Is the ad industry about to sink without trace?

Will WPP collapse like a stack of cards? Will the industry fall and rise like a phoenix? Or will it muddle through? Has the industry lost its values and value to clients in the pursuit of shareholder value? These were just some of the discussions I’ve had over three amazing days spent on the Aurora boat at the Marketing Forum.

 

On a more upbeat note I had a great three days speaking on ‘ethical marketing & the new consumer’ and networking. The event is certainly the best one of the year for meeting all sides of our industry. It’s always good to discuss hot issues with people that have different view points. And enjoy great food and a few beers ‘til the early hours of the morning – it’s also one of the year’s best parties.

It was a great opportunity to be able to hear the opinions of clients, agencies and business experts like Robert Shaw and Andrew Marsden.

 

One subject that came up constantly was the effect of the credit crunch on the industry. There’s few who cannot be worried, and I’m sure Martin Sorrell is sipping diet Coke rather than champagne (unlike the fat cats from the banks who were in Monte Carlo last week). Sorrell is a pragmatic realist when it comes to making agencies make money. Few cannot respect him and his ability to build a very successful media group but he’s an accountant not a visionary and could learn a lot from understanding the value of creativity as WPP goes forward. I’d love to spend a lunchtime with Sorrell and change his thinking.

 

The big issue is values, agencies were traditionally built on values not value to shareholders. And with the current economic climate we, the masses, are all paying the price for an economy that is driven the few. Even the Sun has fuelled anti-capitalism attitudes towards the City. Revolution seems to be in the air. One way or another the ad industry could be in for one of the most dramatic changes since the 60s.

 

The industry – both clients and agencies – have moved from longevity to short term thinking. The average clients stays in his job about 2 years, agency staff aren’t much better. When once we thought in campaigns over years we now think in weeks. Is it any wonder many big brands have lost their way?

The industry has moved its focus from great work that worked, to shareholder value. It has been on a path of cost cutting and in the process it’s cut planning, creative and other value dominated areas.

 

“Cutting costs is not the same as making money” was my father’s favourite saying. Replacing talent with time focused low level staff is short sighted. “Bubble wrap’ is the term being used by some clients to describe many agencies – “20% substance, 80% air”. One client put it bluntly, “why would I buy an agency just made up of suits? I want to pay for talent – creativity and thinking – and that’s coming harder to find.” Other clients were nodding in agreement.

 

No disrespect to account handlers, but clients don’t think you are strategic thinkers and therefore no replacement for planners. I‘ve only met a few who could be both planner and account handling. And the idea that account handler led agencies can buy in freelance talent is pointless. So can clients.

On a business level, it was felt that agencies are not aligned with client’s business needs. Robert Shaw in his lecture commented that agencies and clients need to stop thinking of budget as pocket money. Clients and agencies need to work closer together as business partners rather than supplier and master. Both need to adopt more professionalism and financial accountability.

 

So what will the future of the ad industry look like? This is yet to be decided, but change is in the air, so if you are not planning a new model you may be a looser rather than a winner.

We have gone from an agricultural economy to a manufacturing economy and beyond – now more people work in Indian restaurants than car and boat manufacturing. We are now in the Creative Economy where it’s intellectual capital that is up for sale. It’s called the Creative Economy by governments and economists for a reason. By contrast, some developing nations are stuck in a Service Economy, when your people is your greatest resource.

 

So why are agencies not getting this? They need to invest in brain power, yet as an industry we employ more account handlers than planners and creatives. It seems the ad industry wants to work in the service economy.

“Agencies are like restaurants,” was the thought of one great adman, Roy Williams. People go for great food, for that you need a great chef (creatives). They expect excellent service (account handling). Which one do they pay more for?

Clients also need to review their position. “It takes good clients to make a good advertising agency. Regardless of how much talent an ad agency may have, it is ineffective without good products and services to advertise.”?- Morris Hite

Personally I think those agencies who focus on value – creativity & strategy – will become the new winners.

 

Greater efficiency, better understanding of clients (because clients can talk to the thinkers) and more effectiveness. Clients will see greater return for their budget because more will be spent on talent. It’s common sense.

There will also be the development of a new breed of logistic based agencies that just deal with execution to support the previous types. And the role of account handlers will move to more project management – so goodbye to lots of meetings, long Powerpoints and waffle. Of course many will disagree but that’s the beauty of predictions – everyone can have an opinion but only time will tell.

On a more cheerful note, a few days on the Aurora generated some good gossip. I met a couple of great journalists from both Marketing Week and Marketing, but alas I promised not to write any stories about them in my blog, in exchange for none about me! That was one great night!

