[Paleopsych] NYT: Advertisers Want Something Different

[Premise Checker]

Advertisers Want Something Different
http://www.nytimes.com/2005/05/23/business/media/23adco.html

    By [2]STUART ELLIOTT

    BBDO Worldwide in New York, [3]General Electric's longtime advertising
    agency, was not getting the message.

    The agency had been offering G.E. its panoply of traditional marketing
    ideas, leaning heavily on the standard 30-second television spot. But
    Judy Hu, general manager for global advertising and branding at G.E.,
    demanded something daring. What she eventually got fit the bill: an
    online campaign with a virtual sprouting seed that computer users can
    tend and send to people they know by e-mail.

    "They kept bringing us what they thought we wanted," said Ms. Hu of
    her exchange with BBDO a couple years ago. "It took a while to make
    them believe we wanted something different."

    The world of advertising turns upside down when the advertisers - not
    the agencies - are the ones pushing the envelope. But that is what has
    been happening.

    The advertising business is undergoing an upheaval, forcing executives
    to radically change how they do business. Marketers are trying
    desperately to stay ahead of the technological innovations that are
    changing how consumers view their messages - and are putting pressure
    on their agencies to adapt.

    The ad firms are more eager to please than ever. The major public
    agencies face shrinking profit margins and sagging stock prices,
    leading to a shakeout and a frenzied effort to cut costs.

    It's unclear if the traditional agencies will be nimble enough to halt
    a slow decline. Already, many famous names are vanishing: N. W. Ayer;
    Bates; Bozell; D'Arcy Masius Benton & Bowles; Earle Palmer Brown;
    Lintas; Warwick Baker O'Neill.

    The big agencies also face a throng of hip new rivals, which have
    pounced on the opportunity and are looking to steal business. Those
    boutiques use their oddball names - like 180, Amalgamated, Mother,
    Nitro, Soul, StrawberryFrog, Taxi and Zig - as branding devices to
    signal they are not about business as usual.

    "Clients are looking at the results they're getting and they're not
    happy," said Miles S. Nadal, chairman and chief executive of [4]MDC
    Partners in Toronto, the parent of innovative, creatively focused
    agencies like Crispin Porter & Bogusky and Kirshenbaum Bond &
    Partners.

    "Historically, agencies pushed clients," Mr. Nadal said. "Today,
    clients are pushing the agencies. The same-old, same-old is not being
    accepted."

    But some agencies may be moving too slowly.

    "There's an incredible ability to cling to what's been done because
    there's a comfort in that," said Ian B. Rowden, executive vice
    president and chief marketing officer for the Wendy's brand at
    [5]Wendy's International in Dublin, Ohio.

    "There's a lot of talk but less action," said Mr. Rowden, who has also
    held senior marketing posts at [6]Coca-Cola and [7]Callaway Golf. "The
    old model still drives a lot of things."

    The origins of the industry's current problems are many: the dot-com
    bust, the fallout from 9/11 and the explosive growth of technologies
    that help consumers avoid ads - like digital video recorders, iPods
    and satellite radio. Madison Avenue is still trying to regain its
    footing. Industry employment, which peaked at 496,500 in 2000, fell
    14.4 percent, to 424,900, last year, according to the Labor
    Department.

    "The onus is on the agencies to make sure they have the right creative
    talent," said Lauren Rich Fine, an analyst who follows the ad industry
    for Merrill Lynch, but "I suspect that's more difficult than ever,"
    she added, after the "massive layoffs of the last few years."

    Ad spending in the United States, which once grew reliably year after
    year, declined in 2001 for the first time in four decades - and by the
    largest percentage since the Depression year of 1938. While ad
    spending has rebounded since then, the growth rate is slower than
    during its heyday of the 1990's.

    "I used to think the agencies were capable of double-digit revenue
    growth" each year, Ms. Fine said, but "now I look at them as
    mid-to-high single digits."

    Worse yet for agencies, profit margins have been shrinking
    significantly as clients, facing relentless competition and
    consolidation in categories like automobiles, fast food and
    telecommunications, are anxiously squeezing every nickel of waste from
    their ad budgets.

    "In the 80's, we used to fight with clients over creative. In the
    90's, it was about strategy. Now, it's only about money," said
    Jonathan Bond, co-chairman of Kirshenbaum Bond & Partners in New York.

    So in a trend-conscious industry, economizing is the new black. For
    instance, when Kirshenbaum Bond recently filmed a commercial for the
    Liberty Mutual Insurance Company, retelling the tale of the Trojan
    horse, "instead of building a massive set, we used miniatures," said
    Rob Feakins, vice chairman and executive creative director.

    That saved about $150,000, or about 10 percent of the budget for the
    commercial, he estimated.

