Advertisers: You’re next

I’m seeing a lot of avoidance of the elephant that isn’t quite in the room yet but is banging at the door:

Advertising is the next big industry to suffer huge upheaval thanks to the internet. They may think they’re already there, but they’re not, not by a long shot. In fact, it is the ad industry that is holding up the progress of other industries — newspapers, TV, radio, cable — that are already getting tromped on by that elephant. Advertisers can get away with moving slowly — for now — because they are the ones with the money. Funny how that works. But this won’t last for long, as one client and then one agency discovers that the lazy, traditional, one-stop-shopping of TV upfront and the big-media lunch circuit is inefficient, wasteful, untargeted, irrelevant, and ultimately damned irritating to your customers. Once that tipping point comes, dollars will start flowing to the upstarts online — not as many dollars concentrated in a few places as before, but spread out far and wide. As Bob Garfield pointed out in Ad Age and on On the Media, the upstarts aren’t quite ready for it, but once they see money sitting on the table, they’ll get ready fast (see my Ad Age piece on an open-source ad infrastructure for the distributed world). The day of reckoning nears.

There happen to be lots of links to stories that are avoiding that elephant from the last few days. Start with Richard Sikos’ New York Times piece about waiting for money to come online:

But one could make a case that the amount of focus on — and hype about — Internet activities at media companies has some kind of inverse relationship to the amount of near-term revenue they represent for these companies.

We’re still in the early innings, but given how much the Internet has already transformed the media and society, it’s surprising how little money traditional media companies make directly from it.

Don’t take my word for it. Flip through the financial statements of some of the biggest names to see what they say about their Web sales and profits. . . .

The less-cheerful view of the traditional media companies is that all their online efforts will not translate directly into more revenue or fatter profits. Thanks to aggregators, file sharers, pirates and other disruptors, more value will leak away or be stolen than will be gained by these companies.

This is not to say that online will never be an important — if not central — financial contributor to media businesses of all kinds. For some companies, though, it could serve increasingly as a promotional or marketing outlet, or as a cut-rate but widely distributed version of what consumers can buy in conventional formats.

It’s a good piece, but I’ll nudge on a few points.

First: Of course, there’s no saying that these new activities will lead to “more revenue or fatter profits.” They won’t. Period. That’s because there is now no scarcity of competitors for those dollars and ways to spend them more efficiently in more places. The amount spent on advertising likely won’t change, but the revenue will be spread thin.

Now this usually makes the proprietors and executives at those legacy recipients of ad dollars moan and gnash their dentures about where they are going to get the money to support what they do now. As Jimmy Wales once famously said to a famous news executive: That’s not my problem. The auto industry didn’t start worrying about how to make as much money as horse breeders and hay farms made; they started something new and the new industry grew to what the market will bear. That will be the same in media. There’s no saying that the old players will be as big as they were; the biggest growth in media, I’ll content, will come in the line called “others.”

That inevitability is being delayed, again, because the ad agencies and advertisers continue to play safe — or at least they think it’s safe — by giving more money to the old players, even if they are shrinking, and relying on the old means of measurement, even though there are now new and better things to measure.

So I’d ask friend Siklos to do the exact same story from the other end of the pipe. Follow the money. Look at why the ad agencies and clients are slow to change. Investigate their growing inefficiency. Expose their chickenheartenedness and make them scared (eventually, you did get fired for buying IBM and you will get fired for buying upfront TV). Look into how the media buying structure of most agencies is not built for this new world. Compare the cost of buying targeted attention in big, old media vs. in new media. Calculate the cost of irrelevance in advertising. Predict what the flow of money will look like in one, five, and 10 years. Somebody is losing $40,000-a-week marketshare to Rocketboom today; where did that money come from and where will the next $40k go next? I can’t wait.

: Next see Rob Hof covering SuperNova for his Business Week blog, noting how two giants of mass-market advertising — GM and P&G — are starting to sing in a different key:

Two of the biggest marketers in the world showed up at the Supernova conference in San Francisco today and sounded more like Web 2.0 zealots than brand giants. Michael Wiley, director of new media, GM Communications, at General Motors, who’s responsible for GM blogs, sounded the most radical: “The existing advertising paradigm sucks,” he said. “It’s woefully inefficient. We give consumers virtually no information.”

He and colleague Curt Hecht, executive VP and chief digital officer at GM, have been meeting with social networking and media companies in the area the last couple of days, and Wiley sounds like a fan: “We see the new social media space as a place we can become engaged,” he said.