  • CHRIS ARNOLD

    I want to stimulate a discussion so please feel free to express your views.

  • charlie robertson

    There are new models for integrated marketing communications.
    What blocks them are at least 2 things – lack of common ‘language’ and lack of desire to collaborate
    - no coherent measurement system for ROI
    - follow the $ for individual P&L’s inhibits collaboration

  • Max Harrington

    Chris, I couldn’t agree more. Having just returned from the US I got a taste of the industry on both sides of the big pond.
    Agencies need to decide if they are working in the creative economy or the service economy. Working both sides, I think clients want agencies that can do the deep thinking and creativity. The rest they can do themselves and better than agencies, hence why they are taking it away.
    Restaurants – a great analogy.
    Having recently been involved in a review (sitting client side) we all felt that the four agencies we met had little real value to offer. One didn’t even have a planning or creative department! They tried to claim they would hire the best people in. So can we and cut out the middleman. No client is that stupid, we can see through the bull. Translated, what they are really saying is, we do it on the cheap and not very well.
    Agencies need to be more transparent and accessible as well. Here’s a shocking fact for all those over protective account handlers – all clients want to meet and talk directly to creatives and planners, not pay big sums for Chinese whispers.
    My advice, try sitting on the client side for a while. Maybe then you’ll understand what clients really want and it’s not nice biscuits and a sycophantic attitude. It’s real value to their business.

  • http://davidw@agencyassessments.com David Wethey

    Chris clearly had a rollicking time on the ocean wave (well… anchored off Guernsey). But he forgot to answer his question. ‘Will the ad industry sink without trace?’ And also the one about WPP collapsing like a pack of cards. My basic belief is that as long as capitalism survives, so will advertising. WPP and the other groups will be more resilient than most stocks because they are geographically well spread, and also growing well in non-media marcoms. It’s not that agencies don’t understand creativity. More that too much of the creativity is dedicated to the TV commercial. But rather than just rush in and say ‘no’ and ‘no’, I’d like to ask Chris to have a crack.

  • Max Harrington

    David, I think he was trying to get us to answer that. It’s a debate. And one we need to have.
    As for WPP. they are reliant on big international accounts, if one catches a cold – it has a ripple effect.

  • Gary Shannon

    A restaurant with great service and bad food is even worse than one that has bad everything. Like they are trying to blind you with insubstantial fluff and charging you way too much for it.

    I think any decent account handler would agree that it is our creative and strategic product that makes us good. Harnessing that product in the best interests of the client is important but there is no point harnessing overstretched, burnt out, uninspired, uncommitted or talentless resources.

  • Gary Shannon

    Forgive me for using the word ‘resources’ to describe creatives and planners by the way…you know what I meant

  • Rory Sutherland

    Gary said – I quote – “A restaurant with great service and bad food is even worse than one that has bad everything.”

    Pure genius.

  • http://www.anomaly.com James Cooper

    Sitting here in NY watching all the sh*t come crashing down it seems to me the only way to think about it is – am I useful?

    As a creative person, does the fact that I can write a clever headline mean anything anymore? Probably not. Does it make any difference that I can get fancy pants Johnny Director to shoot my ‘film’ when no else can? No. Or when I’m building a web site or some banners I make them more superwhizzy than everyone else, and oh look! win something at Cannes. Hell no.

    So then, what?

    I don’t know – I’ll get back to you when I’ve finished wallowing in the doom but it will definitely involve ping pong.

    There is no doubt that

  • Max Harrington

    Hi James in NY!
    I bet the restaurants in New York aren’t doing so well either. In this weeks AdAge (are we allowed to mention a competitor magazine?) 85% of readers polled thought there’d be a significant reduction in consumer spending. The only growth, will be in soup kitchens (if Scott Taylor’s thoughts come true).

  • Max Harrington

    Chris, has Martin Sorrell invited you to lunch yet? Ask Rory to drop him an email.

  • CHRIS ARNOLD

    Not yet. Hopefully a decent restaurant with great food and great service. Martin, all of Brand Republic are watching.

