WPP

End of Days.

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End of DaysThe leading advertiser organization in the world – the ANA — just issued a 58-page report accusing its ad agency “partners” of everything from shady buying practices to kickbacks to conflict of interest.  The ad agencies’ own trade group – the 4As – has naturally cried foul, arguing that they should have been fully involved in the investigation all along (not unlike having the defense team sit on a grand jury).  But the whole food fight about whether the report was fair or accurate or should have named names just distracts us from the big truth at its core:  The entire premise of the media agency has timed out.

It’s being argued by agency defenders that the ANA’s motive is money and control;  that advertisers are trying to squeeze even more blood from the empty stone of agency margins, and that advertiser procurement practices and policies have been destructive to the advertiser/agency ‘partnership.’  That may well be true, but think about this:  would the ANA have even considered such a drastic and destructive step if advertisers hadn’t already pretty much given up on the media agency?  The media agency problem isn’t the K2 report.  The problem is relevance and time.  The problem is rust.

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The simple truth is that the media agency is a transactional intermediary in an age where transactions have already been digitized and power and control have shifted from the intermediary to the transacting parties.  Travel booking once exclusively belonged to the travel agent; now it’s almost exclusively a direct transaction between the traveler and the carrier or hotel.  There are a hundred more examples of intermediaries being marginalized.  And the media agency position today has the unmistakable feel of a late stage disintegration.

Marketers, publishers, media companies and technologists are all innovating; often for the better, sometimes for the worse, but always with remarkable speed.  The media agency is increasingly seen as a high-priced toll collector who’s adding time and cost but not value to the trip.  A good friend of mine who’s been on the inside of the agency/client relationship argues that the media agency will now and forever more be in a state of perpetual review… yet another sign that the jig is up.

Group M’s Rob Norman writes persuasively about how his company is in a state of massive reinvention; that its investments and partnerships make it a fundamentally different kind of company and change the value equation.  Rob may well be right:  the ultimate spawn of WPP/GroupM/Xaxis may well be successful.  It just won’t be a media agency.  All that’s left for that model are more reviews, continued assault on margins and less relevance.

And rust.

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Publicis/Omnicom: Déjà vu?

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Deja VuAs Mark Twain famously quipped, “History does not repeat itself, but it does rhyme.”  And as I’m reading all this monumental, breathless coverage  of the Publicis/Omnicom merger and what it will mean about the future of data in marketing…well, I’m getting this funny feeling that I’ve seen this movie before.  And the movie had lots of airplanes in it.

The advertising business used to be all about writing ads and selling stuff.  And the airline business used to be all about flying planes and getting people from place to place.  Then back in the 1980s, the major airlines – United, American and Delta, primarily – started to sense that the world was changing:  the industry was deregulated, ending a lot of the big guys’ inherent protection and spurring the creation of dozens of smaller, more nimble competitors.  (Ad business, you feelin’ me on this?)  New price competition cut margins to the bone and left the airlines looking for a way out.  That way out ended up being a new business:  the transaction business.

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If we can’t make enough money putting butts in our airplane seats, let’s try getting a micropayment every time anybody puts a butt in any airplane seat.  Hence the birth of divisions called Galileo, Sabre, Amadeus and WorldSpan – airline reservation systems.  For a while they were a license to print money;  a new, defensible high ground of profitability and control.  Ultimately there was consolidation and (inevitably) legal squabbles;  divisions became freestanding companies…there was divestiture…yada yada.   Eventually the internet came along and what used to be available to only professionals – airline operators, gate agents, travel agents – now got into the hands of Joe Traveler.

The comparison isn’t perfect….but it does rhyme.   The ad business was once marked by long, loyal customer relationships (some of them at least) and by certain institutional barriers to entry;  you needed big, impressive offices, talented artists and writers on staff, the concentrated buying clout to get the best rates.  How much of that is true anymore?  So the big holding companies – Omnicom, Publicis (soon to merge), IPG and WPP – have decided to get into the transaction business.  Their trading desk business units  –Accuen, Audience-on-Demand, Cadreon and Xaxis – are starting to look a lot like 21st Century versions of the airline reservation systems;  they’re an acknowledgement that the financial high ground won’t be won through creative brilliance and superior service, but rather by dominating the world of transactions and distribution.

Here’s the kicker:  It’s 30 years later and the world moves so much faster now.  What took a couple of decades to play out for the travel industry may play out for the ad business in just 4 or 5 years – if that.  We’re just seeing the first major consolidation.  What’s next?

 

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