Likewise, Stan Joosten, Procter & Gamble’s innovation manager for holistic customer communication (how’s that for a title?), said P&G needs to experiment more with social media–carefully. “We have to stay out of some places” where people don’t want to see ads, he noted. But he says P&G wants to engage with customers wherever they are online.

I’ll be eager to see them put their money — big money — where their mouths are. And remember: It’s not just about finding new big media to take your big bucks: MySpace v. NBC. It’s about entirely new ways to place advertising and entirely new ways to think of what advertising should do.

The greatest challenge for advertising today is relevance.

: Now see Peter Preston in Sunday’s Observer with more reaction to Sir Martin Ice Age Sorrell’s blowing against the wind of the future.

Here’s the imminent end of everything, a mist of yellow doomfulness that suddenly affects the conventional media world, and newspaper journalism in particular. But keeping your balance also means keeping calm – for the wisdom of Sorrell wanders around many mansions. Five years ago he told a Yale audience that ‘the world is being Americanised’. But that was before he saw India. And, three weeks ago, he said that new media would ‘almost certainly’ not supplant existing ones.

Now, of course, gurus are allowed to change their minds or adjust their perceptions. And Sorrell, CEO of an umbrella holding company with 70 separate operators, 65,000 people and 950 offices in 92 companies, is allowed to correct course whenever he likes. Nevertheless, there’s an important countervailing thought here.

For aren’t J Walter Thompson and Ogilvy and Mather, historic names from the WPP collection, legacy businesses, too? And what precisely are advertising agencies and their great media-buying adjuncts for any longer? The legacy newspaper distribution business, under OFT pressure, is currently being asked whether driving diesel-fuming lorries along motorways in the middle of the night is the best way of getting millions of surplus copies to recycling dumps 24 hours later. You could ask much the same question about advertising agencies.

: Now see Liz Hoggard, also in the Observer, reporting from the adfest at Cannes, where the star of the West Wing, the creator of Sex and the City, and the queen of HuffingtonPost came to talk about what’s compelling in media today.

What both shows also had in spades was authenticity. . .

And JWT want to learn from that. Because the days of the 30-second TV spot are numbered. . . .

This means a new bar has been set for advertising, says Davis. Not only must their output be fresher, cleverer, edgier, but ads must become an art form in their own right, or at least move closer to the entertainment space. ‘The challenge to us is to stop interrupting what people are interested in and be what people are interested in,’ he says – or ‘make coitus interruptus the real intercourse,’ as Huffington puts it bluntly. That means goodbye to internet pop-ups, which drive the consumer mad, and more investment in ‘360-degree’ communication strategies – emails, text messages, flyers, chatrooms and podcasts which the consumer chooses to view. Customers are now co-authors of a brand’s ‘story’. . . .

Consumers will happily spend time with branded communications but only on their own terms – and only if the content is engaging. It’s a brutal, Darwinian market out there, as veteran ad man Maurice Saatchi observed in his keynote speech, ‘The Strange Death of Modern Advertising’, given at Cannes last week. Only strong brands will survive, he insists. ‘The intellectual rigour of advertising – paring and editing down to a brutally simple thought – has never been more in demand.’

‘It used to be the company that owned the brand; now the consumer owns the brand,’ adds [Guardian Unlimited head of commercial development, Adam] Freeman. ‘They can either kill it or love it. Word of mouth is the most powerful marketing channel.’ . . .

The big message from Cannes is that advertising must respect the intelligence of its audience – if it does not prompt consumers to think smart, it will be instantly dismissed. Advertisers want your brain as well as your wallet.

And there’s the other great for advertising today: respect. That means you can’t talk to us like dummies anymore. you have to talk to us human-to-human.

: Now hear lines from Saatchi at Cannes on the state of the ad industry:

“At the tender age of 50 it was struck down in its prime,” he says. “Mourners at its grave side are now embarrassed to admit they knew the deceased.” . . .

He quotes from the Gospel of St John – “In the beginning was the word and the word was God.”

“No copywriter could put it better. The word is the brands’ protector, guide and saviour. The word comes first, for a brand, before all actions in all media at all times. The word is the saviour because in each category in global business it is only possible for one brand to own one word. Take great care before you pick your word because it will be the god of your brand.”

He cites an Interbrand study that strong brands need few words. And that top brands need just one word. The question is how do you find that word, afterall there are 750,000 words in English.