  • EZee

    Using the restaurant analogy is flawed, as there is the issue of frequency – most of us do great restaurants everyday due to cost – and preparation in that good food can always be mastered at home.
    Agencies are commercial partners offering their expertise of a deep understanding of consumers translated into effective advertising ideas.
    So, let us look back in order to go forward.
    Not go on some nostalgic tour of the glory days but to look at exactly what it was that agencies brought to the table when devising – for Mars “A Mars a day helps you work rest and play” or Stella “ “Reassuringly expensive” or Levis “Rivets” just to name a few that come readily to mind.
    What they delivered was marketing understanding and consumer insight translated into great creative work that resonated with the audience and helped build brands.
    That was a simple task in a world dominated by TV, now we live in multi media world, audience fragmentation and the only way out is to get back to and connect again with consumers tap into their psyche understand their motivations and produce pertinent advertising.
    Account men cannot do this they are sales people, only planners and creatives can by embracing and understanding all the new media and what these mean to a consumer.
    It is a question of attitudes rather than values that are still steeped in 80s thinking and compounded by a “buying and selling” trading attitude rather than creating long-term partnerships with clients

  • EZee

    and another thing………..”Ad agencies, once freewheeling entrepreneurial shops, have been consolidated into global marketing services companies run by professional business administrators, rather than professional advertising people” – the spirit and drive of advertising has been sapped.
    Perhaps in your lunch you can recommend that Martin reads the book, breaks up WPP and retires to Ireland with his millions making room for fresh young talent.

    Reference: Cappo, Joe. Future of Advertising : New Media, New Clients, New Consumers in the Post-Television Age.
    Blacklick, OH, USA: McGraw-Hill Companies, The, 2003. p 8.

  • http://kevincferry.blogspot.com/ kevin ferry

    No the industry isn’t about to sink without a trace but they’ll be a lot of people in this business who’ll drown in their own bullshit.

    A quote from Paul Arden: ‘the word creative is the currency with which ad agencies operate. Without it there are no agencies’

    We know the damage ‘suits’ can cause just look at the sub-prime in the US.

  • http://kevincferry.blogspot.com/ kevin ferry

    No the industry isn’t about to sink without a trace but they’ll be people who’ll drown in their own bullshit.

    A quote from Paul Arden: ‘The word creative is the currency with which ad agencies operate. Without it there are no agencies.

    We all know the damage ‘suits’ can cause just look at the what happened with sub-prime selliing in the US.

  • http://kevincferry.blogspot.com/ kevin ferry

    I’ll repeat that again :)

  • EZee

    @ Chris you said : ” I want to stimulate a discussion so please feel free to express your views”. Well the topic has not exactly set the Internet on fire which says more about the industry than your valiant attempt to raise, air and discuss a real issue.
    Ostriches and sand come to mind, so what’s new then!
    Adding to my earlier musings the attitude which has to come from the top should be stop pushing agendas and start pushing ideas. Perhaps clients will them start listening then.

  • CHRIS ARNOLD

    If anyone wants to join THE FORUM FOR CHANGE debate to be held in London soon, let me know.

    And if you bump into Mr Sorrell, tell him I’m still up for lunch.

  • Gordon Macmillan

    Me too.

  • marcus evans

    I am late into this one so I suspect nobody will ever read this (sigh) however, for what it’s worth, here is my twopenneth. Oh come on let’s be honest the agency model has been broken for years. As if the demise of media comission based fees wasn’t bad enough, during the last recession (in the 90′s) clients discovered that they could have pretty much what they got before for about 70% of what they paid before. This saw the fat sweated out of the business and the end of the likes of the Sicillian brothers shopping for the odd clearing bank. Sadly it also heralded the decline of advertising’s halcyon days. The CRM and digital revolutions have come to pass (in many cases unnoticed by adland) yet, rather than reengineer the age old model to incorporate new media and communications needs, agencies have largely soldiered valliantly on, struggling to maintain revenue growth and staff cost ratios in the face of an overserved market and declining margins. In short, doing more work with fewer people. Then, when that was no longer sufficient to meet the profits demanded by shareholders, doing more work with not only fewer people, but fewer, more junior people. For those clientside folks reading this (and doubtless nodding sagiciously) you are by no means blameless. What did you expect the result of reduced agency fees might be? Yes initially a saving, but what of the long term effect? Clients allways say that they want “the best talent working on my account” but when it comes to paying for it they are seldom as bullish. What’s more, they add insult to injury by unleashing their procurement shock troops, whose key objective is to reduce costs, largely irrespective of any deterioration in quality. And on top of all that, the fleeting tenure of most brand managers and CMO’s means that, rather than taking the long term perspective of building and evolving the brand, they adopt a “don’t rock the boat” apprach where good is quite good enough thanky most kindly,as they will be on to the next challenge in 18 months. To those clients who genuinely believe that good is by no means good enough, and who make decisions based on maximising potential rather than minimising risk, I salute you as you are an endangered species. Now, as I’m sure you have surmised, I have spent many a year in this fine business and, though synicism is an all too frequent companion these days, I still cling to the abiding hope that some good will come from this next recession. That would be that agencies are forced to truly amalgamate their diciplines and operate in a genuinely integrated way. (Please hum “Pomp and Circimstance” quietly whilst you read the next section) ideas will not be the sole domain of planners and creatives, the ad will not “set the tone” for the rest of the campaign, media planners will work in conjunction with creatives to ensure the media buy actually supports or better yet enhances the campaign, clients push back on work on that is only “good”, shareholders appreciate that their investment will not flourish in the hands of junior suits but under the guidance of highly talented, experienced and visionary professionals who don’t (and shouldn’t) come cheap. So will the advertising industry sink without trace? Absolutely not. Will WPP fold like a pack of cards? Don’t be naive. Perhaps a better question would be “Will tomorrow’s advertising agency be worth working in?” Not if it continues to prostitue its self to the lowest bidder. So, as an old industry fart, I say “hey lads, hey!” and look back on the good old days with a self indulgant smile. My race is nearly run, but I truly pity you young bloods, whether client or agency side,full of piss and vinegar who wan’t to stamp your authority on the marketing world – unless, that is, you have the grit and nouse to put the thought, creativity, craft, perfectionism and magic back into this business. Lets hope the recession can be the catalyst that sparks the revolution, at least that way all the lost homes, lost jobs and tightened belts will have not been totally in vain.

