Frenemies Read online

  But this frightens his clients, because they know China is a hard market to crack, and they know the U.S. companies that control mobile will drive hard bargains with agencies and advertisers. They also know the limitations of mobile. Ads on mobile phones soak up battery life, are constricted by small screens, and are so intrusive and irksome to consumers that about one quarter of Americans and one third of Western Europeans sign up for ad blockers to prevent the interruptions. How, clients anxiously want to know, do they reach the mass audience so essential to introducing new products and to building brand identity when ads on mobile phones are not as effective and consumers are dispersed among many new channel choices and social networks? And what the hell do they do to reach the next generation—including the digitally savvy millennials age twenty-one to thirty-four, and the even younger Generation Z born after 1997, who detest being hawked to? A reason people might be annoyed by ads is because, on average, citizens are bombarded daily by an astonishing five thousand marketing messages.

  Kassan’s clients and agencies do marvel at new data mining tools that offer advertising and marketing companies more weapons to target consumers. But they’re also frightened by some of Kassan’s digital clients—Facebook and Google in particular—who cooperate with advertisers but also compete by collecting massive amounts of data, which they do not fully share. These digital frenemies use this data and the marketing services they’ve acquired—like Google’s DoubleClick and Facebook’s Atlas—to become agency and platform rivals. More and more of his clients are terrified of Amazon, for Amazon has even better data than Facebook or Google, because it tells when a consumer made an actual purchase decision, and like Facebook and Google it walls off its data. Particularly worrisome to brand clients, Amazon promotes its own products, as Google is accused by the European Union of using search to steer users to its own products. For example, if you ask Alexa, Amazon’s digital assistant, to choose a battery, it will choose an Amazon battery, the reason Amazon batteries dominate battery sales on Amazon.

  Kassan’s clients and agencies also worry about something else: the data that will yield rich targeting information could trigger a backlash if citizens come to believe their privacy is violated and clamor for government protection. While more data fortifies agencies with better tools to target consumers, it also unnerves them because it arms clients with information about which of their ads sell and which don’t. And technology does something else: it democratizes information, giving citizens more choices, more ability to skip ads, to voice their opinions, to vote with their fingers and flee traditional media platforms.

  Everyone in the advertising and marketing business marvels at the platform choices technology enables. Consumers can be reached via an ever-expanding number of TV channels, social networks, apps, blogs, podcasts, and e-mail alerts. But they fear the miniaturization of the mass audience and wonder how to introduce a new product so that it captures people’s attention in this new world.

  The advertising industry collectively worries that what they think of as their art—big creative ideas—will be replaced by machines weaponized with data and algorithms and artificial intelligence. The primary machine we increasingly rely on is the smartphone, and many in the industry would not be comforted to listen to Tim Armstrong, the CEO of AOL and before that Google’s senior vice president of advertising for the United States and Latin America. In 2015, Armstrong sketched a future in which marketers will have to talk to a consumer via their mobile machine: “And the machine is going to highly disrupt what kind of advantage and what kind of messaging and what kind of interaction you have with a consumer.” Within five years, he continued, six billion people will be connected to the Internet, meaning marketers “are going to have to interact with their machine, which we refer to around here as ‘the second brain.’ You’re going to have an advertising model that works fluidly for the consumer but also works fluidly for what that machine is.” He illustrates the machine’s power by telling of a visit he made that week to a Mastercard board reception where they displayed future products. One was a gas station pump that recognized your Mastercard and regulated the price at the pump based on whether you were a regular customer or not. “In the future, the pump pricing may change based on what type of customer you are and whether you’re in a points program. But also, the company will have a lot more information on you.” And the smartphone will “keep track of all your relationships with all the companies you deal with. The exponential power of using that data will change consumer behavior. It will shift more power into the consumers’ hands. And it will shift more power to companies that move faster into this world.”

