December 18, 2017

Best Of 2017 #6: Ad Industry Lost At Sea

If we had access to the internal financials of WPP, IPG, Omnicom, Publicis and Dentsu, here's what I think we would find.

We would find that in the past decade they have invested heavily in technology, data and analytics and not at all in creativity.

In fact, I would bet the farm that in each of these holding companies the proportion of salary devoted to the creative area has dropped in the past decade.

The financiers, accountants, investors, and Wall Street wise guys who now control the ad business are betting on the wrong horse. There is only one element of marketing at which agencies have an advantage over other suppliers -- creativity.

Consultants can provide clients with better strategy; data and analytics companies can provide clients with better numbers; "martech" companies can provide better technology services. But no one can provide better creative ideas.

And yet agencies -- who are always telling clients that they need to differentiate -- are de-emphasizing their only unique differentiator.

The Pivotal Research Group reported this week that clients are starting to bring programmatic media buying in-house. This is not a good sign.

They surveyed 200 of the world's top advertisers and found that 15 had established in-house media operations. Pivotal called it a "relatively significant escalation from the last time we explored the topic." But they concluded that "we expect to hear of more marketers participating in such activities. But at the same time, we also expect that the depth of involvement many of them will have with agencies may expand as well."

I'm not so sure. It seems to me that there is a slow but steady leakage of marketing services away from agencies and toward either specialized firms or in-house operations.

Agencies are diversifying into areas at which they have disadvantages, and are letting the one area at which they have a distinct advantage languish. This is just plain bad strategy.

New media types, new communication models, and new media distribution modes are developing every day. Agencies are hiring for the technological aspects of these new practices. But the real winners will be the agencies with creative ideas to make these new modes come to life.

Circumstances change but principles don't. The ad industry is first and foremost about ideas. Any agency that believes technology can mask an insufficiency of imagination is looking for trouble.

No comments: