What’s wrong with adland (and how to make it great again)

D. SriramIn this guest post that first appeared on LinkedIn, D. Sriram argues that the ad industry has fundamentally changed for the worse since he joined it 26 years ago, but there are ways to make it great again.

I loved advertising and worked in agencies for 18 years of my life before getting involved in startups and then new media companies.

However, it feels to me like its fundamentally changed, and not for the better. The trade press is full of awards scams, agency reorganisations and layoffs, frequent pitches, falling margins, lack of transparency and disruption by small, smart startups (which then get bought for large, stupid prices).

So I got to thinking why, and here’s what I came up with.

CEOs aren’t master craftsmen any more

People like Leo Burnett, David Ogilvy and Raymond Rubicam all shared one key characteristic. They were incredibly good at the craft of advertising, better than most other people in the field. They were personally involved in solving client problems for most of their careers and they stayed sharp and up to date throughout.

Now let’s cast our eye over some of the big global networks – think about the global CEOs (or the APAC CEOs if you know them better). Can you put your hand on your heart and say these guys really know their craft? Most of them stopped learning about the business a long time ago – primarily because they don’t solve client problems any more. (There are exceptions, of course – I’m talking about the majority of network agency leaders).

Owner managed agencies and startups are usually headed by brilliant people who are master craftsmen – but then they get acquired and either leave or end up like the people I just described.

There is one simple reason for this. Being an agency CEO has become a job in itself, one that has nothing to do with the craft of advertising and everything to do with trying to make it look like a real business. I’ll come back to this theme in a moment.

Agencies have too many goals that are not related to a client’s success

I was recently re-reading one of my favourite books about advertising – “Giants, Pygmies and Advertising People” – and realised that in the entire book, advertising awards get mentioned twice, in passing. If someone wrote a book about advertising today, awards would get at least a foreword, a couple of chapters and an afterword all to themselves.

Effective advertising should lead to happy clients, long relationships and profitable agencies. People who create it will be easy to spot within the agency, possibly even outside because their work is visible and the client’s happiness should be visible too.

The criteria for winning awards don’t often have anything in common with helping clients succeed, so pursuing awards often leads to a misalignment of objectives with clients.

The other cause of misalignment is money. Agencies need to make some, while clients seem to hate paying any. That’s led to pitches based purely on price, agencies trying to make money through the back door and recommendations that are biased by these factors instead of being purely about what’s best for the client. That’s wrong.

Agencies have become ‘too big to fail’ and nobody is authorised to make any real decisions

The world of marketing is changing quite fast. Agencies are constantly playing catch-up. This isn’t because they’re dumb or run by dumb people. Quite the opposite, in fact.

Agencies got to a certain size based on an old business model. All the new stuff tends to start out small. Therefore, they are either unable to put a lot of focus on new ideas and models, or they try to deal with them in old ways.

Take programmatic digital for instance. It’s a great opportunity to reinvent advertising, make it relevant and exciting for consumers and get paid for results. Instead, agencies are trying to perpetuate old world rebate and markup models to drive big margins out of it before clients catch on.

You’d think a global agency CEO could change this, but they are part of a holding company structure, which means they don’t really have the freedom to make bold decisions.

The holding companies aren’t run by people who understand or love the craft of advertising, they’re run by finance gurus who get really upset when you miss your quarterly numbers – which is going to happen sometimes when you try and pitch a fair fee, transparency and new business models.

So what’s the solution?

Here’s my theory:

De-list advertising agencies, buy back the shares and make them privately held

Advertising is not really a business in the sense that commodity trading or banking or manufacturing cars is.

Sure, you can make some money investing in an agency but you can probably make a lot more putting that same money into some other industry.

The moment we stop trying to list agencies and competing with others on Wall Street, we stop having to meet the expectations of investors and analysts who don’t really understand or appreciate the craft underlying the industry.

That may sound far-fetched, but it wasn’t that long ago that it was this way – before WPP came into being and Publicis suddenly became a holding company. Not so long ago, Leo Burnett, D’Arcy and Carat were privately owned and quite successful.

A fair number of large companies take loans from private equity to buy back their shares – in the context of the advertising business I think that would be a very good move.

Link all revenues to what clients pay, and get paid for delivering success

Agencies should win when their clients win. That means no ‘backdoor’ revenue but it also means fair fees and no ‘mandatory’ re-pitches just to shave 5% off the fees.

Agencies exist to solve marketing problems. They may buy media or create content in order to do so, but the focus needs to be on the degree to which they solve the problem rather than on the price at which they bought an impression.

Agency CEOs need to have a functional role in the agency

Nobody can be ‘just’ an agency CEO any more. They need to be involved in a few key clients, in reviewing the work and even in shaping the strategies and solutions that get presented to that client.

Doing that keeps you sharp – you tend to look out for whatever new things are out there that can help solve a client’s problems.

Let’s get back to solving problems and having fun – you want to make money, go work in a bank or something

I describe myself nowadays as being ‘advertising adjacent’ rather than in the advertising business, but the truth is, I’ll always love this minor business for just one thing – that moment of pure insight when you come up with a way to solve a client’s problem, and their eyes light up because they think it’s a great idea. If we can make the business feel like that again, I’d be back like a shot.

D. Sriram is the chief operation officer of mobile advertising platform VPon. In his career, he was APAC CEO of Starcom MediaVest Group, COO of Aegis Media China and China CEO of media logistics company IMD. He has also consulted to many of the major ad and media networks in Asia.


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