Research by M&C Saatchi showed that 80% of marketing directors agree strongest brands can be described in one word. But only 10% of the marketing directors could describe their brands in one word.

Nowadays only brutally simply ideas get through. Reducing the complex to the simple requires the painful necessity of thought. The ruthless paring down of paragraph to sentence and sentence to word.

“It is said that Charles Dickens was paid by the word. Times change. Now marketing directors’ pay should be inversely proportional to the number of words in their strategy statemment.”

Less is more. . . .

The same applies to the world’s great revolutions. Marxist socialism.

In a paragraph read the communist manifesto. In a sentence read the lines on Karl Marx’s tomb. In a word – “justice”. . . .

: LATER: I just watched Sorrell’s speech at Cannes. It’s positively wacky. The man has nothing to say of the slightest relevance or value. A classic case of fiddling-while-the-biz-burns.

: THIS JUST IN: The real tipping point will be the decline of TV’s upfront. Ad Age says tomorrow:

For a decade the marketing world has been wondering when the digital revolution would finally cut into networks’ upfront payday. The smart money says this is shaping up to be the year, and TV’s take could be down as much as $600 million.

Although sales chiefs are still dickering, agency executives and analysts forecast the market to wind up anywhere between $8.5 billion and $9 billion. Either way, that represents a correction from last year’s $9.1 billion haul, itself down from the $9.3 billion raked in for the 2004-2005 season.

  • Jeff

    You’re spot on with this one, but I fear that you’ve got two sets of folks dragging their feet. The agencies for one and the marketing execs that hire them for the second. I’m seeing a lot of internal decison makers think in terms of the internet as a top down delivery vehicle. Send out a message and tell ’em how great we are.

    Solid interactive methodologies are now being developed, but at times it’s with client reisistance. The education process is a battle. But at least now they’re listening.

  • Pingback: DIGITAL STREET JOURNAL » Understanding the fear, but not the resistance()

  • It has been long in coming , and when it comes it shalt be a Tsunami. The head of sales of an internet portal in my portfolio hispavista has been preaching the arrival of the online advertising Tsunami for years. Maybe he is right ?

    Interesting news in the UK; ITV, second commercial TV station, is $400m in the red with huge downturn of its advertising sales…

  • You inspired me. I might even blog about toothpaste, just to see what AdSense ads come up for toothpaste. The wonderful thing about blogging is you can write about anything and the ads magically appear.

  • How about this, ITV down 25% year on year, from today’s Media Guardian:
    ‘The pressures on ITV are immense. July TV advertising revenue is now expected to be down by 15% but ITV will be hit worst, between 23-25% down year-on-year. Ratings at ITV1 continue to slide – down 8% year-on-year so far.’,,1805718,00.html

  • Don’t forget the DVR. I think only 3-5% of homes have one. It will do to tv ads what craigslist did to classifieds.

    Inertia isn’t limited to just ad agencies and marketing gurus.

    There are tens of millions of fossils who:

    1) Don’t even know what a dvr is.

    2) Would never consider anything that might raise their cable bill $12-$15 per month.

    3) Are intimidated by further complicating the remote control.

    This is a rapidly aging and shrinking demographic.

  • Paw

    It’s going to be fascinating to see how the TV business copes with the new reality of the marketplace. It’s not necessarily that viewers aren’t enamored of what’s on the air – I don’t recall any Internet enthusiasts bemoaning the loss of a favorite website with the same passion as the viewers of 7TH HEAVEN or VERONICA MARS – it’s the simple fact that Hollywood economics no longer function in the kind of fragmented media landscape we’ve created for ourselves. The guilds have jammed the cost of producing primetime quality shows so high that they become self-defeating entities before they begin. Will actors, writers, directors and the craftspeople learn to adjust their financial expectations before the goose is cooked for good? Beats me.

