Advertising’s infrastructure problem is cultural

This is a strange time. Many of the challenges facing the economy seem more than cyclical but structural. In so many areas – energy, health care, transportation, financial services – we’re confronting infrastructure problems. Our systems clearly aren’t modernized, which this deepening recession is proving. Fixing that is going to be some seriously hard work and new thinking.

On a smaller level, this is the same challenge facing advertising. Big Spaceship CEO Michael Lebowitz made this point recently. It makes sense. If you think of the big challenges in the industry, they’re infrastructure related: how agencies and clients are set up, analytics and reporting systems, integrating technology, and finding new ways of adding value to people’s lives rather than interrupting them. The marketing industry feels very much like it’s organized for the 20th century rather than the 21st. Tim Leberecht thinks it’s in “permanent crisis.” Social media is simply revealing a lot of the inadequacies of the current structures.

What I’m struck by is how reversing this comes down to culture. The hardest part of changing infrastructure is not necessarily integrating technology but changing deep-set mindsets, processes and business models. Case in point: TV ad buying and selling. I wrote this week about how companies like Spot Runner are trying to bring some semblance of modernity to a process dominated by phone calls and faxes. Nick Grouf, CEO of Spot Runner, described the practice as “antiquated.”

This is a similar refrain to what I heard this summer at Google, where a very bright computer scientist made a compelling case that TV advertising is in the horse-and-buggy era. Google has seen some traction, but it’s running into a stubbornness to upend current practices. Yet both Spot Runner and Google are facing something greater than a technology problem. Yet efforts by eBay and Enron to change the system failed.

A big reason these efforts have failed is a TV ad buying and selling culture that’s set in its ways and worried they’ll get cut out of the equation if the process is modernized. Spot Runner exec Mark Rosenthal should know. He spent nearly a decade as president of MTV Networks and ran IPG Media. He was speaking about TV, but it could apply across most of the ad world, including agency and client organizations.

It is almost a handcrafted industry. Some of it is plain fear of technology and some of it is the idea their work is so personal that there's no way technology can replace it.

This is at the root of why change has come so slowly to most of the industry. Every digital startup puts up a Keynote slide showing the gap between time spent online and client budgets. It’s still huge. The reason it remains that way is both structural and cultural – clients and agencies haven’t modernized and many in those groups aren't keen to do so because it might not be to their benefit.

What I wonder is whether the recession is used as the catalyst to transformation – or as an excuse to retreat to the tried and true and not deal with the hard task of changing culture. It will be interesting to see how many of the established players make the changes needed to adapt. Many won't and will likely die. I’ve seen this resistance to change in my own industry, which has a culture that’s been highly resistant to change. That’s not a great strategy. Look at what’s happening to newspapers.

Comments

[Melanie Thompson]

The infrastructure of ad agencies will continue to hurt real evolution in this industry. You've got the old-timers used to doing it a same way and not wanting to evolve. They fall back on the tried and true messages and have been preaching "client relations" as the solution to this economic downturn. Then you've got the young start-up people who know new media but aren't necessarily in a position to actually sell it to the client. The lucky (aka profitable) agencies are the ones who have found people in the middle. Someone willing to pitch the client but who also has the knowledge to make the new effort actually work.

[decourcy]

There was a brilliant piece in New York Magazine about the culture and operational change at the New York Times. I especially like the piece about Arthur Sulzberger and the old school Times bosses and their handling of the paper...literally. The comment about nostalgia being a kind of blindness is so very relevant to us all now. Sadly, it doesn't matter if you liked it better, thought it had more value, think the world is going to hell ..because of the change. The truth is, it changed and now you have to change too. You can't undo progress. Who is it that said "the thing with change is people have to die"?

http://nymag.com/news/features/all-new/53344/

[bastholm]

@decourcy: I believe it was Chairman Mao who said that "Change must come from the barrel of a gun". And the current economic climate is the spitting image of a caliber 45 Magnum.

[Craig Elimeliah]

Good post!

Again, like i said in my comment to yesterdays post, its all cultural!

That is what differentiates the traditional with the digital. The culture is so ingrained in the traditional shops that they will die before changing the "system". The chatter, the hierarchy, the ass kissing, the bureaucracy, the system stinks and digital cannot breathe in that kind of atmosphere.

I have worked with agencies who had assigned 5 people to do the job of one, they have the outdated processes and ancient ways of communicating, everyone has a separate version of the same excel doc that contains cluttered data that is interpreted in 500 different ways. The same questions asked again and again and finger pointing up the wazzu!

