Oct 3, 2007

Mad Men No More

AMC via NY Observer

Two recent articles, one in Ad Age, the other in the New York Observer focus on how advertising has lost its mojo and try to explain why.

They both get it wrong too, the Ad Age article focusing on the exclusion of women and minorities during that era (true enough, but not sure what it has to do with anything) and the Observer focusing on the types of clients (big pharma) the industry now uses to pay the bills.

The articles were so off, I actually posted a comment on the Observer article, which went something like this (NB: It makes more sense if you read the Observer first.)

Interesting article but you skipped over the main reason advertising agencies lost their glamor: in the late 80s and early 90s, the major agencies were all acquired by 4 major holding companies: WPP, IPG, Omnicom and Publicis. These holding companies have come in, cut staff dramatically, demanded stricter accountability on expenses, and, most importantly, cut salaries dramatically, even at the very top levels.

What's left is a much more corporate, much less creative environment where no one sticks around because there's no way to get rich or even close to it. Lupinacci is dead-on in his take that the sort of people who were once attracted to the ad business are now all working for Google.

If there are small hot start-up agencies like Anamoly, they are quickly snapped up by the holding companies as soon as they show any signs of growth. And given the holding companies deep pockets who can blame the owners for cashing out for millions.

A final factor in the death of Madison Avenue is that clients are no longer particularly New York-centric. The hot agency of the moment, Crispin Porter Bogusky (Burger King, VW) is based out of Miami and Boulder. Goodby Silverstein (Hyundai, Comcast, Sprint, HP) another powerhouse is in San Francisco and Wieden and Kennedy (Nike) is in Portland, Oregon.

As for Richard Kirshenbaum, he's not exaggerating: he really is the last famous ad man left in New York.

15 comments:

Scamp said...

You're so right about the money. I only came into this business to get a Porsche. Where is it?

toad's sixth reader said...

yup. holding companies sucked the life out of advertising. the big agencies are soul furnaces that don't pay particularly well. so they don't attract the smart people anymore. advertising has become a commodity. is there any difference between JWT and Ogilvy?

Lewis Green said...

Toad,

Great article and right on target. Corporate managers often do not understand the value of creativity and innovation, let alone building or maintaining a culture that encourage and nourish employee ideas, innovation and thinking. As a result, we end up with worship at the alter of the status quo. I agree with Drucker: Business has only two functions - marketing and innovation. Neither are present when managers care more about accounting than excellence.

Anonymous said...

1) Money. Blame is misplaced on holding companies. First step was negotiating and, therefore, the reduction of compensation, the loss of the commission system at the same time other industries (brokerage firms, for example) also saw a new way of getting paid. Second step was the separation of media buying and planning from creative/production. The latter had benign effects on other parts of the country and contributed greatly to the rise of regional (outside NYC) companies. The holding companies sought to figure out how to make profitable the fragmented world of less-compensated entities.
2) Glamour. I remember someone telling me that publishing was a glamour industry. I asked why (I was about to get a job as a proofreader) and was told because they don't pay much but you get to do interesting things and meet interesting people. Seemed like a crock then and a crock now. BUT...to walk into an ad agency in 1968-1970...the big ones (Esty, BBDO) or the flashy ones (Wells) or the profitable midwestern agencies with NY outposts (D'Arcy) was to see a use of space that would today be profligate (a secretary at D'Arcy or Esty had an office the size of a CD today), but that was money that wasn't sucked out of the system by holding companies but by the reality of new compensation models.
3) The advertising business has its principal allure in that individuals with talent can, with a single client who recognizes their ability, start an agency and have fun and make money and be as glamorous as personal taste allows.
There are few business that permit such entrepreneurial leaps. And if they're lucky, they can peddle themselves someday to one of the holding companies.

Toad said...

@Anonymous: Interesting take from someone who seems to have been there back in the day.

One question for you: I was always under the impression that it was the holding companies who started all the unbundling and changed the compensation arrangements. The former, as a way of justifying owning several agencies (separate media operations serving a few big agency networks were supposed to provide economies of scale) and the latter to stay competitive with each other and to keep large pieces of business within the holding company network. Since the holding company era dates back to the mid-1980s, when did all these changes take place?

And then, as to your third point-- do you think it's much harder to start an agency and make money these days given the low profit margins?

Anonymous said...

It's always a good time to start an agency; it's always a good time to sell an agency.
Although, the notion of an agency itself is passé. An agency being an entity that takes a % of media spending and production spending and plans and buys media and does creative and production and research. Hardly exists any more, if at all.
Timeline: agencies go public: Starting in 1960s. PKL, DDB, O&M, WRG, JWT, Interpublic (itself the first holding company, the brainchild of one Marion Harper).
Media buying services start:1970 or thereabouts.
Agencies merge and submerge and re-emerge and become part of holding companies. 1980-today.
Commission system collapses: Mid-70s to the 90s through competitive pressures and media buying services themselves deep-discounting.
The age when agencies were really profitable was, I suppose, when their principal clients were tobacco companies, U.S. car makers,
packaged goods of all kinds, and the liquor companies.
Richard K., I am surprised to learn, is famous. He seems to have thrived in his agency, but where is he famous? I asked some people today to name an ad person; the only ones they could come up with were Deutsch and Della Femina. These were New Yorkers. Oh one said Charlotte Beers, remembering that she had an assignment from the government to do something or other.

