About digital disruption in advertising and why big advertising agencies can’t handle digital
Great read over at Digiday: they have an anonymous “confessions” format where they let top people from the advertising industry spill the beans about their job. This week it’s about why the huge, global advertising agencies are performing so poorly in digital and why they can’t produce anything interesting.
Mostly, the ad executive explains, it’s because their clients don’t need them to do anything interesting: “they have a volume need more than a creativity need.” The interview also has an interesting prediction that should sound very familiar to anyone in the traditional media:
“They can’t win. It’s just not possible. The new CEO of JC Penney was head of retail at Apple. He had done all these wonderful things at Apple to create an amazing retail experience. And now he is finding it hard at JC Penney. It’s not that he is doing anything wrong. He is doing everything right and is clearly very smart, but there is just no way he can win.
There are too many inherent obstacles. It’s the same with the big agencies. If they want to modernize, then they need new clients. But new clients won’t pay what their existing clients are paying.”
That’s exactly the reason why traditional media are not innovating: because they can’t. The income from paper distribution is dwindling, but it’s still way larger than any digital revenue they can hope for. To get rid of that income stream would be to destroy shareholder’s value. The advertising agencies do have an advantage over the (more local) media, though: they can take money in emerging markets – whereas for media, those emerging markets are generally even more crowded than the Western markets:
“The global networks are remaining in business because the emerging markets are making them money. These smaller offices have grown in the last five years because they started from scratch and have been able to operate on a small budget and, through necessity, have become good at making things other than TV spots.
Where once a New York head office paid for the outposts, that will be reversed until it becomes no longer financially viable to have anything other than a nominal presence in North America. The question is not whether that will happen but how long it takes. Again, it’s like global warming.”
spotted by @duvandre
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