Recessions do help weed out the good from the bad and force companies to trim the fat, agencies should use this opportunity to do exactly that.

Otherwise the downfall will be imminent.

[Craig Elimeliah]

Good post!

Again, like i said in my comment to yesterdays post, its all cultural!

That is what differentiates the traditional with the digital. The culture is so ingrained in the traditional shops that they will die before changing the "system". The chatter, the hierarchy, the ass kissing, the bureaucracy, the system stinks and digital cannot breathe in that kind of atmosphere.

I have worked with agencies who had assigned 5 people to do the job of one, they have the outdated processes and ancient ways of communicating, everyone has a separate version of the same excel doc that contains cluttered data that is interpreted in 500 different ways. The same questions asked again and again and finger pointing up the wazzu!

Recessions do help weed out the good from the bad and force companies to trim the fat, agencies should use this opportunity to do exactly that.

Otherwise the downfall will be imminent.

[decourcy]

Ah Lars....I can always count on you. That was the quote I was looking for, for all the reasons you state. The thing is, I think that some of the digital agency structures are broken too. A friend has given me "The Convergence Culture" by Henry Jenkins. As digital mainstreams I think what we need is a culture that knows how to take the best of both worlds.

[Michael Lebowitz]

@decourcy - similar to the the New York article you reference is this piece on movie marketing in the New Yorker: http://www.newyorker.com/reporting/2009/01/19/090119fa_fact_friend?currentPage=all

best quote: “Basically, the code is this,” a prominent agent says. “ ‘We will show you thirty pumped-up people, so you will go do the junket and go on “Letterman” and fucking perform with a sense of enthusiasm.’ It’s the same meeting we were having five years ago, except now there’s a girl in a sweater who does the Internet.”

[Alan Wolk]

I've often described our reaction to the new world as being similar to that of immigrants in America.

The vast majority will spend their time talking about how much better things were in the old country, how much happier they were there. They will learn just enough English to get by, but will revert to their native language as soon as the last English speaker leaves the room and roll their eyes at their children when they adopt American ways.

A much smaller percentage will accept that they are in America now and that they are not ever going back home. They will learn to speak English without an accent and they will embrace all things American.

Pretty much the state of things in our industry right now

[Richard Webb]

This is the problem I've been wrestling with: I'm a big agency owner or holding company CEO. I KNOW all of this, but I can't decide what to do. Do I protect my clients, billings and the old way for as long as possible, or do I embrace change? Sure, sure, embracing change is what clients need, and what it's the right thing, and where all of us here are going and thinking, etc., etc. But I'm 50 years old and my company's doing something like $400 mil in revenues, and even if over the next 10 years that goes down to $200 mil, $100 mil, I'm still retiring soon and out of here for greener pastures. What motivation do I have to evolve? I guess it's similar for newspapers. The Times is the trailblazer, but they aren't particularly more profitable for it than other more conservative papers.

Then there's the fact that this shouldn't matter, really, because young whippersnappers will embrace the innovation and the future will move forward whether I, as a traditional agency owner, do or not. And this is happening *a little bit,* but not tons. Yet. There's something blocking that change. Is it that the innovation that has happened so far isn't right? is there a block on the client side?

[Craig Elimeliah]

Rick,

Good way to set up the scenario, definitely easier to think about when putting on those shoes. In many ways your right, why change when things are good? The answer is because if you dont do it now your gonna be 5 years behind when your forced to make those changes.

I like to liken this to a sports team. You got a killer squad, they are winning championship after championship and salaries go up, ticket prices rise, etc... The price of winning typically hits the pockets of the fans but they are willing to pay more to watch their champions.

This goes on for what 2-3 years, maybe 4-5 if your lucky.

While your at the top younger teams are gearing up, drafting younger and stronger players, hiring the right coaches to overthrow what made your team so successful. Suddenly you have got an aging team, your defense has been exposed, the fans are mad because all of a sudden they are paying top dollar to watch your team start to lose...

Our industry is no different, we deal in talent, and that talent gets more and more advanced.

Younger, stronger, more nimble and more creative shops are cropping up everywhere. Clients will soon open their eyes to the fact that a smaller shop is willing to take on the entirety of the work at a fraction of what they are paying their current AOR.

We all know that change is imminent, Obama taught us that in this years election. Its a sign of the times and a smart agency CEO must consider that sign when in that mode of thought you so nicely described for us.

Its the agency CEO who should be educating the client about what that change entails and then getting them on board to help make that change together and not see them leave for a more willing agency who in is that process already.

Scary times, but exciting!