Toad said...

@Anonymous:

It's funny- my friends and I have a running joke that the only ad guy people our parents generation can name is Jerry Della Femina and the only one people our generation can name is Donny Deutsch.

(The joke of course being that neither is someone the One Show crew or the Miami Portfolio Ad Circus Center crew considers worthy of their attention.)

Richard Kirshenbaum is/was as famous as Alex Bogusky is today: primarily within the industry as a spokesman for his agency. Though unlike Bogusky, he does occasionally show up in the fashion pages for something unrelated to advertising.

Your history of the industry is illuminating: I was always under the impression that the early 80s were still gravy years (there were some people left over from that era when I started) full of sex and drugs. By the time I came onto the scene it was all pretty corporate and we couldn't imagine anyone maintaining a serious drug or alcohol problem while putting in the hours we were expected to put in.

Finally, any chance I can cajole you into adopting a nickname of some sort so that I don't have to call you "Anonymous"?

Regards,

TT

Anonymous said...

Anonymous can become eponymous only if he remembers his google username and password.
The 80s, of course, still had some economic life to it, especially between 1982 and 1987. But all the other stuff was in place. I think in 1983, Ally went public (a silly thing) and in 1987 Ogilvy was taken over by Wired Products and Plastics (unavoidable); earlier DDB and BBDO and Needham merged to form Omnicom (a gigantic poison pill, but one that worked). But there probably were remnants floating around: Esty and Bates folded into groups (gigantic cashouts, course) and Ammiratti bought itself back and then sold itself again and merged with Sullivan Stouffer colwell and Bayles----but the big story, largely untold was shrinking margins and the end of commissions as they had been structured.
When agencies went public or were acquired by public entities, clients had two reactions. The older, more traditional clients questioned the compensation agreements as they saw the value of their contracts being sold; the new entrepreneurial companies were happier that their agencies were acquired as they saw that the public was in effect compensating their agencies so they didn't have to.
I also have to say, no offense to Richard K., that if he has become a spokesman for the industry, I must have missed it. What has he said that I should remember? Or is he just a visual?
Those folks you cite who determine who is and who is not worthy of their attention are marginal----talented, but marginal; as they create their own networks of one hand washing the other hiring practices, they do become like academics and set standards of what a portfolio should look like and how much you should pay for it. They also become their own icons whom the next generation will rebel against for stuffy standards' settings and rule-making.

Toad said...

@anonymous:

Thanks so much for adding your insight. As for giving yourself a name, you can click on "Other" and come up with something. Just beware though, that if you don't give it a whole lot of thought, you might be stuck with something like "Tangerine Toad."

I agree that agencies need to find a way to make more money. It seems that the various holding companies are so keen to hold on to large pieces of business that they gladly cut the profit to the bone just to retain the account, and like consumers with coupons, clients get addicted to the discount.

I know that Crispin and some others have tried getting a share of the profits as a way to increase profits, and that Anamoly, a start-up here in NYC, has set up a separate entity to sell ideas.
Not sure if either model has proved successful.

Regardless, we've gotten ourselves in a position where we are looked at as interchangeable vendors rather than experts and that can't be good for business.

Agree 100% about the cabal of tastemakers who set the standard for what "good" creative looks like and their resemblance to academics. I dealt with a lot of that in the "Not Everyone Is An Upscale 30something White Male Hipster" series ( you can find it at http://tinyurl.com/354b55 )

Finally, as for Richard Kirshenbaum, he got a lot of press around the time his agency did- early to mid 90s, but his relevance to the media waned along with his agency's fortunes. These days his name appears in the occasional Style section article, while Bogusky seems to have taken over as the quotable hot small(ish) agency owner. I've only heard good things about both of them from people who have worked with them, so more power to them.

Eponymous said...

Three times I saw situations in which the agency could have worked for stock options; three times I saw the offer rejected; and three times I saw a stock price leap that would have made the margins of the 1950s look like, well look like, diddily squat
(I am not much at similes.)
But that is a bit of dice-rolling.
I saw a picture today of the last adman to run for President, Chester Bowles. He got his head handed him in the primaries and went into the convention that nominated Kennedy with a hoped-for Vice-Presidency and ended up ambassador to India.
Deutsch has done a good job buying fame--I actually liked his old show before he turned it into some kind of infomercial with cutesey-named segments; Della Femina got famous by saying funny things at the right time, writing an amusing book, and then getting rich.
The fact that there are no famous ad people is not lamentable; the only famous accountants are in jail and the only famous hedge fund managers are probably on their way.
Fame within the business is another thing---and there have always been loads of them; in fact, there was a time when one ad could make you famous within the business. Maybe still true, but I haven't followed the trade press enough to notice art directors' and copywriters'names.
Can you tell me off the top of your head who won the one show gold for a thirty second spot this year?
If not, then fame is indeed fleeting even among the habitués.

