Ken Auletta has put the advertising industry in the crosshairs in his new book. At the 4A’s (American Association of Advertising Agencies) 2018 Accelerate Conference, The New Yorker journalist was tackled by Bill Koenigsberg, president/CEO of Horizon Media.
Frenemies: The Epic Disruption of the Ad Business (and Everything Else) has a publication date of early June, but Koenigsberg had just finished reading an advance copy of the book. And he did not seem happy.
“I don’t feel that the reader [will] come away from the book and see the significant contribution that agencies are making to our economy, to moving our businesses,” he challenged Auletta. “You talk a lot about the complexity and you talked an awful lot about the friction within the industry.
“But I felt there could have been a whole chapter on the value of what we’re doing.”
Auletta demurred ... at length: “You are a very talkative industry. People talk. And people like to talk, particularly if they feel like you’re really interested in knowing what they do. You begin by asking questions about their childhood and, two hours later, you’re at age 80.
“Every time I talked to someone, I said, ‘Who else should I talk to?’ And then I talked to those people. After a period of time, I went up to 450 interviews ... I wasn’t just writing an essay, I wanted to tell a story. I want to create a narrative as a story. So, I talked to all of the heads of the major holding companies. I talked to a spate of advertising companies.”
Auletta then rattled off a directory of marketing leaders who’ll be featured in Frenemies: Beth Comstock (former GE vice chair and CMO), Carolyn Everson (Facebook VP/global marketing solutions), Ann Finucane (Bank of America’s vice chairman and former global chief strategy and marketing officer), Irwin Gotlieb (the recently retired CEO of GroupM), Michael Kassan (MediaLink’s founder/CEO), Martin Sorrell (the WPP founder/CEO who resigned the week after Auletta’s 4A’s appearance), and Keith Weed (Unilever’s chief marketing and communications officer).
And, he allowed, Kassan and Sorrell are two of the liveliest subjects profiled in the book: “Michael is a real power broker in this industry. And oftentimes, in that sort of negotiation, you’ll have the client on one side and you’ll have the agency on the other side. Who represents both? Michael Kassan. I said, ‘This is delicious.’ [MediaLink] is a really complicated story: They represent Facebook, and Google, and digital companies, and clients, and ad agencies – they were a great vehicle ... to help me tell the story. I wanted to tell a story and Michael Kassan was a very inviting vehicle to help me tell that story.”
Of Sorrell, Auletta observed: “He’s not the most popular man in the world today, but Martin Sorrell was a great source for me. You write him an email and five seconds later, he’s responding to it. He opened up his people, who were very open. And he was candid. I don’t know what’s going on today, but I enjoyed the time I spent with him. And I enjoyed the combat with him – it was active combat with him, which was a lot of fun.”
Aside from the personalities in advertising, media, and marketing, Auletta turned to the focus of his new book: “If you think about the threat to the ad-agency business, you are surrounded by friends who are also your enemies ... For instance, Marc Pritchard” – Procter & Gamble chief brand officer who addressed the 4A’s assembly the previous day – “[is] taking more stuff in-house. That’s when the client becomes a frenemy.
“You think about consulting companies: Frenemies. You think about Google and Facebook: Frenemies. So those are some of the threats to the ad-agency world.
“But it seemed to me that the larger threat – an existential threat to the advertising world – is that the public has become a frenemy. You have this device in your pocket with a very small screen. It’s very personal. The thought that you are going to interrupt me [with an advertisement]: Who gave you permission to interrupt me?
“Why do roughly 20% of Americans use an ad-blocker? Why do over 50% of people who record a show on their DVRs skip the ads? It’s a real existential threat to all of you in the room.
“And there’s also a threat to media: Without advertising dollars, there are no newspapers. Many TV [stations] and magazines would perish. And, by the way, Google and Facebook would perish – 97% of Facebook’s revenues [and] 87% of Google’s come from ad dollars.
“That’s a concern for society, not just the people in this room.”
For the 4A’s audience, The New Yorker author offered a challenge: “Do you recognize that trap? And do you lean forward or lean back? If you lean back and say, ‘Oh, woe is me,’ you’re not being proactive. You’re seeing it as a problem rather than an opportunity.
“For instance, if you say ‘The threat we face is a threat of getting our costs under control – we have to get the procurement offices out of the way, we have to get the CMOs back in power – and we have to get the clients to spend more money on ads’: If that’s your takeaway, I think you’re leaning back.
“I think you have to recognize the existential crisis and also the competitive crisis that exists.”
And, he continued, “When I go forward and look at the ad world, you’ve expanded. You’ve created digital agencies. You work closely with Google and Facebook.
“In general, one takeaway I had was that you’re an industry driven by anxiety. And one of the questions I asked is, ‘Do you lean forward or lean back?’ And I [found] lot of people who I feel are leaning back and not confronting.”
That “existential crisis,” Auletta proposed, kept playing back as he talked to his 450 interview subjects: “Everyone told me, ‘We need to be able to target individually, and reach people individually, and know what their interests are so that the ads will be of interest to them.’
“What does that bump against?” he asked. “Privacy,” he answered. “And that’s a huge takeaway.”
“I literally don’t know, nor do I venture forth in the book to know, what advertising will work or what the answer is to privacy [concerns]. And people who would claim to know: I think they are fools, because you can’t know.”
Another sore spot that Auletta discovered in his reporting is the industry’s inability to keep up with other kinds of enterprises that are making their way into the marketing mix. “The advertising agency usually ranks low both in pay and morale,” he told the Miami Beach audience.
“So how do you recruit people? It’s not like the old days. You’re going to have to up your pay scale. And I think you have a real challenge to do that. You have an industry that’s worried about its margins, but they’ll have to lower the margin to help your pay scale.”
As for the evolving competitive mix, a member of the 4A’s audience asked if the basic nature of advertising dynamic will change with the addition of new service providers – new frenemies – into the client/agency mix?
Auletta answered, “One of the advantages that management consultancies have is that they already have a good relationship with the C-suite. They’re already familiar with [the potential clients] as friends and [through] the strategy work they do as a consultant. Will the consultants come in and say, ‘Hey, wait a second! Don’t ghettoize us as just strategists’?”
If a consultancy – an Accenture or a Deloitte – were to decide to make a move on one of the global agency holding companies, who would be a likely target? “IPG,” Auletta replied without hesitation.
Finally, Koenigsberg reintroduced his concern about Frenemies’ portrayal of the advertising business with the question, “Do you think the reader will come away with the glass being half full or the glass being half empty about our industry in the future?”
Again, Auletta didn’t miss a beat: “To be honest, half empty.”
When Martin Sorrell stepped down from his leadership post at WPP, Auletta and The New Yorker gave a preview of Frenemies, which can be accessed here.