July 30, 2013

Playing The Other Guy's Game

Over 20 years ago I left the agency business for the first time. We had sold our agency to a "global" network and after two years of working for them I decided it was not the life for me. I took the money and ran.

For three years thereafter I did creative services (mostly TV spots) directly for clients. In that three-year period I pitched against ad agencies half a dozen times. I only lost once. I learned a very important lesson during those three years -- clients hated agencies.

Behind their backs, they laughed at agency "strategic abilities." They put no value on "account service" ("all it does is keep the agency from fucking up, it doesn't do a thing for me.") They thought media planning and buying were commodities they could get anywhere. The value they saw in agencies was in creativity. They believed the only place they could get good advertising was from an agency. If they could get it somewhere else, they would.

Apparently, the advertising industry has decided that it is no longer in the creativity business.

According to the OmniPub press conference in Paris on Sunday, and the analyses in the news media yesterday, the primary rationale given for the merger between Publicis and Omnicom had nothing to do with creativity. It was mainly about their ability to compete with Google and Facebook in the collection and utilization of data.

It is not clear to this shallow mind how this new entity will be any more competent to collect and utilize data than the two old entities. I am not alone.
“I think it’s a total misdirection to think that you can leverage the scale and advantages of big data if you’re bigger. Quite the opposite,” says Simulmedia’s Dave Morgan. “These aren’t technology companies, and you don’t get better tech development out of consolidation.
Having run ad agencies myself, it is my experience that the important data about consumer behavior comes primarily from 1) the brand, and 2) media and media research companies.

Traditionally, the agency's role has been to 1) misinterpret the data 2) create questionable strategies from the data,` and 3) buy media carelessly. The idea that the agency will now be the collector and keeper of data and the go-to developer of media technology seems highly unlikely.

There are still a few agencies around that do terrific creative work and still a few clients who value it. But if we are to judge by the rationale these two agencies gave us for their merger, the agency business is betting its future on the assumption that clients will believe that the value they can get from data and technology is greater than creativity.

Let's assume for a moment that all this techno/data hysteria is valid. Since Google and Facebook essentially control web advertising, OmniPub's strategy must assume that their clients will trust them to know Google's customers better than Google does and Facebook's customers better than Facebook does. Otherwise, why not just use the data Google and Facebook (and every other online media channel) will give you for free when you make a buy?

It is hard for me to believe that even clients are that stupid.

The ad industry has decided to play the other guy's game. They are now competing in an arena in which they have distinct disadvantages. They are not as good at data or technology as their competitors. They are quietly abandoning creativity, although it is still the one and only thing that clients can't get somewhere else.

Richard Pinder, former COO of Publicis says...
“...the bulk of the enterprise’s activity is still about finding, creating and executing inspirational ideas to motivate the world’s population to choose one brand over another...there is a point beyond which scale can actually be a disadvantage—talent feels lost, ideas get killed by people who have no idea what the clients’ needs are and everything takes too long and costs too much”
Or as we like to say:
"Creative people make the ads. Everyone else makes the arrangements."
It is very tempting to predict that the ad world's desperate attempt to remake itself as a technology industry will lead to failure. But I've been around business too long. I am too  cynical to underestimate the remarkable power of big and dumb.

The Type A group will be doing a closed-circuit broadcast to about 200 TV stations today throughout North America on the subject of "The Battle For The World's Most Valuable Consumer" (people over 50.) If your group can profit from this one-hour talk, you are urged to contact us.


Terence Tam said...

Good analysis of the situation...I do however think that some clients can be that dumb, or in reality, lazy is a more appropriate word to use...

boredguy said...

The Onion, good for a laugh as always:

anon said...

"Traditionally, the agency's role has been to 1) misinterpret the data 2) create questionable strategies from the data..."

...but they were forgiven for all of that because, somehow, a piece of genuine creative spark emerged that catapulted the brand into popular consciousness and - without really meaning to - did wonders for the client's business.

Why must agencies do the opposite of what they tell their clients?

"Decide who you are, and then be it like hell."

Cecil B. DeMille said...

Success by accident or a lucky break, huh? For an industry full of people with no faith in people, that strategy requires a lot of faith. Seen it happen, though. I think we all have. Great creative closes a lot of wounds.

Ilana Rabinowitz said...

Barnes & Noble tried to compete with the technology industry and look how they're doing? It's sad to watch traditional businesses try to fight the internet goliaths by trying to act big instead of playing to their own strengths.

paulbenjou said...

What would prevent the "new" holding company from buying Nielsen and its trove of consumer data and measurement services? With a market cap of $12.5 billion for Nielsen Holdings, its not such a stretch for the $35 Billion "OmniPub"

bob hoffman said...

They better hurry before Sorrell beats them to it.

Justin McCarthy said...

Does anybody really buy this as the reason for the merger? Anyone with any real understanding? I don't think so. You refer primarily to creative agencies, but you need to acknowledge that the big groups have long diversified into media buying, CRM, PR and specialist services like research a long time ago. If the giants want to compete in the big data space it will be in the space occupied by research & CRM - insight and data mining. Time will tell if they reap any success, but I'm sceptical.
For the real reason behind this move look at the promised return on investors' funds. In 2011 Publicis returned a 24% dividend, Omnicom 30% and in 2012 it was 25% and 33% respectively. The combined entity is "promising" circa 35% off a much larger base. It's not about creativity or data or even talent (although these do account for something), and really about shareholder returns and an anticipated operating cost saving of $500m over the next 5 years.

Jim said...

Yes, very good.

tore said...

It's just smoke and mirrors. Trying to get around the fact that the merger may not be approved in many of the markets they operate. By pitching themselves against much larger entities such as Facebook and Google they hope to fool the legislators.