  Marketers will have to befriend the machine, he continued. “The phone or machine will be as powerful as a second you, with a lot more ability to use software to simplify things for you. Today, the consumer does all the work. You have to get in your car and drive to the store. You have to go online to Amazon and figure out what you want to buy. But in the future if you have this machine that has a deep understanding of what you do, when and how you do it, the things that may be helpful for you, it’s likely that the onus on the consumer to do all the shopping will shift to the corporation.” Information for the consumer will be screened and presented by your smartphone’s digital assistant, which will be more sophisticated versions of Amazon’s Alexa, Apple’s Siri and its HomePod speaker, Google Home, and Microsoft’s Cortana. “It may watch how you behave over the course of a year and say, ‘Here are all the things you’re doing and here are three or four products that may help you live a longer life, may help you save twenty percent of your income.’” The digital assistant becomes your agent, potentially supplanting the middleman, including the agency middleman.

  Agency employers stewed over all this. And as they also stewed over Jon Mandel’s claims in 2015, Michael Kassan heard a new drumbeat from various clients: trust. Or mistrust. Kassan was all too aware of the views of a frequent client, Beth Comstock, who was promoted to vice chair of General Electric after the innovations she instigated as their CMO. “You hear this time and time again, a lot of people are frustrated that there’s a disconnect between their agency and what they want,” she says. “I think we want more media properties to come to us,” to bypass the agency and collaborate directly on creating an ad campaign, as the New York Times did in creating an award-winning virtual reality campaign for GE. Over the years, she says, the mistrust between client and agency intensified because the media-buying agencies came to see themselves as the customer. “They gathered all the clients together. They negotiated the sales.” They, not the client, directly paid for the ads. They didn’t always assign their best people to a client’s account. They were sometimes opaque about rebates or why they placed bets on different media platforms. To Comstock the trust issue boils down to this: “Are you working for me or for the media company? I’m paying you!”

  Agencies are naturally anxious not to become superfluous middlemen, supplanted by clients who seek lower costs by building their own in-house marketing departments, or by turning to advertising platforms that retain MediaLink—like the New York Times, the Wall Street Journal, or Vox, which double as ad agencies, going directly to brands and offering to craft their ads. Agencies worry that as consumers shift to the convenience of online buying and do it on their iPhones, reliable advertising clients like department stores and retail outlets will do more than contract—they will perish. Big agency holding companies “are dinosaurs,” thinks Bob Greenberg of R/GA, a thriving digital agency, because they grow by buying companies and become hobbled by an inability to harmonize disparate cultures, while at the same time being challenged by formidable consulting companies with deeper pockets and intimate relationships with the CEOs of major brands. They are collapsing, he says, because “everything is run by accountants and bean counters.” Greenberg obviously makes an exception for IPG, the holding company which acquired his R/GA.

  “Change sucks,” sighs Rishad Tobaccowala,
the resident futurist for Publicis. “I hate change. I work for the same company I joined thirty-four years ago. I live in the same area of Chicago for thirty-six years. I met my wife in India when I was twelve. I hate change. The reason why change sucks is if you do something different, you don’t know what you’re doing. Therefore you make mistakes. You make a fool of yourself.” Senior executives don’t want to look foolish, or admit they don’t have answers. “So what people do is they put out press releases pretending they know what they’re doing. And they hope this will go away before they retire. But it is happening faster.”

  In human terms, what marketing execs like Tobaccowala, Sorrell, and Kassan know all too well is that many of the jobs held by their employees are threatened by technology. They know that new technologies like programmatic or computerized buying of advertising eliminate jobs. They know personalized ads dispatched by Instant Messages (IMs) or e-mails can be created by machines. They know algorithms and machines powered by AI increasingly decide what we see or read. They know, as Kassan says, “Technology is the number one threat to agencies. Technology allows for a more direct relationship between a buyer and a seller, with less need for an intermediary.”

