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  Joanna Peña-Bickley works for Papas and is the global chief creative officer for IBM iX. Her career started at ABC News, which she left to invent a video player to deliver streaming news videos and to design company Web sites. After the dot.com crash, she spent the next decade working for advertising agencies owned by WPP and Omnicom. Thinking that agencies were too focused on mass—like TV and full-page newspaper ads—and not focused enough on “solving the business problems of companies,” she started a marketing company that grew to 150 employees.

  IBM iX acquired her company and together she said they set out “to rethink the agency world.” The “hole in the market” they saw was that data was not being used to zero in on what individuals wanted or needed and to solve large corporate problems. “Agencies are in a race to the bottom. They are losing talent, and the reason is that they have commoditized their creativity.” Their corporate bosses at the holding companies, she believes, dwell too much on finances, including selling more thirty- and sixty-second ads. “The people that will win the race in the end will be the people who can fundamentally refine and make new products out of data.” This data, for instance, tells IBM that large numbers of millennials don’t want to own cars, they want to share them. So in representing an auto company, IBM iX brings a team to the auto company “to tackle this big business problem,” and employing the data its engineers, writers, and designers assemble, they craft individualized messages to reach these millennials.

  Although her creative department hired 1500 designers and writers in 2015, and would hire another 1500 in 2016, she said IBM would not supplant creative ad agencies. “Your ad agencies will still absolutely play a role in the innovation that we create. There’s really room at the table for everyone. Our focus isn’t ever going to be in the ad creation or campaign creation. It will always focus on innovation.” She is sugarcoating, because her use of data and strategizing might not leave much “room at the table” for Irwin Gotlieb’s GroupM.

  In the world of data gatherers, IBM sees weather as a beachhead. Weather reports trigger emotional and very human responses that yield important marketing clues. Weather offers IBM an opportunity to marry data and marketing. For example, people tend to get depressed when it rains, which boosts both soup sales and movie watching. High pollen counts cue Walgreens ads. Inclement weather might trigger a company to advertise its all-weather tires. Steamy weather invites Gatorade ads. “We process billions of data points a day about the weather,” says Jay Henderson, director of IBM’s Marketing Cloud. “The weather,” IBM CEO Ginni Rometty declared in a keynote speech at the Consumer Electronics Show in January 2016, “is the most pervasive impact source of data there is. It is why IBM acquired weather.com.”

  Another reason IBM acquired weather.com and its digital agencies was to mate them with Watson, a supercomputer that uses artificial intelligence and software to answer verbal questions, as Apple’s Siri, Amazon’s Alexa, or Google’s Home strives to. But Watson’s ambition is to be much more than a personal digital assistant. Its goal is to be capable of cognitive reasoning, like a human. Unlike a human, it would be capable of processing enormous amounts of data to unearth a single correct answer or to search for patterns to predict behavior. Watson searched weather.com and instantly awarded an IBM client, the Campbell Soup Company, with locations to invest their marketing dollars. Watson sweeps the Internet for what millions of people write on social networks and blogs. Instead of using standard measurement tools—clicks, CPMs, demographics, geography—it identifies personality types and interests that advertisers can precisely target. Instantly, Watson can scoop up sports fans, personalizing marketing messages to individuals. IBM is betting that ads directed at individuals will result in highly relevant marketing that may please rather than annoy.

  It worked for Unilever when it partnered with IBM’s Weather Company and created a new platform, Watson Ads, allowing consumers to tap into their mobile phone or computer and ask for a mayonnaise recipe using favored personal ingredients. “The big thing more than anything else,” Jeremy Steinberg, the Weather Company’s global sales chief, announced, “is that Watson is going to help humanize the advertising experience. It allows consumers to have a one-on-one relationship with brands like never before.”

  Of course, some part of what Steinberg and IBM hypothesize is blue sky. Artificial intelligence has been a holy grail since the birth of computers, and more than a half century later we’re not there yet. Progress may be slower than visionaries predict.

