NEIL CAVUTO, HOST: All right. I love having this gentleman on. You know, It is a privacy matter that is now ultimately become very, very public hasn't? Facebook admitting that it hired a public relations firm by the name of Burson Marsteller, to sort of get a leg up and maybe some dirt on Google. Now, the PR firm tried to secure negative stories from columnists and writers about the search engine use of private information from Facebook and other social networks. You've heard it all by now but it was really never disclosed that Facebook were the folks paying for it. Now Burson Marstellar doing a bit of a mea culpa here, saying that it's no longer working with Facebook, never should have never accepted the assignment in the first place. Part of a huge communications empire opened by WPP. Here exclusively with me right now, the man that runs the empire, started it 25 years ago, WPP. CEO, Sir Martin. SIR MARTIN SORRELL, WPP GROUP CEO: Good evening Neil. Wire and plastic products in those days. Yes, a small engineering company. We're coming to the point -- obviously, that was not right what Burson did. They have admitted as such. CAVUTO: Did you know at the time -- SORRELL: Hold on. Let me finish. Withdrawn from the assignment. It conflicted with Burson's policies and our own policies. And the disciplinary action has been taken in relation to it. CAVUTO: Now what conflicted from what I -- from what I understand, sir martin, what conflicted was when Facebook wanted to retain anonymity, right? SORRELL: Yes. CAVUTO: That's when you said -- SORRELL: I didn't say that. Wait a minute. Burson took that decision. CAVUTO: OK. But were you aware of the particulars at the time? SORRELL: Aware of the particulars when? CAVUTO: When this was all unfolding? SORRELL: No, no, only afterwards. Only afterwards. But I should point out you were slightly inaccurate in the way you introduced that. The data that was provided was all public domain data. CAVUTO: Right. SORRELL: All that effectively they were doing was drawing attention to public domain data that is there. CAVUTO: Right. It was -- you're right about that. It wasn't secret. SORRELL: No, no, no. This was no secret. So the --. CAVUTO: But the issue for you was what? SORRELL: The offending issue that it was anonymous. That is against Burson's policy and against WPP's code of conduct. CAVUTO: So when this kind of stuff happens, I kind -- SORRELL: You have to deal with it. CAVUTO: Right. But by deal with it, you found out -- or your guys found out after the fact that Facebook said if we had our druthers, we don't want fingerprints on it. SORRELL: There's no question about fingerprints on it. The assignment should have never taken in the first place. CAVUTO: But it was never brought up that Facebook want anonymity. SORRELL: Sorry, never brought up with where? CAVUTO: When Burson was first signed on? SORRELL: I think initially it was accepted by Burson that it should be anonymous. And that was wrong. CAVUTO: I got you. How are relations between your two firms now? SORRELL: Which two firms? CAVUTO: Burson and Facebook? SORRELL: Well, Burson have issued their statement. Facebook have issued their statement. And that assignment has ceased. CAVUTO: Would you ever do business with them again? SORRELL: Well, we do business with Facebook on a continuous basis, because we buy media, of course. CAVUTO: But on something like this, no? SORRELL: I think obviously it was the wrong thing to do. I think Facebook has indicated it was wrong thing as well. So I think it's a moot point actually. CAVUTO: Are you surprised it got almost this Nixonian treatment of secrets and all this? As you said, it really concerned publicly available information. SORRELL: -- not Nixonian treatment. I think it was dealt with effectively and quickly and -- CAVUTO: I'm talking on Facebook's part, that they just reinforce this intrigue about competitors in a business and how they deal with each other? SORRELL: I think you have a lot of things going on in the technology area of high-risk and high reward. And I was looking at some of the blogs in relation to the story and in relation to some of the things that Fox and others have written and said. And there are some interesting comments made about the nature of the competitive combat that is going on in the technology area at the moment. But that doesn't excuse -- excuse the conduct. CAVUTO: What do you make of the overall economic environment, in which these guys reside? Technology and valuations -- SORRELL: Well, technology actually is leading a lot of the activities. One of the areas that recovered sharply in 2009 after the Lehman weekend was --. CAVUTO: But