Does the Advertising & Agency model in general need an Exit Strategy?

Do Advertising Agencies Need An Exit Strategy?

An article Patrick Hanlon from 2015 (I am posting this to remind myself and the rest that in 2015 the writing was already on the wall, the birth of performance marketing had happened we hadn't christened it yet, that's all)

The last 30 years have not been good to the business of advertising agencies. Over time, agencies have been stripped of their 17.65% commissions, media buying, production upcharges and downsized in their role as primary marketing partner.

By the time clients arrive at their agency lobby in year 2015, the biggest advertisers have already decided on their media buy, product strategy and positioning, their co-op partners (whether they will be sponsoring SXSW or the Super Bowl, or partnering up with Beyonce or Scarlett) and visit the advertising agency to pass?them the brief to conceive and execute 30-second television commercials and print advertising.

The thirty-second television commercial, which has been the advertising agency’s core product since the birth of radio, has always been suspect. What started as secondary amusement between prime-time entertainment programs on radio and television, by the 1960s became a consumerist curiosity.

By the 1970s, the hyperbolic rant of better, faster, cheaper, more powerful had worn thin and caused viewers to flee the living room for the kitchen and bathroom. (In fact, the agency’s mandate was to ‘break through’ the clutter and conceive ways to keep eyeballs glued to the set.) The VCR and DVR gave consumers the opportunity to avoid advertising altogether and today’s blockbuster cable serials like “Game Of Thrones”, “Homeland” and “Masters Of Sex” complete the task.

PROMOTED

Traditional television advertising is leapfrogging toward dead air and taking advertising agencies with it.

This year, P&G reduced its agency roster by 40% and agency spending by $300 million, citing unproductive agency and production costs. “And we're getting a heck of a lot more out of our digital, mobile, search and social programs,” quips A.G. Lafley, former CEO and chairman in an article in Advertising Age.

Quick service food retailer Quiznos has likewise ditched traditional media in favor of digital and social.

Two weeks ago, Wall Street analyst firm FBR Capital Markets predicted that within the next year Netflix viewership will surpass that of advertising supported ABC, NBC, CBS and Fox combined. (So far, Netflix insists that they do not and will not run third-party ads.)

Last week, the Wall Street Journal quoted a Standard Media Index report that declared overall advertising media spending was up in the second quarter of 2015, despite TV advertising spending down 5%. (The increase was thanks in part to digital and out-of-home.)

And Mondelez International claims it is seeing a better return from online investments than it does from TV advertisements: the company is planning to increase its mobile and digital budget from roughly 25% of its ad spend now to more than 50% by 2016, according to Mondelez president of North America Mark Clouse.

At the center of today’s media environment is the consumer, who stands in a vortex of thousands of advertising images each day. Example: Millennials who consume media 18 hours a day may be immersed in two thousand to 20,000 such impressions. And the average consumer is not far behind.

More and more messages are being sent, followed, downloaded and streamed. According to Gartner research, mobile data traffic is targeted to reach 52 million terabytes this year, an increase of 59% from 2014.

Natural biologists use the term ‘disruptive camouflage’ to describe the patterns used to confuse predators: the maze of zebra stripes that bewilder pursuing lions; schools of fish that cluster into disorienting mass. In human scale, advertisers have created their own disruptive camouflage in a blur of bitstreams. Our attention is no sooner seized, when we are distracted by something else.?No, look at this instead.

But as any brand manager can tell you, advertising does not exist to simply grab eyeballs. Advertising is there to persuade.

But how persuasive can advertising be if everyone is running to the bathroom, fast-forwarding, skipping you altogether on ON DEMAND, or simply the fact that 84% of Millennials?neither like nor trust ?advertising? More than half say they’re more likely to watch a video on YouTube than on traditional TV.?Over half assume ?cleaning and beauty ads are Photoshopped.

In the age of authenticity and values, veracity counts.

