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Deconstructing the complexities of the advertising business

COMMONNESS - Bong R. Osorio - The Philippine Star
Deconstructing the complexities of the advertising business
Yet, despite this negative perspective, you’re not ready to go all-out to declare that they are “not friends,” even when compelled to.

Frenemies are people or groups in your sphere who have offended and deceived you. Trust is something you don’t give them. They have engaged in actions that angered you and made you vengeful.

Yet, despite this negative perspective, you’re not ready to go all-out to declare that they are “not friends,” even when compelled to. This could be because they are part of your wider social and professional circle, and openly breaking friendship with them could be too publicly precarious for you. So, begrudgingly, you continue to call them “friends.” But, of course, in your heart, you know that they are much more “frenemies” than “friends.”

In the advertising business, “frenemies” is a label whose ubiquitous use in the ad industry reveals the level of anxiety, as former allies become competitors. The title comes from a word popularized by Sir Martin Sorrell, formerly the chief executive of WPP, the world’s largest advertising and marketing holding company. Frenemies describes the difficult relationship between marketers and technology platforms, but undoubtedly the former has the upper hand — for now.

Advertising impacts every aspect of your life. It is the hidden persuader, the masked firewood fueling almost all media. You may complain about it to high heaven, but without advertising the world would be a duller place. And of all the industries deeply challenged by change in the digital age, few have been turned upside down as radically as advertising.

Ken Auletta’s book Frenemies: The Epic Disruption of the Ad Business (and Everything Else), analyzes an industry that is under tremendous challenges.  The author penetrates the inner sanctums of the most critical performers in the ad universe. He surveys the industry from the vantage of its new powers: Facebook, Google, Amazon, Microsoft and other impatient, aggressive and fragmented creatives and techies who are ushering in all sorts of change, as millennials and centennials who despise interruptive ads harness technology to zap them. It also looks to the future, observing what is supplanting traditional advertising.

The author provides a view of the tumultuous, treacherous ad landscape. He shares, “Not only are Madison Avenue and Silicon Valley frenemies, but so, too, are ad agencies and their marketer clients; agencies and media companies; traditional and digital media companies; agencies and consultancies like Accenture and McKinsey; agencies and software firms like Adobe and Salesforce.com; and, perhaps most telling, advertising and consumers. The easier it becomes for the public to zip, zap through and avoid interruptive ads — through innovative technology like ad blockers and streaming video — the madder, and more anxious, the mad men and women grow.”

Key thoughts on Auletta’s deconstruction of the advertising business of yesterday, today and the future:

From its purported golden age, memorialized by the hit TV show Mad Men, the ad industry has changed fundamentally. Mad Men is a period drama set in 1960s New York, starring alpha male Don Draper, who struggles to stay on top of the heap in the high-pressure world of Madison Avenue advertising firms. For years, the mechanism for the practice of advertising was simple. Advertisers hired ad agencies to promote their products in media channels that could reach potential buyers: magazines, newspapers, radio and television. Creativity was the name of the game. Creativity that sells and win awards. Today, gone is that simpler time when brilliant creative campaigns made clients swoon and corporations paid agencies big money to reach consumers through newspapers, magazines, billboards, radio and television. “Back then you had three major networks. You had people’s attention. People had fewer choices,” states Beth Comstock, a former General Electric executive.

Fast-forward to 2018, and the picture changes radically. The internet connects billions of people with each other and, potentially, advertisers with all of them. Very nearly every one of earth’s adult humans possesses a cellphone; Facebook has two billion active users; Google performs 3.5 billion searches every single day; Google and Facebook are “frenemies,” willing to work in rough concert with each other but always poised and ready to cut each other out in the ruthless environment of putting ads in front of people.

There are two different types of people in the world of media and advertising. One type leans back and wails, “Oh, my God, woe is me, what a problem this is and the digital world is decimating the business and, oh, God, it’s terrible, it should stop.” The other type leans forward and says, “I’m not going to treat this as a problem — I’m going to treat this as an opportunity. I’m going to figure out what I can do to transform this business to a new world and get away from my legacy media and advertising world and do things in a different way.”

The business ecosystem has changed over 10 years of competition. There are also changes on how to reach consumers. In 2015, total global digital ad expenditure — mostly on Facebook and Google — was at 44 percent; in 2017, it reached 60 percent; in the first semester of 2018, it had gone up to 78 percent. Apps like Snapchat and Instagram are everywhere; services like Airbnb and Uber are fixtures of modern life around the world. Amazon, the world’s largest store, knows what individuals have purchased; its data is unrivaled. If this trend continues there will no longer be any need for ad agencies. There will be a future without agencies. But ad agencies are not about to just sit back and allow this to happen. They are diversifying their partners, and working with their frenemies to grow their businesses.

A bonanza for advertising: 130 billion ad pages are displayed on the internet every day. While the personal information of consumers is more thoroughly known and disseminated than ever before in history, those consumers also have some unprecedented controls over their exposure to even the best-targeted advertising supported by advertising.

Non-stop interactive traffic generates towering mountains of personal data about the people engaged in it. You get names, addresses, preferences, disposable income, even daily routines, which in turn makes it possible for advertisers to know with alarming accuracy who might buy their products, and when, and where, and why. As one ad agency member puts it: “We know what you want even before you know you want it.”

Publishers facing declining revenue from traditional advertising have started their own studios to create “native advertising” for clients, cutting out agencies. And the lifeblood of the business is no longer creativity — though commercials can still pull at the heartstrings, or go viral — but rather computers, which use algorithms to place advertising on websites, and produce data that can be used to precisely target consumers to buy more stuff.

Clients are increasingly taking things in-house; the brands are competitors as well. The same is true of consulting companies. The McKinseys, Deloittes and Accentures are increasingly and actively getting into the advertising business themselves. PR firms are increasingly becoming ad agencies.

• The real existential threat to the ad industry is the public. Many are ad blockers. They look at DVRs and record shows on TV. Nielsen says roughly 55 percent of people who record shows skip ads. And there’s a whole generation growing up on HBO and YouTube and now increasingly on Netflix where there are no ads. Imagine the impact of all these on the advertising world. “Today, the consumer is in control, and increasingly the challenge for advertisers is to create experiences that people will want to have because they will no longer have to have them,” Auletta writes.

What does the future hold? Digital marketing experts are saying that there can only be four houses in our future as marketers: Google, Apple, Amazon and Facebook. But the ad agency business continues to integrate and align with frenemies, own the audience, implement evident-based technology, fight and deliver.

Frenemies, to date, is the most striking narrative of what may be the most decisive time in the history of advertising — the moment when data went from servant to master. It is a must-read for people in marketing and communication, to those who have a lot to say about this world, and importantly, to frequent communicators who are mindful of the potential consequences of their statement or action. The survival of media as you know it depends on the funds generated by advertising and marketing — revenue that is in peril in the face of technological changes and the fraying trust between the industry’s key players.

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