George Parker said...

Excellent conversation between you and “anonymous.” Just want to make a couple of points. It wasn’t just agencies going public that screwed the business, because they were still run by advertising people. It was when they all started to be acquired by the four giant conglomerates, all of which are publicly traded companies. IPG is run by someone who came from the insurance industry and never worked in advertising. WPP is run by an accountant, who, yes did work for the Saatchi Brothers, but is still a bean counter by nature. Publicis is run by an ex IT manager. Omnicom is questionable. But the point is, every major agency (with the exception of Weiden, which is still private) is driven by their corporate masters to make the numbers…. Every fucking quarter. There can be little long term planning or investment in training programs or whatever else might develop the business a couple of years down the road. These people don’t have a couple of years, they have weeks if not days. On the famous Ad Guys theme. You give both Donny and Jerry credit for writing books on the ad biz. In fact both were ghost written, or if you want to be kind… Co-authored. Which is rather funny when you consider they both claim to be writers. As for famous Ad Men, David, Howard, Bill and Helmut must be spinning in their graves. And yes, Charlotte Beers, ex-chairman, JWT, New York, was, for a while working for Colin Powel at the State Department spreading the word about all the wonderful things we were going to bring to Iraq. At least she had lots more class than the current holder of the office, Karen Hughes, a Texas crony of “The Great Decider” who recently appointed Cal Ripkin as “Baseball Ambassador” to China… “Cos as we all know, baseball is huge in China. Good to know our tax dollars are being spent so wisely.
Cheers/George

Toad said...

Welcome back George. We missed you.

@Eponymous: The scenario George Parker laid out was always my understanding as well: that the 4 big holding companies were really the ones who put the squeeze on how much money the agencies had available to pay staffers, run training programs, buy supplies, etc. On a purely anecdotal level, I can see their influence when it takes 3 weeks for someone in "finance" to approve the hiring of a $50K/year junior. There are also all those additional XXL salaries to be paid to people employed by the holding companies.

@George: I never knew Donny wrote a book: I thought he became famous through his TV show and through the fact that he gives good quote. Ditto Della Femina: I knew he wrote that 30 Seconds Over Tokyo book but was mostly famous for resembling Telly Savalas, giving good quote, being married to a TV reporter and (primarily) owning a well-known restaurant in the Hamptons.

Funny anecdote: When Della Femina retired, the only well-known ad campaign the Times could come up with that he'd done was "Purina Cat Chow. Chow. Chow. Chow." Well that, and the SF office of his agency came up with Joe Isuzu.

@Eponymous: No idea what spot won a pencil last year or who the creatives are who did that Dove "Evolution" spot (Jancy?) Fame is indeed fleeting, hence today's post on the need to actually get to know digital.

eponymous said...

Funny stuff.
1)Hard to do these arguments because it is hard to disagree with a lot George's stuff because whether he is right or wrong isn't the point. It is how he says it. My argument for contemporary "squeezing" is that the "juice" to be squeezed is muchmuch smaller than when the 15% commission ruled. There always were headquarters people or financial people or an accounting firm or superannuated people who managed people and did little else, but now there isn't as much money to manage, so to speak.
2) The Jerry thing listed here is funny because a) he is not retired b) his agency did Meow Mix, not Cat Chow c) the LA office did Isuzu, not the SF office since he never had an SF office. Has the NY Times gotten anything right in the last 40 years?
3) The fame within the business thing: reason it is lamentable that no one seems to know who won the :30 One Show Gold is that the fame for doing work or a specific piece of work used to be fame that could get deserving creative people better pay or a better job or even a better office. I listed :30 One Show Gold because it always seemed to be the hardest award to win in the U.S.
4) Being long in the tooth, I remember a trade journal article from 1966 that commented on DDB going public. The headline asked if they were trading their souls. It was both prescient and naive.

Thomas G. Messner said...

George,
Do you know if Ogilvy wrote his books?
Serious question.
Thanks,
Tom
PS The classic line on this topic was
the baseball player--I think Mickey Rivers--who said, when asked about an incident in his biography that he didn't know as he hadn't read it yet.

Toad said...

@Tom: Welcome back to you as well. Your comments are always welcome.

@Epnoymous: In all fairness to the Times, the errors in Della Femina's bio are more likely the result of my faulty memory than their bad reporting.