challenger not just for auto companies but for telecommunications companies and threatens to disintermediate them at scale. You've see what he's done in the case of Ukraine, making Starlink available to the Ukraine population.

So you probably will see increased use elsewhere. So it's part of a digital data ecosystem, which is new, disruptive, and extremely effective.

BRIAN SOZZI: For as long as this cloud hangs over Twitter, do you think advertisers will just start pulling back on how much they spend on Twitter?

MARTIN SORRELL: Well, there are a couple of million followers on Twitter or users of Twitter, daily average users. So it's an effective platform at a small scale. I doubt whether it will hinder it much in the short term. We'll see what happens.

I mean, the love me tender, sweet tweet seems to indicate that he might make a tender offer, which just intuitively, you think that's the direction in which he's going. Both sides have formidable advisors at Goldman and JPMorgan on one side and Morgan Stanley, I think, on the other. So we'll see.

It may become a battle royale. We'll see maybe some Sumner Bravo has come in, indicating they might be of interest. A heavy price, $40, $45 billion for a company with a cash flow of $700 million, revenues of $5 billion. That's a pretty chunky price. If I was on the board. I think I would take it.

JULIE HYMAN: Sir Martin, I would be remiss if I didn't ask you about your own company as well. S4 Capital, because the stock price has taken a hit recently. You've had two delays in the release of your financial results because the auditors, PricewaterhouseCoopers, are still auditing. Can you give us any more information? It seems as though as what the market has reacted to is not knowing what's being uncovered in the audit that would cause this sort of delay. Can you give us any more information on that?

MARTIN SORRELL: Well, the information we've signaled or sent out, the information in two bulletins recently, I can't say much more than that, other than PriceWaterhouse continue to do their work. And I anticipate a resolution in fairly short order.

JULIE HYMAN: And so is that sort of your message to investors to try to reassure them?

MARTIN SORRELL: Well, as we said before in our previous release, we said that PriceWaterhouse continue to complete their work. And we confirmed that the results would be in line with market expectations, the range of market expectations.

So I think that's very explicit. If there was anything material to report of significance, we would be obligated, both PWC and ourselves, obligated to report it. So I would just say, just stand by for further news.

BRIAN SOZZI: All right, we'll leave it there. Sir Martin Sorrell, founder and executive chairman of S4 Capital, good to see you this morning. We'll talk to you soon.