  Racing alongside IBM are consulting company giants. What was once known as Arthur Andersen, primarily an accounting firm, is now Accenture, the world’s largest consulting company, which offers marketing as a new service. With 358,000 employees in 120 countries in 2015, including 80,000 employees in India, and three quarters of the Fortune Global 500 companies as clients, Accenture is a behemoth. By 2015, digital marketing revenues totaled 41 percent of all marketing spending in the United States. According to an analysis of more than a thousand agencies by Advertising Age’s Datacenter, Accenture Interactive’s revenues ranked number one in the United States and the world, followed by IBM. Accenture Interactive offers digital marketing, shapes creative messages, provides strategy, data, analytics, and mobile services to clients. They have recruited almost 40,000 design and creative professionals to work in marketing. Companies like Accenture have an advantage in recruiting talent. “The average employee at Accenture makes three times as much as the average person at WPP,” observes Terry Kawaja, whose small investment banking firm, Luma Partners, focuses on the marketing and tech sector.

  Deloitte, with 225,000 global employees, has also aggressively expanded its marketing footprint. John Dunham, a former management consultant who today runs a branding consultancy in San Francisco, rates Deloitte as an especially formidable threat to agencies. Like Accenture and IBM and other consulting firms, they “already have an edge because they have relationships with top management. They had already been vetted. So it was easy for them to move over into the marketing side.” They understood who the customers were, understood the data. “All they were doing was adding new services. Deloitte not only bought media companies, they bought a top-notch creative shop in San Francisco named Heat. All of a sudden they had capabilities to go against full service agency offerings.” Deloitte, IBM, and Accenture confront intense marketing competition from other giants, including McKinsey, Bain, the Boston Consulting Group, PricewaterhouseCoopers, and Infosys.

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  Tech companies also jockey to compete. Adobe, Oracle, and Salesforce.com race to offer cloud services that gather data on customers, target potential consumers, reach them on various company platforms, and generate information about what works to reach consumers and what doesn’t. A “galactic war” is being waged between digital and tech companies, says Dan Rosensweig, a former COO of Yahoo and now CEO of Chegg, an online textbook rental and tutoring company, who serves on the board of Adobe. They vie to “let you know not only what does the person do but how do we get the person to come to your site? Once they’re on your site, did they buy? How many steps did they go through? How can you make your site more efficient? And then testing which words and prices worked better? That’s the modern-day ad agency!”

  Anne Lewnes, the CMO of Adobe, saw Adobe’s cloud services providing valuable data on its six million $10-per-month individual subscribers who use its Photoshop to edit and share photos or host Web sites. Adobe charges steeper fees to corporate customers like WPP and Publicis, who covet their data and have signed on as Adobe partners. Since they generate data and seek to know more about individual consumers, and WPP’s GroupM or Kantar does as well, aren’t they bound to collide? “We’re not selling data,” Lewnes says. “We’re leveraging data. It’s a little different.” Rosensweig is blunter: “At the moment it is not competition.” But he concedes, “Ten years from now, it could be.”

  Oracle did directly
compete with Sorrell and Irwin Gotlieb to acquire Datalogix, a firm that massages data and helps analyze purchasing patterns, linking them to online ad campaigns to gauge how well or poorly an advertising campaign performed. When the bidding competition for Datalogix climbed north of $1 billion, Sorrell and Gotlieb dropped out. Gotlieb conceded it was “a company we lusted after,” but admitted that WPP has a competitive disadvantage against companies with deeper pockets.

  The company they lusted after took time to attain altitude. Eric Roza, the CEO of Datalogix, started out by sweeping up sales data from catalogue companies. He says he assumed “that what people purchased in the past was an indicator of what they would purchase in the future.” He next went to grocery chains and their discount loyalty programs, collecting their data on what groceries their customers purchased. His big breakthrough came when Facebook contracted with Datalogix to learn whether ads on Facebook drove in-store sales. He induced Facebook to share what they would not with agencies—the names and e-mail addresses and information about its users—so he could match these individuals with those in the Datalogix database. “We could then say, these ten million people saw this ad and spent x dollars before the ad campaign and y dollars after the campaign. For the first time, the media impact on sales in terms of millions of people was done.” Facebook told advertisers they could prove what drove sales, and publicly praised Datalogix. The company, Roza says, demonstrated that what products people purchased before was a much more valuable predictor of future purchases than clicks, page views, time spent watching or reading an ad, or search data. And not only could Datalogix demonstrate whether an ad campaign worked, Roza says, it had the ability to create addressable ads by marshaling its data to aim ads at likely consumers.

