[Paleopsych] NYT: Advertisers Want Something Different
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Mon May 23 19:44:32 UTC 2005
Advertisers Want Something Different
By STUART ELLIOTT
BBDO Worldwide in New York, 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
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 MDC
Partners in Toronto, the parent of innovative, creatively focused
agencies like Crispin Porter & Bogusky and Kirshenbaum Bond &
"Historically, agencies pushed clients," Mr. Nadal said. "Today,
clients are pushing the agencies. The same-old, same-old is not being
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
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 Coca-Cola and 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
"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 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 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 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
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 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
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 FedEx, PepsiCo and Visa are wrenching but
"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."
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