• Lou Killeffer

From Mad Men to Math Men: Frenemies by Ken Auletta


Ken Auletta, journalist and best-selling author, is a gifted reporter with the remarkable relationships and inside knowledge of the media landscape that have distinguished his “Annals of Communications” profiles at The New Yorker since 1992.

His new book, Frenemies: The Epic Disruption of the Ad Business (and Everything Else) is a swan song of sorts for advertising traditions, including a near eulogy for the advertising agency - the victim of dynamics that began long ago and keep accelerating in response to continuous digital disruption.

Frenemies

In an age of confusion, everyone’s at risk, and so invading each other’s domain in search of sustainable revenue. Old friends become new competitors. Studios become publishers, publishers become agencies, digital companies become studios, etc. Within the continuing scrum, Mr. Auletta makes clear the ad agency model isn’t simply at risk but under active assault.

The agency's demise is a long standing issue with any number of reasons – the move from commission to fee-based compensation (which may have reduced agency income by as much as a third), the rise of client procurement, the advent of agency networks, the impact of programmatic media buying, management’s painfully slow adaption to digital – the list, and finger pointing, goes on and on.

Trust

But Auletta repeatedly cites the collapse of professional trust between clients and their agencies as the central issue. And he makes clear the client/agency relationship was dealt a crucial blow by Jon Mandel's 2015 bombshell accusations that some media agencies were corrupt. Allegations later verified by the 4A's and ANA investigations that without naming names showed some media agencies received hidden kickbacks, or “rebates”, on client media purchases. So they were cream skimming, stealing if you will. The revelations left clients outraged, the innocent agencies disgusted, and the industry racked by a rash of agency reviews.

How any of this ever gets repaired is left to the imagination and of course the individual agencies and clients. What’s clear, however, is more and more clients are taking their advertising “in-house”. Doing their own media buying and their own creative work because they’re increasingly confident they’ll do it faster, better, and cheaper than any agency...

Ad Land

Mr. Auletta garnishes his story with portraits of several of the leading figures in today’s ad world, including: Michael Kassan, CEO of MediaLink; Sir Martin Sorrel, the fabled founder and recently dismissed CEO of the biggest of the four agency holding companies, WPP; Carolyn Everson, VP, Global Marketing Solutions, Facebook; Les Moonves, the recently deposed CEO and Chairman of CBS; and Bob Greenberg, Founder, Chairman, and CEO of R/GA.

Auletta also gives the reader lifelike postcards from the annual Consumer Electronics Show (CES) and the mother of all award shows, the Cannes Lions Festival. Cannes is particularly fascinating as everyone in advertising denounces it as an over-hyped, wasteful indulgence, complete with what Auletta deliciously dubs “Babylonian excesses”. But then everyone religiously pays to attend nonetheless. And while there’s been a backlash and some cost cutting in recent years, the beat goes on.

Digital Dominance

Enhancing his analysis with wonderful sketches and anecdotes, Auletta distills a torrent of facts and figures into a compelling people driven narrative. One with staggering implications for the future of advertising, its aging governess the ad agency, and the future organization of commerce and society.

Annual marketing and ad spending is variously estimated at $1-2 trillion worldwide. And while there’s still a heated debate on whether on or offline spend is dominant, let's just say the trends are healthy in digital.

Consider:

  • Roughly 130,000,000,000 ad pages are displayed on the Internet every day.

  • Facebook derived 95%, or $26.9BN of its 2016 revenue from ads; Google 87% of its $79.4 BN.

  • Mobile phones are the new, dramatically dominant platform and Facebook is the dominant social network on mobile by far. As Everson says, the mobile phone is simply “the most personal device” people have ever had, always on and never out of reach. There's nothing like it, or the influence it has on its estimated 7.2BN users worldwide.

  • Indeed, EMarketer projects ad spending on mobile will shortly account for 70% of all digital spending at $65BN. In effect, Facebook and Google are a digital duopoly; owning fully two thirds of all mobile ad revenue.

  • Central to the success of these platforms are the AI, algorithms, and machine learning, that design and field the individualized messages to break through your ad blockers and simultaneously inform and fulfill your wants and needs.

90% of Americans consult a second screen while watching TV and, rather frighteningly, 62% of Americans say they get their news from Facebook - who offers clients over 1,300 categories for ad targeting

  • Finally, regardless of what all this may be doing to us as people, consider the poor advertiser! No less than Microsoft has concluded “the attention span of a goldfish (9 seconds) now exceeds that of a human being (8 seconds)…”

Determining Behavior

Facebook, Google, and Amazon own oceans and oceans of user data. Google merges all the data from its 3.5 BN daily searches, and then offers advertisers everything it knows about you - date of birth, phone number, mailing address, email address, where you’ve travelled, etc. Every time you post something, tag something, like something, or update something on Facebook they log it – and then they sell it. Amazon uniquely slices and dices the individual purchasing data for every person it serves as the world’s largest store!

As ad friendly as Google and Facebook are they’re still walled gardens and don’t share the massive amounts of data they collect and use to make their models more efficient. Amazon even more so because their data isn’t just demographic or shopping driven it’s actual purchase behavior. And of course Amazon’s personal assistant, Alexa, sells Amazon products first and enjoys a head start among the current gold rush of assistants that includes Apple’s Siri, Google Home, and Microsoft’s Cortana.

This then is the paradigm shift in the purpose of advertising, from simply arousing interest to provoking intent. Where the advertiser knows what people want and need based on their own individual behavior. Clearly the winners will be those who fashion new products, selling messages, and brand stories directly from the data.

As Shoshana Zuboff, of Harvard Business School, says in her rather ominously titled article, The Secrets of Surveillance Capitalism “The game is no longer about sending you a mail order catalog or even about targeting online advertising. The game is selling access to the real time flow of your daily life – your reality – in order to directly influence and modify your behavior for profit.(Emphasis added)

Auletta then quotes a favorite former client of mine, Wendy Clark, now Global CEO of DDB, as, per usual, the voice of reason. Briefly, Wendy makes clear that without empathy there is no humanity in selling. And this intuitive understanding is the heart of communication between brand and consumer – an intangible sensitivity that a machine simply cannot provide.

I agree with Wendy, as I know we all make even the most rational purchase decisions emotionally, but I wonder…Perhaps this is the how the advertising agency ends. With a whimper, not a bang, as AI turns brands into commodities and relationships into mere transactions.

As I write this, IBM’s promoting Watson in a corner of my screen by suggesting AI will “transform the human race”. Well, maybe the entrance to the Matrix runs through the marketing stack.

#KenAuletta #TheNewYorker #FrenemiesTheEpicDisruptionoftheAdBusiness #JonMandel #4As #ANA #MichaelKassan #MediaLink #SirMartinSorrel #WPP #CarolynEverson #LesMoonves #CBS #BobGreenberg #RGA #ConsumerElectronicsShow #CannesLionsFestival #Google #Facebook #Amazon #Apple #EMarketer #Microsoft #Goldfish #Alexa #Siri #GoogleHome #Cortana #ShoshanaZuboff #HarvardBusinessSchool #TheSecretsofSurveillanceCapitalism #WendyClark #DDB #IBM #Watson #TheMatrix

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