  Today Roza is the co-senior vice president of Datalogix and three other companies that have been grouped together in what is now called the Oracle Data Cloud. In 2016, its database contained 2 billion worldwide consumer profiles, including 110 million U.S. households. Were they a threat to agencies? No, Roza responded. “We’re a technology company. We partner well with agencies. Unlike companies such as Deloitte, we don’t sell services. We don’t place ads or create them.” On the other hand, Silicon Valley companies like Oracle are not renowned for staying in their lane.

  Salesforce.com has clearly veered into the agency lane. Entering 2016, Salesforce.com had acquired four companies—ExactTarget, Buddy Media, Radian6, and Brighter Option—to erect a marketing cloud. They aimed to serve as “the brain” for clients, assembling customer data, devising content messages to reach consumers, making these messages addressable to targeted individuals, and linking consumers directly with brands. Surveying tech companies who have jumped into cloud marketing, an April 2016 report by Pivotal analyst Brian Wieser concluded, “Salesforce.com appears best positioned to compete as a brain for marketers . . . and it contributes to our expectation that Salesforce.com should be the fastest-growing company in our coverage over extended periods of time.”

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  Public relations firms also strive to disrupt agencies. Interviewed in 2016 at the annual conference of the Public Relations and Communications Association, or PRCA, Europe’s foremost PR and communications membership organization, Martin Sorrell extolled public relations as “a good business” that was getting better for two reasons. “The first is because data has become more and more important. The other is digital. Digital has made public relations much more important than it was because of 24/7 communications at all levels. You can gain or lose a reputation at a click.” Executives increasingly rely on PR crisis managers to douse fires.

  Few public relations firms have expanded their reach more than Edelman, a privately owned public relations company with six thousand employees in sixty-four countries and such blue-chip clients as Unilever, Johnson & Johnson, Starbucks, Adobe, Samsung, Mars, and Kellogg’s. The firm is run by Richard Edelman, son of the company’s late founder. From his airy, open office high above bustling Hudson Street, where new buildings sprout up all around him, he says, “I decided that the only way to succeed in a world where classic distribution mechanisms”—newspapers and local TV news and radio opportunities—“were not only shrinking but evaporating,” and where social networks became the primary distributors of news, and where consumers were allergic to ads and relied on ad blockers to defend against them, was for his firm to change.

  Twenty percent of Edelman’s business is now digital, he says. He disagrees with Martin Sorrell that PR agencies can’t supply creative content to clients. “I believe earned media—pitching and telling stories—is the new paid. It’s going to be very hard to get stuff through the ad blockers.”

  One of their campaigns that did evade ad blockers was, as noted earlier, for Vaseline, a Unilever product. Unilever prides itself on being a socially conscious company, and in its marketing often sells not just its products but the company’s social mission, which Unilever also knows is a way to navigate past the skepticism of millennials. In 2014 they asked the Edelman agency to develop a social mission for Vaseline that linked the product to healing dry skin. An Edelman team conducted research and learned that dry skin can lead to infections and serious health issues. They came across a Washington Post story of two dermatologists who visited Syrian refugee camps in Europe and the Middle East and discovered that 70 percent of the refugees fleeing Syria had cracked skin and blistered feet. Working with Unilever in 2015, they launched the Vaseline Healing Project, donating one million jars of Vaseline and recruiting dermatologists to heal skin. The Healing Project was featured in sponsored content orchestrated by Edelman online, but also broke out as a TV and newspaper story. Referring to the tens of million of dollars Jeb Bush spent on TV ads before he dropped out of the Republican presidential primary contest in the winter of 2016, Edelman said, “There’s a reverse relationship between how much advertising you buy and how trusted you are. You’re trusted if you’re seen as spontaneous.” Or authentic. Unilever passed that test, and as we would stunningly learn, so did the winner of the Republican nomination, Donald Trump.