these evaluations are off the charts. Do you find that they're justified? SORRELL: I thought these valuations were off the charts 12 months ago. I've been proven to be yet again wrong. CAVUTO: You could be just early and right? SORRELL: No. I think we're seeing a lot of speculative excess in some parts. For example, I was in Brazil a couple weeks ago. And I think we are seeing some speculative froth. Brazil will continue to grow very significantly. It is one the BRICs, one of the major faster growing markets. Just like Russia, India and China, it is a pivotal market for us now and in the future. Having said that, you are going to get cyclical swings around that. I think the real in that particular case has been extremely strong. That has driven the speculative thrust as well. You're seeing in the Internet area, in the high tech area, in our own industry in the United States, excessive valuations, in my view. But again, what do I know?. CAVUTO: That's why I want to hone in on that, if you don't mind, Sir Martin. When a Microsoft comes and pays more than eight million dollars for Skype. SORRELL: Ten times revenue. CAVUTO: OK. And I see a Facebook valued -- relationship notwithstanding -- that it is 70 plus billion. SORRELL: Well, we've seen Facebook's value go from a muted 50 to 65. CAVUTO: You can't tell me -- you can't tell me that Facebook is worth 70 billion dollars? SORRELL: Well, I don't know. I mean, it's -- ultimately, Neil, it will be dependent on what -- if it gets floated -- CAVUTO: If people pay it, if people pay it. Doesn't it feel like Earth Web to you, like the late '90s? SORRELL: If you went back to Google -- remember Google did their IPO and they did it on the bidding system. You remember? It was underwater. You remember? And people like Bill Miller and Legg Mason came in after the IPO and did extremely well. So it's very difficult to come to a view of this. It did look as though eBay's purchase of Skype looked wrong. It now looks very right. We have to see. CAVUTO: But Microsoft looks like a genius now not getting Yahoo!, right? It is roughly a third of its value at the time. SORRELL: Well, it picked off the part of Yahoo! that in the end probably made sense. And Bing has been launched and has actually been very successful since it's been launched. CAVUTO: So I'm just interested because you're a pretty good reader. SORRELL: I'm not a very good reader. CAVUTO: You don't build a firm like yours on a luck. SORRELL: We make mistakes. CAVUTO: But -- but I'm worried. Allay me of my -- SORRELL: About speculative excess? CAVUTO: The speculative excess. The way that we are attaching values to entities in some cases that barely have any earnings at all. In the case of Skype, just now getting earnings. SORRELL: We saw -- we saw AOL buying "Huffington Post". CAVUTO: You're quite right. SORRELL: Ten times revenue. CAVUTO: You're feeding my argument. SORRELL: I think there is an argument. There is certainly a lot of money about. There is certainly a lot of liquidity about. There is certainly some areas -- and in our own industry, I can see some of the things you're talking about in relation to the Internet in America and Brazil, a little bit in China, but not that much. But those are the areas -- those would be the three geographic and functional areas I would --. CAVUTO: Not the United States? SORRELL: The United States Internet, but not the United States generally. CAVUTO: Really? SORRELL: No, in terms of investment. I'm talking about --. CAVUTO: So the highers for you, China, Brazil, Latin America in general? SORRELL: Well, the three strategic areas which are highlights for us are the new markets. That's the BRICs and next eleven. Knock out Iran because we can't include that in the next -- so it's next M. What the economist calls the Civits (ph), Colombia, Indonesia, Vietnam, Egypt, Turkey -- even Egypt now, Turkey and South Africa. CAVUTO: Egypt now? SORRELL: Yes. I think -- well, there is a view in relation to the Middle East that there will be short-term turbulence but long term increased growth. I was down in the Business Council in Washington. And we had a session on the Arab Spring and what the implications are. And despite the significant uncertainty, I think the general view -- not a view maybe that I would share -- the general view is that in the long term, that the collapse of some of these regimes will lead to greater economic progress. CAVUTO: But they keep collapsing. Look at Syria is in this. Yemen is in this. Libya who knows. Egypt still doesn't have a government. SORRELL: I agree that there is lot of uncertainty. I think it probably increases the risk. And therefore it is a