  Deep down, Kassan, like most media executives he advises, fears that marketing dollars will not just be redirected, they will actually shrivel. Their fear calls to mind this brief exchange between two friends in Hemingway’s The Sun Also Rises:

  Bill Gorton: “How did you go bankrupt?”

  Mike Campbell: “Two ways. Gradually and then suddenly.”

  3.

  GOOD-BYE, DON DRAPER

  “Today clients are not married to an agency. They are only dating.”

  —Michael Kassan

  Mad Men’s Don Draper was a fictional stand-in for midcentury advertising executives like David Ogilvy, Bill Bernbach, and George Lois, who reigned at a time when the creative departments ruled agencies, when a single street—Madison Avenue—was synonymous with advertising. In those days, there was no need for a company like Michael Kassan’s MediaLink. In fact, Kassan and MediaLink would have been treated as an interloper, for the ad agency, as Jon Mandel and clients like GE’s Beth Comstock claimed, was the agent of the client.

  Newspapers starting in the late nineteenth century began to compensate agencies with a fixed 15 percent commission on all advertising placed in their pages. Magazines followed, then radio and television. It was an unusual compensation system—the ad was paid for by the advertiser, but it was the seller of the advertising, not the buyer, that paid a percentage of the fee to the agency. In addition, agencies were paid a 17.65 percent commission on all ads created, and were separately reimbursed for production costs. The arrangement “was pretty lush,” concedes Miles Young, the CEO of Ogilvy & Mather until 2016.

  Randall Rothenberg has been immersed in the industry for more than a quarter century. He wrote one of the most instructive and entertaining books about advertising, Where the Suckers Moon: An Advertising Story,* and today serves as the spokesman for digital companies as president and CEO of the Interactive Advertising Bureau. He believes the commission system fortified the agency business, boosting their profit margins. “There was collusion between the agencies and the publishers to keep prices high. The myth was that the client was the marketer. In fact, the client was the publisher. The ad agency acted as a broker for the publisher.” Ad agencies did not often haggle with publishers on price. The more ad dollars publishers received, the more the agency got paid.

  Doyle Dane Bernbach’s Bill Bernbach—the creative decision-maker behind such iconic ad campaigns as Volkswagen’s “Think Small,” and “You Don’t Have to Be Jewish to Love Levy’s”—reigned at a time when ad agency execs and their place in the world was secure. When the CEO of fledging Avis offered his account to Bernbach, he qualified his acceptance by telling him, “But you must do exactly what we recommend.”* The campaign Bernbach crafted—“When You’re Only No. 2, You Try Harder. Or Else”—changed Avis’s fortunes. George Lois, like Bernbach a Bronx-born maverick, had won a basketball scholarship to Syracuse, and his hulking physicality and booming voice could be menacing. More than once, Jerry Della Femina, a creative colleague, recalls Lois screaming at clients, “I’ll jump out this window if you don’t approve this ad!”

  “In the old days, creative guys were the only ones in the room to pitch clients,” recalls Michael Kassan, whose advertising career started in media buying. “They never met Harry”—Harry Crane, media buyer and head of Sterling Cooper’s TV department—“who was treated as a nerd in Mad Men. But in the late 1970s, independent media buyers spun off as companies, and in the ’90s they gained respect. The suede-shoes guys challenged the power of the white-shoes guys.”

  A recurring debate within agencies in the Mad Men era was over what constituted a great ad campaign. In the 1950s, Rosser Reeves, the chairman and creative head of Ted Bates & Co., argued that advertising was a quasi science. He promoted what he called a “Unique Selling Proposition,” claiming that one idea that consumers could latch on to foretold whether an ad campaign would succeed. It had to be unique, but it also had to win the approval of survey research predicting it would sell. Colgate ads for toothpaste that “comes out like a ribbon and lies flat on your brush” was unique, but it wouldn’t sell, he said. Colgate ads for toothpaste that “cleans your breath while it cleans your teeth” was both unique and successful. Recruited to pioneer thirty-second TV ads for Dwight Eisenhower’s 1952 presidential campaign, Reeves ordered a Gallup poll that identified three issues on which the Democrats were vulnerable: corruption, the economy, and the Korean War. Reeves coined the phrase “Eisenhower, Man of Peace,” and portrayed Ike as a war hero returned to America to bring about domestic and international peace. His opponent, Adlai Stevenson, who didn’t own a television and thought TV ads talked to citizens as if they were second graders, countered by spending 95 percent of his TV ad budget on a half-hour telecast of his speeches. He reached a minuscule audience.*