And imagine standing in front of the client CEO and explaining why they should be spending $30 million on your precious new advertising campaign, when Google, Starbucks, YouTube, Instagram and other highly valued brands created multimillion dollar success?without?advertising. Advertising is one marketing tool among many and, in an era of rapid prototyping and disruptive innovation, agencies have become more like walls than windows.

Time shift.

Time has shifted for advertising as a practice, for their clients and, most of all, for consumers. For decades, people watched television commercials on their couch, thought about buying something, then went to the store to buy it.

Today, that consumer journey has collapsed from days to minutes. In a new ethnography study produced by Google, a female consumer shares her shopping journey with viewers. She explains that she broke her latte-making milk frother (the frother makes the foam that is poured on top of a latte). Holding the broken glassware in one hand and her smartphone in the other, she purchases a replacement frother while standing in her kitchen. (Importantly, she couldn’t find the brand she broke during her search on Amazon, so immediately bought another brand.)

Six minutes from breakage to reorder. According to a Google consumer survey taken in April of this year, 39% of consumers bought merchandise while in their kitchen; 28% of consumers made purchases from their car; and another 21% made purchases from the bathroom. You know who you are.

Google is calling these?micro-moments . The company is moving the needle from search to action. “Searches on mobile have surpassed searches on desktop,” says a Google spokesperson. “They are very action-oriented, rather than passive. I’m looking for a coffee shop near me, I have people coming over to my house in 10 minutes—what are the top movies to watch?” We have evolved a need to know?now.

Micro-moments are contextual. They are inflection points when consumers think of you, use you, buy you.

“In these moments, we can be more concerned about our need than about the brand,” says Matt Lawson, Google director of ads marketing in Mountain View. “So it’s more important than ever to be there.”

And you also need to be there over longer consideration cycles, to make sure you are present during their decision journey.

Everyone is thinking about mobile. Ann Cairns, president of international markets for MasterCard expects 2.6 billion smartphone users worldwide by 2018. All these smartphones in our pockets, purses and backpacks have already created a dominant, spontaneous opportunity.

Google’s Lawson provides two more examples.

Cosmetics retailer Sephora noticed how their female customers regularly picked up the product in one hand, and held their mobile phone in the other. Sephora floor salespeople are trained to question customers about their wants and needs. What they learned is that customers were checking out product reviews—will this product work with my skin, my complexion, my style? “Sephora created an app so that women could look at reviews immediately,” says Lawson. This helped Sephora brand the need for information and also get credit for enhanced experience. “They fulfilled the consumer need?in the moment,” emphasizes Lawson.

Red Roof Inns, a brand designed for the on-the-go business traveler, are located near busy airports and business centers. To help boost spontaneous bookings, the company got smart: They take flight?cancellation data?from airports with frequent delays and cancellations (example: Chicago O’Hare), then use?location-based marketing?plus?search,?to seek out people looking for last-minute hotel rooms. Then they ping abandoned fliers with Red Roof Inn-branded messages. Understanding the traveler’s contextual moment (I’m in an airport and I need a room and I’m using a mobile phone), and using an engagement tactic that only mobile can employ, has resulted in increased business for Red Roof Inn.

Nike’s FuelBand is a product where consumers willingly collect their contextual data. After each workout, the platform uses the power of social sharing to generate more interactions, creating a scale that rivals paid media. As of August, Nike+ had 18 million members, with 15,000 joining each day.

Apple’s new iWatch will take moments like these even further.

Real responses in real time can even turn social jeers into cheers. Conversocial is one of over thirty certified Twitter partners that provide real-time analytics on what’s trending. Their clients include Audi, Sprint, Tesco, Dollar Shave Club, among others. “Social engenders a sense of genuine engagement between the customer and the company,” says Conversocial’s Founder & CEO, Joshua March. “Speedy responses give companies an opportunity for openness, so even the most senior members of a company are drawn towards the center of the social mix. Such transparency translates into trust, and helps build brand loyalty. This gives companies a platform to make personal connections with customers that can ultimately convert unhappy customers.”

This type of mico-management is a timeshift where traditional advertising cannot cope.