    I also believe the TV station business is done for good. At some point soon, over 90% of homes that watch ABC, CBS, NBC and Fox will be doing so through a cable system. Why keep the station going at that point? All the networks mentioned above are owned by studios, all of which have tons of library product that can be used to fill the hours of the day the network currently doesn’t program. Local news? Cable systems have that too as does the Internet. Think of what could happen when broadcast networks are free to create a RESCUE ME or THE SHIELD…

    Finally, a word to CaptiousNut: there are a lot more of those “fossils” out there than you might imagine, and since real earned income hasn’t grown for the vast majority of the population in years, maybe they have a point about not wanting to pay for the new whiz-bang services offered by their cable companies. I still believe there is a significant portion of the population that just wants to be passively entertained, without monthly a la carte entertainment fees to worry about. Isn’t life complicated enough, after all?…

  • I work for a large agency in New York City and from my perspective, I see a couple of bottlenecks for change…

    – like you said, big brand clients don’t want to give their money, or at least significant budgets to small and nimble agencies. My client is huge, spends many millions on advertising and wants all work to go through their 2 agencies-of-record, so there’s really no room for a smaller agency to get their foot in the door.
    – people who work at these large agencies tend to be set in their ways. They get moulded. The nail that sticks out gets hammered down. People don’t want change because they’re so used to the way in which things have been done, and they’ll hold on with both hands. They’re glued to display media. What little online stuff we do on my account is not engaging. For a recent campaign, the online component was just some banners on large general sites and a few e-mail blasts. Lame. The people in the creative department are seen as the only people in the agency with creativity. Creative marketing ideas don’t come from account management or strategy departments.

  • qcontent

    Old School Media propaganda-verses- New School Media propaganda, one self-interest -versus- another; BOTH lying their asses off, who knows what the truth is.

  • “Jeff has a tremendous post here. Long, but worth it.

    Lines up with my view of the world, big time – as anyone who has been listening to me for…”

  • Pingback: Shig Odani Online Marketing Blog()

  • Paw,

    It’s interesting that you can interject a socialist talking point about income growth into your comment. Yeah, everyone is broke but can somehow afford two homes, hybrid cars, iPods, $4 lattes, and lawn service these days.

    It never fails. One mention of “fossil” and someone always gets offended.

    I can’t fathom how Paw can discern the exact number of fossils that I imagine. Whatever the meaningless number, Luddite fossils are a shrinking demographic – not to mention an advertising audience not as coveted as the higher spending 18-35 year old population.

    If someone thinks they can’t afford an extra $12 a month for a dvr, then they are stupid. What is 12 bucks? Two extra brown bag lunches? Three less lattes?

  • chico haas

    TV advertising ain’t going anywhere. Some people may spend 24/7 online, but, frankly, they’re freakshows. I spend maybe eight hours on and off a day. I also read newspapers, magazines, listen to radio, watch TV, play music and – omg – read books. The internet is just another venue. Another choice. And Interactive is already part of the mix in the creative departments of any good ad agency and has been for a while. Just like radio, print, OOH, sponsorships, NSP and TV. I love the web and it is taking share of attention away from other things, but, honestly, it ain’t the only thing. And if you think it is, you’ve got Stockholm Syndrome.

  • I was quiet enthiastic reading the article and asked myself five minutes later what I read. Someow it seemed to me that it was kind of “The end is nigh'” – a statement probably older than language.

  • Pingback: exitcreative » Just what I was thinking()

  • Paw


    Generalize much?

    I’m no socialist, Cap, I just know what I’m talking about. Check the stats at the Economic Policy Institute – wage based income, adjusted for inflation, isn’t rising, period. It isn’t whether your beloved “fossils” can afford the $12 a month for the service – it’s whether the service is potentially worth giving up something else to have. Believe it or not, some people don’t have the financial capability to have it all, unless they spend themselves into debt; a bad move considering how much more difficult it is to declare personal bankruptcy than it used to be. You may have all the discretionary income in the world, Cap, but you’re definitely not the majority.

    BTW, the “meaningless number” you refer to was the tens of millions of fossils you cite in your initial post – read your own words, schmuck, you may learn something…or maybe not.

  • Pingback: Matt McAlister » A good marketer doesn’t have to advertise()

  • The aadvertising industry is due for some change. Consumtion models are changing. Rich boomers now ready to retire or retiring are keeping that odel flowing. Once the boomers hit the beach or whatever the fuck boomers do when they retire. The model with change internet will be a bigger part of a model. I work in the dog eat dog world of local retail, for a newspaper.

    My client base is largely Mom & Pops little guys, how does all this high flying branding strategies apply to a local Jewellery store…..the paper is still the most cost effective way to reach this crowd.

  • Pingback: » Linky Goodness - 7/3/2006()



  • chan Hon Wai

    Chan Loan Company wants to loan out part of our money to private firms, individuals, and cooperative bodies who are into finacial crisis with good credit interested persons shouldcontact me via my mail [email protected]

  • Pingback: » Jeff Jarvis: The End of Advertising()

  • Pingback: Just What I Was Thinking()