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Not Being Advertised...how The Advertising Business Has Changed
By Allan Kalish, Mon Jan 2nd
There are three words which often bother me. " I rememberwhen....." When my peers and friends use them, I always feellike telling them to switch gears and think about today andtomorrow, not yesterday. They seldom comply. Now, having beeninvited to write about how the ad agency business has changedsince I was in it on a day-to-day basis, I suppose I have to"remember when." If you remember when Channel 10 did a live, (LIVE!) daily,(DAILY!) Network (NETWORK!) show, you're probably as old as I am. If you remember when ad agencies relied heavily on Type Shopsfor fast, efficient service, you are probably in your forties.
If you remember when word processing people were called typistsand when they used a thing called carbon paper, you are probablyin your fifties. (Side effects from typewriters and carbon paperwere messy erasures and blue-stained fingers.) And if you think FedEx, cable TV, B101, All News All The Time,Video Conferencing, and Satellites have always been there, I'mjealous for not being your age. In the ad business, the only thing that's certain is that what'scertain today will not be certain tomorrow. Which brings me to the agency business and some significantchanges that have taken place in my career-lifetime. Whereas client/agency relationships changed focus from print tobroadcast over many years, the changes now move with lighteningspeed. For example, when UHF television came along, it was bignews because viewers in this market could see six stationsinstead of three. Now, who can keep track of all the videoavailable with cable and internet access for movies and on andon. How will agencies have to adjust? Who knows? We do know thatthe media challenges that face agencies are already causingseveral significant changes. First, some are not fighting the media wars. Many are farmingout their media requirements. That means they are actuallytrusting another organization to collaborate directly with theirclients. That's something that was unimaginable just a few yearsago. Second, many of the larger agencies now have very robust MediaDivisions and those divisions are involved with sales promotion,sponsorship and even some creative tasks. Many of them actuallyfeel like full service agencies if you study them closely. Third, agencies must take steps to become more aware ofaccountability as it relates to their clients' spending.Welcome, Internet Marketing. Just a few years ago, manymarketing folks started thinking about one-to-one marketing.Today it's becoming an absolute necessity for agencies tounderstand Search Engine Marketing, Optimization and other termswhich were virtually unknown just five years ago. Those agencies which relied on creative radio ideas no longerhave a fairly simple pallet to deal with. AM radio was dominantand the change to FM dominance took many years. Now we have twomajor factors which already influence how radio is utilized bythe consumer: Satellite and a little phenomenon called IPod.Cost per thousand is still important but specific, measurableresults are more important. That factor is pushing today'sagencies into thought processes which require greater strategicability as well as a keen understanding of how to meldcommunications for image/brand with clients' demand to see salesfigures climb as direct ways to measure ROI. Whoever succeeds infinding
the best way to turn IPod users into a demographic groupthat's available as "media" will harvest big rewards. Think about how Internet advertising has changed and is changingmarketing strategy. That new media increased by 21% in 2004.It's projected to take seven billion dollars away fromtraditional ad budgets in 2005. Soon, it will be "traditional."Maybe it already is. Agencies must take a leadership role infinding optimum ways to apply those funds. There are other important topics and terms today which might nothave existed for agencies in the past but are core factors todayand are likely to become even more important: Broadband,Customer Relationship Management , Video on Demand, PaidInclusion, Latino Media, Collaboration Extranets, Streaming,High-Definition and even IMAX theaters. More and moreadvertisers of all sizes are trying to save money by takingroutine responsibilities away from agencies and doing theminside. Many agency executives believe that their real value forclients is their business knowledge and their strategiccapability along with their creative execution. These trends inthinking drive change and challenge for agencies. Not only arethere fewer employees per million dollars of billing, but thereis a large gap between well paid and not-so-well-paid agencyemployees. Believe it or not, there was a time when, on average there wereten employees per million dollars worth of billing. Today it'sone and a half employees per million. Who knows where it'sheaded? One of the country's fastest growing agencies, KalanThaler Group reports $600,000,000 in billing with only 140employees. Yes, they must work very hard but they also must besmart, creative and, as they say, "cutting edge." Why the salary gap mentioned above? Because strategic support ishard for clients to find and comes in expensive packages.Therefore, the agency which probably has the best chance toretain its client is the agency whose client trusts therecommendations that come from the agency. Translated, thatmeans smarts, strategic thinking and courage on top of the usualhigh expectations about effective, wonderful creative solutions.Translated further, that means expensive brains at the agency, asalary gap between those brains and the other folks as well asfairly low salaries beneath the top thinkers. In a way, the CEOof an ad agency is now responsible for managing salaries in thesame way major league teams do it. They place the big dollarswhere the big benefits are, in star performers. In summary, the only way to view changes in the ad business ispretty much the same as changes in other businesses. LeeIacocco, of Chrysler fame, once said , "Change or die!" That'strue of our beloved ad business. It always has been. It is now.And it always will be. Figuring out how to be ahead of the curveis the challenge of today's agency CEO. I guess I'm glad that Ino longer have to live up to that title and those expectations.Instead, I'm doing my best to provide agencies with ways to getalong with fewer employees and, at the same time, to giveclients what they need and want: easy collaboration, accuratecommunications and, above all, efficient and effective use oftheir most valuable assets, brains, creativity and time.
About the author:Allan Kalish is Chairman of Trichys, providers of advertising agency software and client extranets.
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