  When public relations legends like Edward Bernays toiled earlier in the last century, their prime mission was to establish the public image of clients. They usually came to the table after the advertising agency shaped the advertising campaign. Today, they often sit at the table from the start. Richard Edelman explains that “classic PR” growth has stalled, requiring agencies like his to “evolve our traditional PR business into a communications marketing agency.” To advance this goal, Edelman hired “four hundred creatives and planners” to work with clients like Samsung, Unilever, and Heineken. Edelman has entered advertising’s inner kingdom, the thirty-second television ad. Richard Edelman recalls that when his employees created a Kellogg’s YouTube story for the Winter Olympics of a four-year-old girl who one day became an Olympian, Kellogg’s CMO told him, “‘We want that as an ad.’” Edelman’s four hundred creatives and planners now devise the kind of ads that were once the exclusive province of ad agencies. “We recast our business as communications marketing,” he says. “The reason we did that was we wanted access to the marketing budgets, and we wanted to signal: you don’t have to go to an ad agency to get marketing results.”

  If Edelman and other PR agencies are nipping at the heels of ad agencies, Martin Sorrell and the other holding companies are not standing still. A reason giant holding companies like WPP diversified and now own some of the most prominent PR agencies—Burson-Marsteller, Hill & Knowlton, Finsbury, Cohn & Wolfe—was both a defensive and offensive gesture. WPP aims to offer a full range of services. Donald Baer, who oversees 2300 employees in 110 countries for Burson-Marsteller, serves such clients as Bank of America, Microsoft, Intel, and Ford. He envisions two categories of growth in public relations. One is strategic counseling, helping shape the message and reputation and projecting a positive corporate image, as well as providing crisis counseling to companies. The second
is what he refers to as “integrated communications. That’s the injection of the digital, social, mobile, and content creation revolution that is transforming this business, and is the work that advertising and marketing agencies do. That’s where we have had to move. Most of our growth is in this second category.” Today, he says 25 to 30 percent of his employees work in integrated communications. Tomorrow, 60 percent will. Inevitably, Baer knows he will at times be competing with his sister ad agencies at WPP.

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  Reflecting the up-in-the-air nature of the marketing world, increasingly agency clients turn not just to public relations firms or consultancies or tech firms, but hire fresh start-up agencies or turn inward. The Association of National Advertisers announced in February 2016 that brands were increasingly abandoning old-school agencies as out of touch. They were turning to start-ups, particularly to help them navigate social media and incorporate new technologies. As we’ve seen, many of the largest brands have snatched their media buying away from agencies and established in-house programmatic media buying.

  Prominent brands like General Electric and PepsiCo envision a day when they will spend less on advertising and become content creators, marketing and interacting with their consumers online. “GE wants to be a publisher, a content creator,” says Sam Olstein, who as their director of innovation supervises GE’s Disruption Lab. GE will expand their filmmaking and sponsorship of content—either “Brought to you by GE,” or featuring GE scientists or engaging characters and selling their content to platforms, or placing content on GE Web sites. Olstein says, “We hope we can build an ecosystem or platform on a par with other media platforms out there.”

  Pepsi set up a content center and recruited creative talent to produce content they can sell. A reason Pepsi made this move, Brad Jakeman, president of the Global Beverage Group, told an audience at the 2016 Cannes festival, is because agencies are too rooted in the past: “I’ve been asking the advertising industry for years to evolve their business and they haven’t. We value our agencies. But we also need the ability to produce fast.” Fast may not equal effective. Few brands have been as successful as Red Bull in creating their own media platform that creates events that are covered by news organizations. It is costly, which is one impediment. And it may be delusional. Rishad Tobaccowala of Publicis cautions, “Brands want to talk about their brands, which in most cases is boring as hell and does not make an ongoing content platform.”