  Reeves’s peer Bill Bernbach had a very different view. He was not a slave to research, relying instead on gut instinct. Research, he told Martin Mayer,* “can tell you what people want, and you can give it back to them. It’s a nice, safe way to do business.” But it usually produced pedestrian ads. “Advertising isn’t a science, it’s persuasion. And persuasion is an art.” Another legend, David Ogilvy, was both Reeves’s protégé and at one point his brother-in-law, but their philosophical differences grew so intense that they stopped speaking to one another. Ogilvy extolled the value of a consistent brand personality shaped by what he called “trivial product differences.” In many an Ogilvy print ad, the headline and graphics were followed by short essays touting the brand. In one famous ad, after the bold headline—“At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock”—the text enumerated thirteen reasons to buy the luxurious car. In the consumer’s mind, he believed, the brand stood for something.

  Ogilvy broke with Bernbach as well, albeit less vociferously, asserting that Bernbach’s “art” got the better of his content. “What you say in advertising is more important than how you say it,” Ogilvy declared.

  Bernbach firmly disagreed. “Execution can become content,” he replied. “It can be just as important as what you say.”* It was an argument without end.

  Whatever differences divided the industry’s titans, however, they were united in the belief that it was the companies doing the buying—the advertisers—that ultimately wielded the power. Fearful of offending white viewers, initially advertisers vetoed the idea of an all-black variety show starring Sammy Davis, Jr. With tobacco ads making up almost 10 percent of their ad revenue, network newscasts rarely reported on smoking’s health risks. Over the years, when program schedules were decided, the head of network sales was always in the room, for no network wanted an ad to appear in what was deemed an unfriendly environment. A medium dependent on advertising for its
revenue knows that its primary business obligation is to corral an audience for its ads. Bill O’Reilly seemed to be surviving his sexual harassment scandal at Fox, until a group launched a successful boycott campaign against his show’s advertisers. When advertisers fled The O’Reilly Factor in April 2017, Fox News quickly pulled the plug on cable TV’s top-rated anchor.

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  Over time, for industry-specific reasons and also due to a larger shift in American business culture, ad agency clients began to bring more and more scrutiny to bear on the whole cost structure. Jon Mandel’s j’accuse moment did not come out of a clear blue sky. After the 2008 economic crisis in particular, CEOs increasingly turned to their chief financial officers or chief procurement officers to more closely monitor marketing spending. Inevitably, the power of CMOs, who hired the agencies, eroded. “In Don Draper’s days there was never a procurement department,” says Wendy Clark, who has been a CMO of Coca-Cola and AT&T and is today the North American CEO of Bill Bernbach’s former agency, DDB Worldwide. “In new business briefs,” she says, in addition to the CMO “we have two procurement officers in meetings.”

  Irwin Gotlieb saw this beginning to happen in the early 1990s, when procurement officers would hire auditing firms like Accenture and Ebiquity to monitor agencies. They became the agency’s adversary, he explains. “They got compensated for generating savings,” and they had a built-in “conflict of interest. They ran around saying, ‘The sky is falling!’ And then they sold you umbrellas.” By slicing marketing costs, they boosted short-term company earnings at the expense of the long-term health of companies, he argues, correlating marketing dollars with growth. An inevitable consequence, he says, was a loosening of the bond of trust between client and agency.