Is the ad industry about to sink without trace?

322703 — Tue, 30 Sep 2008 03:03:00 GMT

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!

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Is the ad industry about to sink without trace?