  • marcus evans

    I am late into this one so I suspect nobody will ever read this (sigh) however, for what it’s worth, here is my twopenneth. Oh come on let’s be honest the agency model has been broken for years. As if the demise of media comission based fees wasn’t bad enough, during the last recession (in the 90′s) clients discovered that they could have pretty much what they got before for about 70% of what they paid before. This saw the fat sweated out of the business and the end of the likes of the Sicillian brothers shopping for the odd clearing bank. Sadly it also heralded the decline of advertising’s halcyon days. The CRM and digital revolutions have come to pass (in many cases unnoticed by adland) yet, rather than reengineer the age old model to incorporate new media and communications needs, agencies have largely soldiered valliantly on, struggling to maintain revenue growth and staff cost ratios in the face of an overserved market and declining margins. In short, doing more work with fewer people. Then, when that was no longer sufficient to meet the profits demanded by shareholders, doing more work with not only fewer people, but fewer, more junior people. For those clientside folks reading this (and doubtless nodding sagiciously) you are by no means blameless. What did you expect the result of reduced agency fees might be? Yes initially a saving, but what of the long term effect? Clients allways say that they want “the best talent working on my account” but when it comes to paying for it they are seldom as bullish. What’s more, they add insult to injury by unleashing their procurement shock troops, whose key objective is to reduce costs, largely irrespective of any deterioration in quality. And on top of all that, the fleeting tenure of most brand managers and CMO’s means that, rather than taking the long term perspective of building and evolving the brand, they adopt a “don’t rock the boat” apprach where good is quite good enough thanky most kindly,as they will be on to the next challenge in 18 months. To those clients who genuinely believe that good is by no means good enough, and who make decisions based on maximising potential rather than minimising risk, I salute you as you are an endangered species. Now, as I’m sure you have surmised, I have spent many a year in this fine business and, though synicism is an all too frequent companion these days, I still cling to the abiding hope that some good will come from this next recession. That would be that agencies are forced to truly amalgamate their diciplines and operate in a genuinely integrated way. (Please hum “Pomp and Circimstance” quietly whilst you read the next section) ideas will not be the sole domain of planners and creatives, the ad will not “set the tone” for the rest of the campaign, media planners will work in conjunction with creatives to ensure the media buy actually supports or better yet enhances the campaign, clients push back on work on that is only “good”, shareholders appreciate that their investment will not flourish in the hands of junior suits but under the guidance of highly talented, experienced and visionary professionals who don’t (and shouldn’t) come cheap. So will the advertising industry sink without trace? Absolutely not. Will WPP fold like a pack of cards? Don’t be naive. Perhaps a better question would be “Will tomorrow’s advertising agency be worth working in?” Not if it continues to prostitue its self to the lowest bidder. So, as an old industry fart, I say “hey lads, hey!” and look back on the good old days with a self indulgant smile. My race is nearly run, but I truly pity you young bloods, whether client or agency side,full of p**s and vinegar who wan’t to stamp your authority on the marketing world – unless, that is, you have the grit and nouse to put the thought, creativity, craft, perfectionism and magic back into this business. Lets hope the recession can be the catalyst that sparks the revolution, at least that way all the lost homes, lost jobs and tightened belts will have not been totally in vain.

  • http://www.Seanie.info SEAN RUTTLEDGE

    “Cutting” in this context is SELF-HARMING

    Inevitably smart business will cut off the fat but leave the muscle intact

    Oh and anyonewho thinks it’s the end of the industry is a pure Malthusianist

    innit

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