The end of the beginning of the end

Reacting to “the death of the ad agency” with some thoughts on creation, maintenance and destruction

A relief of Trimurti on a dome at Sri Mukhalingam temple by Adityamadhav83 (CC) — link

In the Vedic philosophy, all things encompass Trimurti (“three forms”)—Creation, Maintenance, and Destruction. Even the advertising agency is not immune. But that kind of calm acceptance doesn’t solicit clicks as well as It’s the End of Agencies As We Know It. Rei Inamoto’s recent thesis in Adweek is correct, despite the hyperbolic headline. It is, 20 or so years into the commercial Internet, time for ad agencies to end as we know them to be.

Before we move much further, let’s note that Inamoto isn’t denouncing ideas at all, or idea people or the value of ideas (and thus the value of advertising). Far from it. Inamoto’s concerns—shared by Avi Dan in Forbes—have everything to do with the machine; our processes, staffing and standards lurking behind the ideas. The purpose of “brand” and advertising remains: to attract relevant attention and persuade where possible, to provoke memory and preference amidst competition. It’s how the industry’s been going about this, our “maintenance” of the past few decades, that’s ripe for destructing and ultimately a new form of creation. In that context, ideas matter more than ever.

So, where should the destructing (or re-inventing, if you need a more positive spin) of the advertising industry begin?

Reorient the Addiction to Certainty

The trouble began with The Click. While not perfect, the ability to observe a discrete action—a link or button clicked—seemed so much more tangible in the mid 1990s than the vague assurances of Nielsen ratings or MPA pass-along studies. Finally, we have direct correlation!

Then we got addicted to measuring ever-granular activities, and the Internet devolved into a direct marketing vehicle. Of course, none of this is wrong, per se. The ever-increasing efficiency of measuring and optimizing (and even automatically making) content benefits many parties. The ad industry should strive to connect the dots between ideas put out into the world and the results of those ideas for the most important reason of all—to create and distribute better ideas.

But our ability to measure has replaced our responsibility to reason. How many of us have sat through results presentations that communicate nothing actionable to the client or those charged with developing and executing ideas? What did we learn this past hour? That the Internet continues to exist. But we shouldn’t be quick to lay the blame on those authoring the presentations. They are doing the job assigned them. The reason so many measurement and analytics meetings occur is psychological, and is assigned much farther up the ladder. Measurement of advertising is really an aversion to the risk of art and an addiction to (a false) certainty. “Did it work?” isn’t an inspiring query into the nature of humans and their relationship with ideas. Instead, it serves as a limited, mechanical exercise aimed at trying to reduce fear. We care about clicks to cover our ass.

The current model, the one that needs destructing, places too much emphasis on the process after ideas have been created, and gives too much credit to our ability to discern effect and attribution. The current addiction to certainty preys upon those marketers who perceive marketing as an expense. It suggests more measurement, more analysis, more optimization will mitigate the risky burden of having to place ideas into the world.

If we really want to destruct the ad industry, we’d shift the burden. We’d do the hard work first. We’d ask tougher questions of the businesses marketing seeks to serve. We’d address problems upstream from marketing—seeking to improve products, and delivery systems so less marketing is needed (i.e. Bezos’ “Advertising is the price you pay for having an unremarkable product or service.”). If marketing proves necessary, we’d insist on, and invest more resources towards, keener insights before the business of advertising ideas starts its engines. In these ways, de-risking ideas would occur naturally, as marketing became an investment towards highly articulated business goals.

And then there’s trust—the critical flaw in today’s environment. It is ironic that the rush by technology and advertising to monetize the Internet has also fueled the erosion of trust upon which advertising depends. If audience data or even reality itself is suspect, what’s the point of measuring ideas after they’ve been distributed? Wouldn’t it be smarter to place the time and investment emphasis up front, before ideas and media are in question?