negative in terms of the risk/reward ratio in relation to the Middle East. But having said that, there are a lot of people that believe that these political changes, in the longer run, will result in higher growth rates. So I would say on balance people were more optimistic, paradoxically, than maybe I would have been or, indeed, you, by your questions, are implying that you are. So there are parts of the world that attract new markets is one. New media is the other, which you're well aware of. So mobile social networking, which you touched on, video content, in addition to PC-driven media. And then last but not least, data analytics and the application of technology to our business. Consumer insight is critically important. CAVUTO: A double-dip a real possibility? SORRELL: No. CAVUTO: You don't see it? SORRELL: No. The thing I worry about, Neil, is that I think 2011 is set pretty fair. 2012 I think is set very fair. London Olympics, presidential election. We'll see four billion spent in media, in one way or another, in the run-up to --. CAVUTO: Do you buy that media presages the rest of the economy? SORRELL: No. What it does, it puts pressure on the markets. Therefore it intensifies -- CAVUTO: How about our presidential election, regardless of how much money? Does it matter the outcome? SORRELL: It matters the outcome to the country. But we're apolitical in that sense. We have companies that historically worked from both sides of the aisle. CAVUTO: From your vantage point, does it matter in this country with the Democrat running the show or Republican? SORRELL: You're really putting me on the spot. CAVUTO: You're a sir. Sirs answer. SORRELL: Then I should be in the position not to answer. Does it matter? What matters to me is whether the economy is run effectively and efficiently. CAVUTO: It is not. I can tell you that. In America, it is not. SORRELL: That is your view. It's a different view. In relation to the U.K. -- we chatted a little bit before we came on. To my mind, government policy in the U.K.,, the coalition's policy is a good one. Deal with the deficit. CAVUTO: Those two are framed. I know your country. SORRELL: They are comfortable in their own skins, at least to some degree. But they're dealing with a deficit. That gives them the room. They have five years, or a little bit less than five years to get the long- term strategy right. Here you have an administration that is facing an election next year. And I think it is unlikely that they will deal with the deficit in a significant way prior to that election. CAVUTO: You're right. SORRELL: Whoever gets reelected -- and I think the odds must be on President Obama to be reelected, from my point of view, the way I see it. CAVUTO: Interesting. SORRELL: If he gets reelected, he will have to deal with the deficit. What worries me you can't kick the can down the road. CAVUTO: We keep doing it. We keep doing it. SORRELL: Late 2013, 2013. So I say '11 and '12 set fair. 2013, the going will get tougher. CAVUTO: I agree with you. In your country, at least those two are running it. SORRELL: That is reality. CAVUTO: They're trying to do stuff. SORRELL: The coalition. You would have --. CAVUTO: They hate each other. (CROSS TALK) CAVUTO: They're always fighting. I read "the Financial Times.". SORRELL: You must not believe everything you read. Certainly sitting here in Fox with your association with the "Wall Street Journal," that is a no, no. CAVUTO: Same thing. They're telling me the same thing. SORRELL: I think they're pretty comfortable in their own skins. I think Vince Cable (ph) may be an issue, because he certainly probably would have favored a coalition with labor rather than conservatives. CAVUTO: But the whole world isn't going to end? Things are stable right now for you?. SORRELL: The world is growing at four or five percent. What the difference is this year to last year is America is not growing as fast. CAVUTO: OK. SORRELL: Still growing, but not as fast. It is the BRICs and Next 11 where the action is, which we in the west find very uncomfortable. We like to be top dog. CAVUTO: And we're not. SORRELL: In the longer term, we may be equal dog, if there is phrase like that. But we certainly won't be top dog. Don't underplay China. Don't underplay India. Don't underplay Brazil. Don't underplay Russia with its oil reserves, with oil at approximately 100 -- the Russian economy works in spades. CAVUTO: You're pretty good at this. You might have to future in business. SORRELL: We'll have to check the ratings. Are the ratings better. I got invited back on the basis of rating being better. Just check the Nielsen ratings. CAVUTO: Thank you very much.