Break up the internet giants, says guru of advertising

Legendary advertising mogul launches stinging attack on Facebook and Google

HE’S the advertising guru behind the famous Levi’s launderette commercial, Audi’s legendary ‘Vorsprung durch Technik’ catchphrase and the memorable ‘Lynx effect’ campaign. Now, Sir John Hegarty, one of Britain’s original ‘Mad Men’ who cofounded agency Bartle Bogle Hegarty (BBH) in the 1980s, has a new message for the world: the time has come to break up the internet giants, which have strangled the advertising industry online, acted ‘irresponsibly’ and even held back economic growth in the UK.

‘They’re sucking money out, not paying tax on it and destroying what they’ve left behind,’ he tells me in a top-floor bar area at the annual Advertising Week Europe event in Central London.

It’s an extraordinary attack – particularly given that the crop of start-ups which Hegarty has invested in, housed and nurtured through his Garage Soho business incubator rely heavily on Facebook and Google for advertising.

The two web companies have become so powerful that they dominate digital advertising. In the final three months of 2018 alone, Google generated a staggering $32.6billion worldwide revenues from advertising. Facebook made $16.6billion global revenues from advertising in the same period. Google’s advertising revenues doubled between 2011 and 2017 and, with Facebook, the two companies scoop up 90 per cent of new digital advertising spending in the UK.

‘These companies have turned into monopolies, and when you get a monopoly they eradicate innovation because they want to keep things as they are,’ Hegarty says, referring to a ‘buy ’em and kill ’em’ approach to dealing with competitors.

Hegarty’s comments come a week after a hard-hitting Governmentcommissioned report called for tougher competition laws to crack down on the ‘bullying tactics’ and ‘killer’ takeover strategies of the US giants.

The review revealed that Amazon, Apple, Facebook, Google and Microsoft had swallowed up more than 400 smaller rivals over the past decade with little scrutiny from regulators. In the advertising sector alone, Google bought giant rival DoubleClick for $3.1billion in 2007 (around double the price it paid for YouTube a year earlier) and has subsumed several other major players including Ad Exchange.

Just a day before we meet, Google is fined €1.5 billion by the European Commission for abusing its dominant digital advertising position.

‘Google are making nearly $9billion [profit] a quarter so when you fine them €1.5billion, it’s like taking somebody out for lunch...one hell of a lunch,’ Hegarty says.

Born to Irish parents in North London, the 74-year-old had a workingclass upbringing. He went to the London College of Printing [now Communication] and it was there his love of advertising began.

He has always gone against the grain. He founded BBH in 1982 with John Bartle and Nigel Bogle and quickly became known for its iconic advertising campaigns. Thirty years later, when BBH was sold to Publicis, Hegarty had become a legend, known for his unconventional ideas.

The big ad agencies, including WPP and Publicis, are now all struggling with the challenges of digital advertising and the changing market. Before, they created TV and print ads. Now, it is not quite so simple as Facebook and Google control the online market and take a huge share of spending.

Instead of the old-school scattergun approach to advertising, the online industry increasingly involves targeting specific groups of people identified by complex data analysis. This data, ultimately, is held by the likes of Google, which controls a long supply chain where each participant takes a cut. Websites say that whereas in the past they might have received more than 80p for every £1 spent by a company advertising with them, they now receive nearer 30p. Google’s dominance means it can keep an iron grip on these prices. Sir Martin Sorrell, another British ad mogul, believes using this type of new technology and data to target specific audiences online represents the future for the big ad agencies – and they must adapt.

But Hegarty disagrees. He thinks agencies which are the most creative will be the ones which survive. He bemoans the lack of creative people at the top of these giant agencies and even has a dig at Sorrell for ‘stripping creativity out of WPP’.

He says Sorrell, who left WPP amid allegations – strongly denied by Sorrell – that he paid a prostitute using company money, won’t have a legacy because he’s a ‘financial guy’ rather than a creative type who has come up with ideas or campaigns that will ‘live on’.

‘Essentially this is a creative industry. So how come the richest man in it is an accountant?’ Hegarty asks. ‘He [Sorrell] hasn’t created anything, he’s just taken other companies and bolted them together. And eventually the bolts rusted and it all fell apart.’

But Hegarty doesn’t dispute that the rise of the internet has changed the way the ad industry works – and made tighter regulation ‘essential’.

‘All corporations will want to monopolise,’ he explains. ‘It’s in their nature. They’ll grow as fast and as big as they can, exclude competition, dominate the market, keep it where it is.’

He believes a break-up is inevitable, raising the prospect of Facebook being forced to sell Instagram as one of the first steps.

While the political rhetoric is dominated by Brexit, Hegarty believes the economy has stagnated over the past 15 years and he points the finger at tech companies, partly, for taking far too large a share of advertising spend and not giving enough of the money to the companies which create ads and display them.

‘They’ve been allowed to not just disrupt, but disrupt irresponsibly,’ he says. ‘They don’t pay taxes and things like that. And they’re not putting back into the economy. They’re sucking all this money out and it’s not going back into the economy,’ he says. He uses a newspaper analogy to explain. ‘If I put more money into newspaper advertising, the newspaper can have more features, employ more journalists, it can have more advertisers in. It’s a virtuous circle you’re creating. I’m not sure that the tech companies as of yet are creating a virtuous circle.’

Politicians are partly to blame, he says, because they are ‘so behind on what’s actually going on’ and so slow to act. Facebook denies it is a media company and claims it only hosts content from news sites. But it already decides which sites its users should be reading more of.

Hegarty says: ‘You can’t be a platform and/or a media company. You’ve got to be one or the other. So that claim that, “we’re a bit like the telephone companies in that we can’t control the conversation” is b ****** s. BT weren’t selling my conversation to somebody else. It was a private conversation.’

He is, of course, referring to concerns about data privacy and misuse, which Facebook has been fined over. Hegarty also has ‘strong views’ about protecting children online. ‘You wouldn’t allow a child to go into a bar and order a double vodka. You wouldn’t allow a child to go into an X-rated movie. We’ve all these controls on things and yet they can go online and get everything they like. The tech companies don’t want to stop that because they get more eyeballs.’

Before setting up his own agency, Hegarty worked with Charles Saatchi at Cramer Saatchi, which he joined in 1967, before becoming a founding shareholder of the worldrenowned Saatchi and Saatchi agency in 1970. With so much change since then, what would Hegarty’s strategy be if he were starting out in the industry today? Would he join a big agency or pin his hopes on an innovative digital rival?

He says he’s drawn to the world of ‘influencers’, where celebrities and social media stars are paid by brands to post promotional pictures and messages to their followers.

‘I might be a creative influencer and join Whalar [one of his startups which helps brands work with influencers],’ Hegarty enthuses. ‘But I love being in a community of creative people too. What an agency can do is create an environment where you bounce off other creative people. I’d probably do both.’

Like fellow septuagenarian Sorrell, who has started S4 Capital, Hegarty has no plans to head off into the sunset, even to his vineyard in the South of France. He is revelling in helping creative start-ups make their way, although admits he has called the ‘undertaker’ for some already.

‘I’ll never retire. It’s like pulling the plug,’ he says with a grimace just at the thought of it. ‘Nobody ever asks David Hockney if he’s going to retire. Life’s too interesting,’ he adds with a grin.

Essentially this is a creative industry... so how come the richest man in it is an accountant?

I’ll never retire. Nobody ever asks David Hockney if he is going to retire. Life’s just too interesting