“There are two really important shifts,” says Jim Moriarty, the new brand citizenship officer at Los Angeles agency 72andSunny. “The first was Netscape: The Internet suddenly became a browse-able interchange. The second is mobile. The changing role of the citizen is changed by those two things.

72andSunny is an agency born in the digital age, so has been able to straddle both the traditional and digital worlds with its work for Samsung, Activision and other brands that often skew toward mobile Millennials.

“A lot of times we focus on Millennials, but I think that’s missing the point,” advises Moriarty. “The citizen today has the tool set to engage and be vocal, and we are. Companies are following that lead. It’s a technology lead.”

Today’s real-time world is instantaneous, spontaneous and unplanned. This can be a challenge for traditional agency processes.

To give you a better picture of traditional agency timing: a story. A Madison Avenue agency was meeting with their consumer packaged goods client during a quarterly business review. During the meeting, the client division president asked how the agency was coming along with the new product positioning the agency had been working on. The project was now weeks overdue. The agency director answered that they were having trouble coming up with an exact articulation for the new positioning.

“Well,” replied the Unilever division president. “While you’ve been working on articulation, we’ve been off the air. When we’re off the air each week we lose share, which, in this case, amounts to about $30 million. Exactly how long do you think it’s going to take before you become articulate?”

When advertising was king, agencies were the brand firekeepers. They were the voice of the consumer and took great pains to translate client product benefits into consumer needs and desires: “consumerspeak”. Translating into consumerspeak took time. Today, consumers speak for themselves.

The dark shores of reality reveal that AMC’s television hit “Mad Men” was not legacy hype as much as it was nostalgia, a final curtain call.

This moment has been long in coming and, sensing the changing winds, some agencies have pivoted to engineer different kinds of partnerships. In lieu of agency fees, management at some agencies have offered to suspend fees in order to receive a share of profits. Others have launched their own brands to show off their marketing expertise: for example,?EOS organic lip balm —it’s the round ball at CVS and Target—was created by New York agency Anomaly. Fabulously successful Method soap was created by Eric Ryan, a former agency art director.

Advertising agencies have not been the only ones affected: agency vendors have also learned to pivot. R/GA was a post-production title house (then known as R. Greenberg) that did sub-contract work on agency television commercials. Sensitive to industry changes, fifteen years ago R/GA completely morphed and went direct to clients to create products, services and communications. This year, R/GA won 33 Gold Lions and was named Agency of the Year at the Cannes Film Festival.

But. And this is a big but. Advertising continues to be an?estimated $500 billion per year industry; despite warning clangs, they have become too big to fail. The advertising process is ingrained in company processes and methods, whether it works or not.

Perhaps the reason traditional Advertising is hard to let go as a concept is because, over the last hundred years and more, advertising itself has become a Brand. Advertising is rich with its own reason for believing, legacy, rites of passage and celebratory rituals. The industry has created icons too numerous to mention (some forgettable, others indelible), a lexicon that includes not only slogans, theme lines and jingles that jar the memory, but terms of art and mastery. It has created its own community of zealous advocates who make the notion of traditional advertising sticky pop culture that is both difficult to abandon and potentially ridiculous to prolong.

Thirty-second television spots that were once able to reach over sixty-percent of the American public in 1960s, today are merely one tool in a toolbox that includes not only digital and social media, but also packaging, brand experiences (from Felix Baumgartner dropping from outer space for Red Bull to a Taylor Swift concert filled with Swifties), user experience (UX), public relations, graphic design and most of all, the consumers themselves who post, blog, tweet, create selfies and otherwise yawp and yelp on the brand’s behalf.

The concept of 30-second advertising pods has become anachronistic. Ignored, evaded and ridiculed, such messaging has become an irritating, avoidable intrusion. We’d rather watch idiots throw Mentos into Coke bottles on YouTube. (Which somehow, stupidly, sustains the reputation of both brands.)

