NEW YORK (Reuters Breakingviews) - The mad men are howling in the wind. A new book examines the advertising world’s uneasy relationship with Facebook, and how Madison Avenue is trying to combat the social network’s clout with electronic exchanges and use of data. Author Ken Auletta has written extensively about the media and advertising business, but he struggles to say the obvious: The middlemen don’t have a prayer.
“Frenemies” is a curious title for Auletta’s latest work. It’s shorthand to describe companies that both compete and cooperate, and of course, a play on the word friend, which happens to be Facebook’s starring feature. The term is used frequently throughout, including by one of the main protagonists, former WPP boss Martin Sorrell. (Google hardly figures in this account, Auletta explains, because the search giant was the subject of one of his previous books.)
The setup is based on a false equivalency, though. Facebook is in a much stronger position than the ad firms. Mark Zuckerberg’s $540 billion dorm-room creation is the one doing all the taking – even as it has been exploited by Russia to sway the U.S. presidential election and is under fire for the way it handles people’s data.
Brands and agencies talk tough. Sorrell, for example, is very vocal about the “continuous disruption threat” including “the frenemies, let’s call them Facebook and Google principally.” Yet, the social network continues to suck up money from the agencies. Auletta notes that WPP purchased $1.7 billion of ads on Facebook in 2016. And it’s far more efficient with them: Facebook is projected to have an operating profit margin this year of 48 percent; WPP, the world’s largest ad firm, is forecast to hit 15 percent.
Zuckerberg’s outfit puts on a nice show of support for the agencies. “We are not trying to disrupt agencies,” Facebook’s ambassador to Madison Avenue, Carolyn Everson, tells Auletta. “We are getting a seat at their table, helping them think through real business problems… I don’t go to meetings and ask for money.” But Facebook’s actions speak louder: it has had to correct its own measurement methods several times after acknowledging it overestimated viewership numbers. And given its growing dominance, it’s happy to cut out the agencies and go directly to clients, as Sorrell observes.
The mad men, after all, don’t exactly wear white hats. The advertising world is riddled with self-inflicted wounds. Auletta chooses 2015 – often cited as the industry’s annus horribilis — as his starting point. That year a former ad executive accused his cohorts of a kickback scheme in a speech at a gathering of marketing executives. It set off a firestorm between agencies and clients including the trade group backed by Procter & Gamble and McDonald’s. Chief marketing officers are under immense pressure to justify their spending, and these allegations gave them a wedge. Some $50 billion worth of business was put up for grabs as brands reviewed their agency relationships and sought out better terms in the shakeup.
Auletta addresses some of these issues by stitching together individual profiles of various constituents. The New Yorker writer’s timing was fortuitous. He had access to Sorrell before his recent ouster from WPP, the agency he built, over allegations of personal misconduct. He also spoke with CBS Chief Executive Les Moonves, who is currently fighting over control with owner Shari Redstone.
The name Don Draper, the fictitious antihero of the TV show “Mad Men,” is invoked widely and is a trigger for nostalgia. More than fifty years ago, clients enjoyed decades-long partnerships with their agencies, which profited from media buys and produced sweeping creative commercials, like the iconic “I’d like to teach the world to sing” spot that bathed Coca-Cola in a kumbaya aura of peace, and Nike’s clever “Bo knows” endorsement by multi-sport athlete Bo Jackson.
It’s hard to recall a recent campaign with anything like that kind of impact. Streaming and social media have radically altered consumers’ viewing habits, and most ads simply get lost in the weeds of a newsfeed. Or worse, the rise of subscription services like Netflix eschew advertising altogether. Big firms like WPP have few friends, or even frenemies. No wonder they face the threat of being broken up and sold in pieces.
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