    Also, when planning a campaign that calls for several commercials, "we
    try to 'gang up the shoots.' Do two a day," Mr. Feakins said. "And we
    always think of shooting them on one location with a minimum of crew
    moves, because the crew moves kill you."

    Some cost-conscious marketers are even turning over responsibility for
    agency relationships to procurement departments. "The corporate world,
    reacting to recessions and Wall Street pressures, is challenging the
    agencies," said Alan Krinsky, principal at Alan Krinsky Associates in
    New York, which advises agencies and advertisers on issues like
    procurement. "Accountability is still a gray area."

    The stock prices of the giant holding companies that own almost all
    the big agencies have been weak. The shares of the world's largest
    agency company in revenue, the [8]Omnicom Group in New York, parent of
    BBDO, are down 8.1 percent from their 52-week high and 13.8 percent
    from their five-year peak. For the [9]WPP Group, which owns agencies
    like Young & Rubicam and is the No. 2 agency company behind Omnicom,
    the share price is down 11.7 percent and 29.1 percent, respectively.

    The third-largest agency company, the [10]Interpublic Group of
    Companies, which owns agencies like Deutsch and McCann Erickson, has
    suffered accounting problems that have led to an investigation by the
    Securities and Exchange Commission as well as the loss of large
    clients for creative and media-buying assignments. The company's
    shares are down 15.7 percent from their 52-week high and 73.7 percent
    from their five-year peak.

    "It's almost accepted that the model is broken and it's time for a new
    approach," said Carl Johnson, a longtime executive at traditional
    advertising agencies like TBWA Worldwide. He and four other
    high-profile refugees from mainstream agencies are now partners in a
    creatively focused New York boutique named Anomaly.

    "No one comes to us for more of the same," Mr. Johnson said. "Our last
    resort is an ad, if we can't think of anything else."

    Anomaly works with the wireless licensing group of ESPN, part of the
    [11]Walt Disney Company, on not only marketing but also "some product
    and content development," Mr. Johnson said. The agency shares in the
    revenue by keeping an equity stake in whatever is produced.

    "This way, we get paid for the quality of our output," he added, "not
    the quantity of our input."

    Anomaly is among a rash of boutiques that have started up to
    capitalize on the desire among marketers to do things differently -
    and the inability of many bigger agencies to accomplish that.

    In some instances, traditional agencies are diversifying, forming
    units to specialize in nontraditional tasks. The Kaplan Thaler Group
    in New York, for instance, opened a division called KTG Buzz to focus
    on, well, marketing that generates buzz.

    "Creativity used to be, 'Think inside the box.' Then it was, 'Think
    outside the box.' Now, there's no box," said Linda Kaplan Thaler,
    chief executive of Kaplan Thaler, part of the [12]Publicis Groupe.

    BBDO responded to G.E.'s pressure by devoting more attention and
    resources to units like Atmosphere, specializing in interactive
    campaigns, playing down its decades-long concentration on producing
    big-budget television commercials.

    Under a new chief executive, Andrew Robertson, the agency even
    dismissed its most senior creative leader, replacing him with an
    executive from another agency known for a slick, successful series of
    long commercials on the Web, known as BMW Films, which won much
    acclaim - and revved up BMW sales.

    Ms. Hu of G.E. is pleased with BBDO's response. "I feel they're
    stepping up to the plate," she said, adding that Mr. Robertson "is
    trying very hard to change the direction of that agency." For
    instance, she said, a top BBDO New York executive, Brett Shevack, now
    plays host to regular brainstorming sessions known as Project Inspire,
    where people from the agency, G.E. corporate and G.E. business units
    meet "to brainstorm a particular problem."

    The meetings "can sometime lead to wild and wacky ideas that might
    have not been considered before," Ms. Hu said. "And that's a good
    thing."

    Online marketing at G.E. is by far the fastest-growing part of the ad
    budget, scheduled to increase 97 percent this year from 2004, Ms. Hu
    said. She declined to provide dollar amounts, citing company policy.

    And in research last fall to gauge response to a previous viral
    campaign, she added, 80 percent of respondents said the G.E. ads they
    saw online made them think of the company as "innovative," and 94
    percent agreed the online ads made G.E. seem "more appealing."

    So besides the virtual seed, which is being tested this week by G.E.
    employees, there will be more unconventional campaigns to come, Ms. Hu
    said, including ads made available on cellphones and an online game,
    played with virtual windmills, to encourage energy conservation.

    Mr. Robertson said the changes he is making at BBDO for G.E. and other
    clients like [13]FedEx, [14]PepsiCo and Visa are wrenching but
    necessary.

    "It's getting easier and easier for consumers to switch from things
    that aren't engaging them to those that will," Mr. Robertson said.
    "And they are."

    "You can look at that and say, 'Oh, my God! The sky is falling,' " he
    added, "or you can look at it as a huge opportunity to create content
    for your clients that does engage."