Fun While It Lasted: Ad Industry Approaches a Reckoning

The ad industry which so admirably mastered the technical complexities of digital and social media is threatened by its deteriorating business economics The business model is broken Marketing executives CMOs and Indirect Procurement and agency CEOs need to radically redesign how they do business with one anotherShareholder value is a major force behind the broken business model Senior advertiser and agency executives obsess about maintaining or driving up share prices by quotmaking their numbersquot whatever the circumstancesAdvertisers Top 50 advertiser revenues were moribund between 2009 and 2019 they never really recovered from the financial crisis Twenty of the top 50 advertisers actually showed declining revenues during the preCOVID decade Nevertheless advertiser share prices tripled How Finance raised dividends and executed share buybacks and procurement unleashed costcutting programs especially in media and for agency fees to maintain or enhance margins Agencies suffered from these cutsAgencies The holding company agencies mindful of their own share price pressures downsized and maintained low salaries in response to procurementled fee reductions Their own revenues were stagnant during the 20092019 decade but they used the same financialengineering tricks as their clients Their share prices tripled between 2009 and 2016 but they could not keep it going so they continued to downsize at an accelerated rate when their share prices declined COVID19 cuts made this even worseScopes of Work Independent of fee reductions client scopes of work were increased and fragmented among media channels in the belief that quotmore creative efforts across a larger number of channelsquot might lead to quotmore salesquot Agencies responded by agreeing to the work and overburning their reduced staffs Unfortunately this SOW strategy did not deliver the goods and it created a genuine employee retention problemSolving the Brand Growth ProblemIf brand growth remains stagnant then counterproductive quotshareholder valuequot actions will always be taken undermining the fragile business foundation of clientagency relationshipsAgency CEOs need to take initiatives to reposition their services and capabilities quotWe help clients restore growth through the effective use of media creativity and analyticsquot needs to become the stated agency mission The pursuit of quotpure creativityquot is not enough Pure creativity has not delivered improved brand performance Just ask Burger King about its awardwinning but ineffective Moldy Whopper campaignPartnerships Clients and agencies need to become partners again Agencies should take the lead in proposing how this can happen They need to commit to becoming proactive solutionproviders rather than serviceoriented vendors and to develop the required skills and expertise CMOs and procurement should listen and embrace this initiativeScopes of Work Agencies need to develop and recommend scopes of work that have a high probability of improving brand sales performance This is part of the partnership pledge Clientdeveloped scopes of work have not worked It takes a partnership to identify and settle on the right programsRemuneration Remuneration needs to be based on the quantity and nature of the agreed work along with the results achieved The laborbased model needs to be abandoned and the quotbenchmarkingquot consulting firms who have helped to drive down fees permanently benched Changes in remuneration will require robust SOW documentation workload measurement and wellmeaning negotiations by agencies and their clientsThere is hardly a dimension of the clientagency relationship that does not need to be overhauled if quotimproved growthquot becomes the objective of the working relationship There is hardly a dimension of the agency culture too that does not need to be reviewed and transformed under CEO leadershipThe hard part as with all journeys is taking the first step Once taken though the necessary transformation programs begin to write themselvesClick the social buttons to share this content with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Fun While It Lasted: Ad Industry Approaches a Reckoning

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Michael Farmer

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Fun While It Lasted: Ad Industry Approaches a Reckoning

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