Changes in the Industry

The advertising industry has changed in very radical ways. The industry has been repositioned because clients have problems that often require a broader set of tools or a broader set of consultants to help them solve. So, to some degree, advertising has been redefined by the Internet, by direct marketing, by public relations, by CRM, by management consultants. That has happened because client problems have become much more complex as a function of the world becoming much more complex.

Technology has had a major influence on that. Who would have thought 10 or 15 years ago that you would have an HTML programmer working inside your company – and not even in the technology group. Today they are part of a marketing group: part of an interactive group that is part of a brand team that works on a client’s business. Those are radical changes. Companies such as Sapient, Agency.com and Modem Media have entered the scene, and these companies have had radical impact. During recent wild times, companies such as AOL and Time Warner brought their properties together; their interest was in going directly to clients and hitting clients with propositions. So there are many different things going on, with a variety of players trying to participate in what was, years ago, a different kind of agency role – the creative aspect of the business. Now you’ve got technology companies in the creative business. I think that’s how the industry has changed, and it gave birth to a lot of different types of companies. It required agencies to learn how to buy interactive media. It created tracking systems for interactives and hits and many different things. It has also imploded to some degree. But like everything else, it didn’t change back to what it was – it just evolved. In the process, the agencies lost many people to these other companies, then the industry contracted and lost a lot more people.

An interesting thing happened to our industry in the late ’70s or early ’80s, when the middle of the agency hierarchy – people like account supervisors, associate media directors and media supervisors – disappeared because the revenues weren’t there to support them. These people were like sergeants in the military, the ones who knew everything and could teach new recruits in an aggressive, substantive way. They could also relate to senior management and provided a way for people coming into the business to learn it well. It lined them up to become future leaders – the ones who were good enough. When you take that layer out, the training is not as good and eventually the caliber of leadership is not very good. The truth is that there is a lack of very top-level, smart, capable leadership in our industry (as in many industries – I don’t believe it’s unique to the advertising business). That has happened because the brightest minds follow where the business goes. It used to be in advertising, then it went to other places, and eventually it ended up in investment banking and venture capital. Quite frankly, I don’t know where it is right now, because it’s still going around.

Beyond the industry, the advertising itself has changed. I’m not sure it’s changed as radically as the industry has, but you can see how ads are starting to change. Advertising has actually changed because the nature of the environment has changed. Advertising used to be 30-second commercials, and every once in a while you’d hear of “guerrilla marketing” or “under-the-radar marketing,” but that wasn’t the norm. The palette of what you define as advertising or creativity – if the purpose is to create an encounter with a consumer to present a cause and ask them to join or to make a proposition to them – doesn’t have to be done that way. Some of the very visible venues right now are the BMW films; online experiences designed to entertain people, bring them in and form relationships with them. Commercial products have always been integrated into movies. In 1985, we had the Puma business and when A Chorus Line was made we were putting product placements in there. Coke has been in there forever. But now people are looking for new, different ways to do that. You get concepts that start in a 30-second commercial then bleed onto online; that’s just based on the fact that the consumer is changing. Here’s an interesting statistic: about 45 percent of people with computers have them in the same room as their principal television set. I think about 80 percent are people watching television while on the computer. You’ve got a large number of people engaged in multi-media – the television as well as the computer. In many cases, these people are doing something related to the program. What you start to see is a dialogue that might start with one medium and move into another.

The way advertising is done is changing, and that’s a reflection of how our world is changing. Advertising must engage the consumer. Consumers are changing – they absorb media differently, they see the world differently, and advertising has to reflect that. One thing frequently said is that the latest generations – Generation X, Generation Y, and so on – are population groups that understand advertising as a promotional vehicle. They don’t like being sold to. Advertising has to serve a different role for them, so it’s about creating engagements and encounters and, therefore, the media has to reflect it. That changes the way you use your advertising and what the content of your advertising message is.

Advertising is fundamentally a way to market, and that hasn’t changed. The basic principle or driving philosophy behind advertising is still the same. What you’re trying to do is figure out how to use communications – whether traditional communications on television or in print, or nontraditional communications which might be field marketing or engagements, for example – to do the same thing. So the fundamental role and objective of the game has not changed. The level of inventiveness and how you think about solving problems has changed and influenced the business.

The future changes of advertising will relate to two things. First, the consumer. What are consumers doing with their lives and how do they interact with the media? Let’s say that things like TiVo really start to take hold (and I’m not sure they will, because there are a lot of infrastructure issues associated with that). When consumers are not watching commercials, who will pay for the program development for commercial TV? You have to figure out a way to outsmart consumer behavior. The way to outsmart that is to integrate advertising communications messages right within the programming itself, so you don’t get that split-second break that notifies a device you’re now going to a commercial break. The things that consumers believe in and think about and what they value will fundamentally change advertising. September 11 had an influence on the advertising business and will continue to have an influence not because of patriotism but because consumers stood back and said, “What’s really important to me? Family is really important to me. Spending time is really important to me.” That’s had an impact on cultural movements – kitchens and great rooms are again the big thing because that’s the heart of the house. Part of that has been accelerated by things like September 11^th, terrorism and the prospect of war.

The second factor that will influence how advertising continues to change is technology and what it enables. When broadband really comes in and has availability beyond its current 15 to 18 percent, the possibilities of what you can do with that start to change radically.