Brands have morphed from a way of?thinking into a way of doing, they are mobile responsive, iterative and in real time. Traditional advertising agencies may slobber, but they are simply not wired for this.

And it goes beyond advertising. If marketing and branding are going to succeed as practices, they must acknowledge that human beings enjoy a 360-degree spectrum of experiences, swept along by a tide of inputs called Facebook, Netflix, Google, Twitter, iTunes, Instagram, Amazon, text, blogs, product reviews, photos, in a must-do-now mashup that has become the legit stressed-out bundle of modern consumerism.

The challenge has shifted from?the art of persuasion and I think/I am to a behavioral model of I think/I do. Our actions are now divided into micro-moments where images, rites, verbal cues and beliefs flash us wherever and whenever.

Like the woman searching for her milk frother, we no longer have time to be convinced. We have become spontaneous.

If the notion is that “big idea” national T.V. advertising is being superseded by these interstitial moments when we’re not observing, but acting: finding information and promptly buying, mostly on digital devices, usually mobile (like, I’m literally writing this on my iPhone) then the real opportunity as a Brand is not only to be there, but to make sure I’m inputting an experience that not only includes the basics of purchase and delivery, but keeps you coming back to me—and only to me—for more and more and more.

The most far-out example this week is that clothing company Uniqlo has recipes online. Rationale: Because their customers eat and they eat wearing clothes.

Really?

Closer in, NBCUniversal has announced it is making deals with new-media companies BuzzFeed and Vox Media. As Kara Swisher at Re/code states, “the TV guys get the promise of millennial-friendly content, the Web guys get access to the TV guys’ reach and revenue streams.” Win win.

In this world, the advertising industry is a big hairy ball of complexity that is difficult to unravel, but is unbundling nevertheless. As agency founder Leo Burnett once declared for another time and another circumstance, the industry is “being nibbled to death by ducks.”

Or as French semiotician Roland Barthes declares in one of his 1950s essays, “They must establish not the ‘images’ or the traits of social mores, but the links and the values.”

Our culture swirls in a pell-mell world of change and transformation. To survive, the advertising industry will have to change with the times. Weeks, months, years ago (depending on when you were paying attention) the pillars of hierarchy, standardization and authority fell to open sourcing, rapid prototyping and flat organizational structures.

While many agencies have responded to the new landscape by claiming to change, most have not changed much more than their office furniture. The blunt hammer of truth is that no matter how big, interruptive, and blindsidingly funny or relevant their end product, if no one really wants to watch ads, how persuasive or effective can they be?

Judging advertising for its creative ability to persuade is itself dramatically old school. Creativity became commoditized the moment two Chinese boys lip-synced the Backstreet Boys song “I Want It That Way” and stole over 20 million views on YouTube. No need to pay for expensive creative talent when talent can be found on the street. No kitty videos need apply. Oh wait, yes they can: check out?Purina Friskies .

If advertising has lost its effectiveness, it has remained marketing bling: look at my Super Bowl spot, my selfie stunt. It is an internally-directed, navel-gazing enterprise, celebrated at Cannes and at AAAA and Advertising Age luncheons. Woohoo. But out here in the real world, social media-driven digital interfaces are where the real, live-action Branding takes place.

Massive change allows massive opportunities. Hope blossoms.

“What I love about the point we’re at right now is the speed with which mediocrity is being crushed,” says Carl Johnson, founding partner at Anomaly, in an email. “The stakes for clients are so high and their budgets under such pressure that a cozy relationship and a few dinners will not suffice, no matter how many decades you’ve had the account. There is no hiding place—you either have the ideas or you don’t.”

Technology created the advertising powerhouse, leapfrogging in the 1920s from print to radio and again in the 1950s from radio to television. Sixty years later, technology has again gone divergent. It will be every advertising agency’s task to pivot, morph or perish.

Exsúrgat deus ut ea

Patrick Hanlon

I am the CEO and founder of THINKTOPIA, a global brand and strategic innovation practice for Fortune 100 clients including American Express, Levis, Bill and Melinda Gates...?Read More