[Craig Elimeliah]

Rick,

Good way to set up the scenario, definitely easier to think about when putting on those shoes. In many ways your right, why change when things are good? The answer is because if you dont do it now your gonna be 5 years behind when your forced to make those changes.

I like to liken this to a sports team. You got a killer squad, they are winning championship after championship and salaries go up, ticket prices rise, etc... The price of winning typically hits the pockets of the fans but they are willing to pay more to watch their champions.

This goes on for what 2-3 years, maybe 4-5 if your lucky.

While your at the top younger teams are gearing up, drafting younger and stronger players, hiring the right coaches to overthrow what made your team so successful. Suddenly you have got an aging team, your defense has been exposed, the fans are mad because all of a sudden they are paying top dollar to watch your team start to lose...

Our industry is no different, we deal in talent, and that talent gets more and more advanced.

Younger, stronger, more nimble and more creative shops are cropping up everywhere. Clients will soon open their eyes to the fact that a smaller shop is willing to take on the entirety of the work at a fraction of what they are paying their current AOR.

We all know that change is imminent, Obama taught us that in this years election. Its a sign of the times and a smart agency CEO must consider that sign when in that mode of thought you so nicely described for us.

Its the agency CEO who should be educating the client about what that change entails and then getting them on board to help make that change together and not see them leave for a more willing agency who in is that process already.

Scary times, but exciting!

[Eugene]

Brian, I think the root of the problem is less cultural and more economic, which you mention of course, but perhaps not enough; intertwined factors, the two, but there are important nuances given the causal relationship--economics drives culture. And in TVC, where demand growth outstrips supply, this means tilting economic favor toward the publisher+network, despite media buyer consolidation, all this the reason why we see propagation/continuity of the more antiquated/more relationship-based/less transparent. It kind of makes sense. Still, I think the industry IS changing, and at a decent pace, if viewed, not from the perspective of the buyer, but from the viewpoint and interest of the seller--think Canoe Ventures/Comcast/TW. Difference is, this time, it's on their terms. Clearly, this is not entirely in sync with Google's proposed automated auctions, which are good for smaller networks like Dish, but less so otherwise...I'd probably do something similar if I were them.

[AnInsider]

Snap out of it. You guys are hypnotized by your own techno-rhetoric.

There's nothing wrong with the TV advertising industry at all. It operates perfectly fine. The TV ad industry is modernizing itself, thank you very much. It shouldn't make any difference to these techies what goes on with TV media sales -- unless they're trying to divert the revenue stream to themselves. These geeks and their financial backers want to disrupt the TV ad industry -- with the same disastrous results that their venture capital, hedge fund and Wall Street cronies inflicted on the entire USA and world economy. How many people have lost their incomes, their homes or their lives because of this thoughtlessness and greed?

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[Brian]

@aninsider: Interesting comparison. I will say that I hear much less often the refrain that advertising needs to look more like financial services. I'm not sure what agency wants to be the Lehman Bros of the ad world. The introduction of technology into the process would seem inevitable. Naturally, that's going to displace some people. Whenever I hear about "stripping out inefficiencies," I ask whose business models are build on those inefficiencies. Change always benefits some and hurts others. To pretend otherwise is silly.

[Oscar]

I think what Insider was saying is that the tech industry applications to TV like Google, and Spot Runner et al, do not benefit the advertising client. This is true. These system provide low-quality at the very highest prices. Goggle has shills rating their production associates (some rated low to appallingly low by the BBB), and air time through these "tech" solutions are not really tech solutions at all. In fact, these solutions are less reliable, of lower quality, and cost much more than a legitimate agency. Compare Google or Spot Runner or Spot Runner copy-cat Spotzer to the original dotcom ad agency Cheap-TV-Spots and see the difference. Real brains trump slapped together algorithms and the hype of pump-n-dumps in every example: Quality of communication, speed to airing, and no additional commissions is the secret sauce. The pure tech companies just can't provide this level of service - they do not have the knowledge, they don't want the knowledge (it hurts their brains), and if they were somehow able to come to terms with just how low profit TV advertising is, their shareholders would stage a revolt. Only if Google succeeds in thwarting antitrust actions concerning bullying other search engines and successfully hides the details of the secret and anti-competitive deal they made with DISH, will tech and TV ads have a chance of harmony. Of course the small businessperson will then suffer continued low quality of service and high media rates traditionally seen with near monopolies. My view is that it is not the TV advertising industry that is in jeopardy (it is not), but the tech bloggers and consultants that stand to loose gigs in an economy exported to the East. That's my view, and I'm sticking to it. :-)

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