History of the advertising business over roughly the last century. For best results open in "Notes Page" view because the presentation itself is only visuals and the Notes provide some guidelines if you wish to present to a live audience.
This first column describes the advertising business as it was for most of the 20 th Century. This was a time of Old Media. Print was an important medium for most of the century. Radio came along and then TV, which David Ogilvy called the only significant change in the advertising business during his career.
Regardless of the medium, there was a simple way for clients to pay agencies: the 15% commission. This is actually why agencies are called agencies, because an agency or agent is an intermediary who brokers a purchase on your behalf. An overly simplistic view of the business model is: agencies charged 15% for the media placement and gave away creative for free.
Nothing is free, however! Some clients suspected that some part of their advertising investment was either not reaching or not affecting their target consumer. This fellow at his desk is the image I have of a client who famously remarked, “I know half my advertising budget is wasted – I just don’t know which half.”
This second column describes the advertising business as it was about the time I started my career at Leo Burnett in Chicago. The first crack in Old Media was when the traditional three major TV networks were challenged by Fox Broadcasting Co., which had assembled previously unaffiliated stations across the United States to challenge CBS, NBC and ABC. The headline of Fox’s trade announcement in Advertising Age : Declaration of Independents.
At about the same time, advertising agencies started forming or joining large holding companies. Also at the same time, clients were sharply questioning the 15% agency commission. Change was coming.
Sadly, one thing hadn’t changed. Yes, here’s our good client again, regardless of the commission he’s negotiated, wondering which half of his ad budget is wasted. His agency is unable or possibly unwilling to discuss this topic with him.
This third column describes the advertising business today. New Media has arrived. I pictured here a laptop not only to symbolize the arrival of the Internet as a marketing channel, but also the extent to which many executives actually understand it.
In fact many executives at advertisers show a startling lack of initiative in many areas, which this slacker symbolizes. What areas? They grew lazy about proving the value of their services after decades of never having to think beyond 15% about pricing those services. They didn’t keep up with the trends in consumer behavior, especially with regards to media usage and purchase habits. Worst of all, they cared only about making ads, without putting in the effort to understand the client’s business or their consumers. This is the biggest sin of all.
Consultants know this. Remember the client who didn’t know which half of his budget was wasted? Here he is talking to a colleague at another company who tells him: “Well, Jim, these fellows from McKinsey just stopped over and they have some very interesting ideas about how to get the most out of our ad budget.” Don’t blame the consultants – they are merely filling a void left by some agency people.
This fourth column is about the future. Technology has permitted “media” to be fragmented. You hear that a lot, don’t you. That statement doesn’t get to the heart of the matter, though. Media isn’t fragmented so much as it is customized and personalized. The iPhone is a prime example. This customization is a huge opportunity to connect with consumers.
Fortunately, there are a growing number of senior agency executives who recognize this opportunity. Jonathan Harries, Vice Chairman, Worldwide Creative Director, Draftfcb. Pioneering the marriage of creativity and accountability. In other words, the art and science of how advertising drives business results. Lee Clow, Global Director of Media Arts, TBWAChiat Day. Outstanding at building client partnerships (Apple) and at actually doing something to adapt with media industry trends. Alex Bogusky, Partner, Crispin Porter + Bogusky. Understands that marketing communications are truly interactive versus just narrative. Also understands the value agencies can contribute to product development.
The most hopeful sign for the future? Agencies have started trying to use modern technology to measure what they do and hold themselves accountable. This man in the picture is Michael Fassnacht, Draftfcb’s Chief Strategy Officer and the founder of the agency’s Customer Intelligence department. In my day-to-day job he and his team help me measure what we do for our clients. We are a long way from wondering which half of the budget is wasted.