Friday, July 8, 2011

Reflections on a Decade in Advertising: Part 1

In 2002, in the midst of a recession caused by the implosion of the tech bubble and the September 11th attacks, I was about to graduate college. I had for some time imagined I would be seeking a job in journalism, but I had also gotten engaged while in school, and the road to success as a reporter seemed long and uncertain, to say the least. After putting off thoughts of my future for as long as possible, I went to the career services office at my alma mater and asked the counselor there what, exactly, I was qualified to do. Almost without hesitation he said, "Go work at an ad agency."

I found it was a business I loved, and only occasionally loathed. And I did well enough that I was able to move up, specialize as an account planner, and avoid the various layoffs and cutbacks that caused pain to a lot of other people in the field.

But even though advertising was very good to me, I think it is fundamentally an unhealthy industry right now. That is not to say that advertising will go away: if anything, it will continue to become more ubiquitous as time goes by, largely because people like to be given things for free. But the model that the industry has adopted is fundamentally out of whack with what clients want and need, and the result is likely to be a lingering illness that lasts for years to come.

What is this illness? In short, it is a business model that is predicated on gaining efficiencies through scale, when that scale is likely to prove inefficient for the indefinite future.

Most ad agencies go through the following life cycle: they start up with a small group of smart and talented people who have a vision for "the right way to do things". It doesn't necessarily matter what the vision is, so long as they believe in it and are passionate about it. That passion helps them to work their butts off for the few clients they have, and do great creative work. That attracts more clients, and they grow. Now, as they grow, they make the following tradeoff: the people they hire will never be as invested in what they're doing as they are, but they allow the scale to let the founders provide the high level ideas to more clients.

This eventually hits a limit, too, because the founders are spread thinner, and it is hard to bring along new people who contribute ideas. (And if you have them, they want to be treated like a partner or they don't stay.) But at this point, you have a lot of ideas, and you can sell variations on those ideas to new clients. (If you don't believe there's a lot of idea recycling in advertising, then check out this site and ask yourself why the satire works so well.)

More importantly, in the advertising world that's fading away, you could also sell them an implementation plan that more or less came off the shelf: this much TV, this much print and out of home, etc. (Or, in the healthcare world I just left, it went: do a great sales aid for the reps, place some journal ads, blow out a booth for a convention, and maybe some direct mail if you're feeling frisky.) Because the ad agencies launch campaigns all the time, and clients do it rarely, that expertise could be packaged and rolled out without much modification.

So now you have a nice, big ad agency with lots of prominent clients. What next? Well, a holding company comes along and makes a big, juicy offer to buy it up. Because an ad agency has no physical assets and could be worth nothing if it loses its clients, the founders have a hard time saying no, so they usually accept. And the holding company introduces additional efficiencies: it brings expertise and scale in finance, IT, benefits and other operational areas that every agency needs but are not core to the business.

So now you have a very large ad agency owned by a company that controls dozens of other ad agencies. And its business model gets pulled out from under it in two ways:

First, its ability to sell a 'paint by numbers' implementation plan is destroyed by the proliferation of media. Not only is there just a lot more media out there to think about, but now clients are confused and asking a lot more questions, which means each plan needs to be thought through and given a lot of senior-level scrutiny. So that mid-level account person can no longer be trusted to bang out a PowerPoint deck featuring the same basic plan in new wrapping paper. That's a major efficiency hit.

Second, a lot of these new media options call for fundamentally different ideas than what you see on TV or in print. However, as I learned watching "Everything's a Remix", we need to imitate and combine to generate new creative ideas. Since we don't have a large store of successful social media or mobile campaigns to draw from (yet), sometimes the new ideas are hard to come by. And many people who have made good careers off of the old way are still trying to find ways to squeeze their ideas into the new media world rather than accepting they need to start fresh. At any rate, the efficiencies that come from being able to remix, recycle and reformulate existing ideas evaporates when those ideas don't work in the new media.

This post has gotten damned long, and I'm going to write a second part with some ideas on how to solve this business problem. But I think the core of the answer come's from Clayton Christensen's Innovator's Dilemma: big companies need to create small, autonomous units that can take these problems head on, even if they disrupt the existing business model. Commanding hundreds of people to 'think digital' or to 'sell a Facebook campaign' isn't going to change anything. People need to have the chance to do it in an environment removed from the normal pressures of the agency's day-to-day business. Because that business isn't sustainable in the medium term, anyway.

1 comment:

  1. Nicely said Dan. Now go sell some digital.....

    ReplyDelete