Consider the End of the Networked Model

Financial Times — November 16, 2017

Perhaps a more apt headline to Inamoto’s Adweek treatise would have been It’s the End of Ad Agency Networks As We Know It. As the Financial Times, notes…

“The ad holding companies are seen as being vulnerable and disintermediated,” says Thomas Singlehurst, analyst at Citi. “Their performance suggests there is something wrong. If the market is growing then they should be growing too . . . but they’re not.”

Something isn’t clicking the way it used to. Investors don’t see value being created. Is it possible the ad agency network model is no longer relevant — just as the 15% commission of Advertising 1.0 came to its end? Speaking of value creation, independent agency co-founder Adrian Ho outlines a theory critical of “weightless companies” that could also apply to agency holding networks. Reinterpreting Ho’s thesis, the agency holding Cos appear to, “deliver only modest benefits to [clients], compared to the major value they’ve delivered to a handful of owners and investors.” Consider: a typical office (“node”) in an agency network has to accrue an additional 2–5% profit over and above operating profit to carry its share of the cost of the network. To what benefit can the local office/node, never mind its clients, attribute this “tax,” other than affiliation with the holding company’s brand?

There is a case to be made for the networks. Spinning up Hearts & Sciences to serve both AT&T and P&G or We Are Unlimited to support McDonald’ssuggests a potent future. But how many custom storefronts can the market truly support?

The real threat, it seems, comes from the Big Four, as the consulting firms acqui-hire their way into the advertising industry. Imagine you run a national or global brand. If you like the people, and the end result—keen insights, potent ideas, and measurable growth—remain consistent, why would you care which managing structure delivers them? If the creative talent exceeds expectations, what’s the added value of a WPP or Omnicom label on the business cards and invoices versus Accenture or IBM iX? And if, as I suggest above, one of the challenges is finding better business insights to fuel better ad ideas—don’t the consulting firms present a much richer offering?

The challenge, of course, lies in deciding if there’s a real problem to be addressed. FT quotes WPP’s Sir Martin Sorrell, who sees, “current trends as more cyclical than structural.” While a few graphs later, the same piece quotes Nick Manning, chief strategy officer of Ebiquity, who says, “This is not cyclical . . . it’s definitely structural.” ¯\_(ツ)_/¯

Either way, something needs destructing. If the ad networks are to remain vital, they have to both deliver a lot more value to the individual office/nodes (and thus, to clients), as well as communicate that value.

Walk Away From the Currency of the Realm—Valuing Ideas by Hours

If we really wanted to reinvent the ad agency, we’d stop measuring time.

The curse of the professional services class is our collective inability to define the value of our ideas in an accountable form other than time. Is the writing of the tagline “Just Do It” worth the (hard to actually verify) minutes or hours it took to pen the words, or should that historic work be valued for its impact on Nike’s bottom line (which is equally hard to actually verify)? Rick Webb’s excellent outtake on time sheets from his book Agency sums up the lie. Valuing idea-making through time keeping is, “a massive fraud, contentedly performed and affirmed by all parties in the ecosystem,” writes Webb.

Of course the current system—built upon centuries of practice, a rich tapestry of contract law, and billions of dollars of infrastructure—fulfills its own destiny. The monolith appears absolute and immovable. Who are we to question? Until you consider all the remarkable change that’s occurred in other facets of life and work in just the past two decades. The business of ideas and the ad industry are not better for maintaining the age old approach. Inamoto offers four principles, “that must be embraced and implemented by agencies that actually want to be useful and helpful.” Making sure everyone does their time sheets isn’t one of them.

The point here isn’t to tear down the edifice without a plan, but to question how we got here and why we stay. Inamoto’s death knell quotes confused, frustrated clients. Their complaints are but one motivation. I argue the very nature of the business of ideas requires us to assess and reinvent if only to be true to ourselves.

Like distributing music, selling books, and renting hotel rooms—the advertising industry is ripe for a Vedic destruction. Maintenance of status quo—be it time sheets, network holding companies or an addiction to certainty—only maintains growing client confusion, holds our industry back and stifles the evolution and growth our most potent product, our ideas.

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First published to Medium.