Where agents fear to tread

The following column, which appears in every other issue, presents a counter-conventional look at contemporary advertising and marketing.One of the roles which advertising agencies have surrendered is provider of software for new technology.When radio came on the scene, it was the...

The following column, which appears in every other issue, presents a counter-conventional look at contemporary advertising and marketing.

One of the roles which advertising agencies have surrendered is provider of software for new technology.

When radio came on the scene, it was the advertising agencies who created the programs and sponsorships that helped make the medium. They produced the software which made the hardware coveted by every household.

Many hesitated

Ad agencies were so integral to the operation of this new technology that many hesitated to move beyond radio.

In The Mirror Makers, a history of the advertising business in the u.s., Stephen Fox tells of the reluctance of advertising professionals to embrace television.

The consensus was that ‘television affords little profit for advertising agencies.’

Remade themselves

Once the power and potential of tv became obvious, agencies remade themselves quickly, developing the visual expertise and production skills for selling in this new medium.

As agents, the most successful companies not only created advertisements, but also developed and managed much of the programming for television. As with radio, ad agencies pioneered the software that made the hardware work.

This capacity to create software is not to be taken lightly. Much of the programming which created what is now acknowledged to be the ‘Golden Age of Television’ was conceieved of, packaged, produced and promoted by ad agencies.

The Kraft Television Theatre, Goodyear TV Playhouse, Texaco Star Theatre are but a few of the many high quality programs produced and controlled by agencies.

As agents, advertising professionals again played a key role in helping a new technology gain mainstream acceptance.

Fox, in The Mirror Makers, reminds us that ‘in these early days, the lines were blurred between ad agencies and tv networks. Many top executives shuttled back and forth between the two, using the same skills and contacts.’

Now, a new wave of technology is again disrupting the old patterns of consumer selling. The convergence of telephone, tv and computer is creating a still hard-to-define world of multi-media and interactivity.

The giants of entertainment, electronics, computer hardware and software are forming alliances and positionings to take advantage of this new technology. Conspicuous by their absence are the agents of advertising.

This hesitation seems to be a replay of what happened when entrenched radio became displaced by tv. In fact, it goes deeper.

Television, like radio, delivered a mass audience. The economies of selling to that mass created the structure and systems that most agencies still employ.

The promise of the new technology is that it will deliver ever finer customization of audience. The economics of going after a more selective sliver are different from going after a relatively indiscriminate mass.

Therefore, the hesitation agencies have about embroiling themselves in multi-media is that their current structural economics will not support them in the new world.

This is not the way it was supposed to be.

One of the benefits of all the merger activity of the 1980s was that it would create companies with the heft and financial resources to make the bold investments in the future of advertising.

Most merged entities have been disappointments on this front, devoting a disproportionate chunk of their management time and most of their money to paying down debt.

r&d into how advertising is changing, and investments to master the new technology, have been non-existent.

In my view, some natural partnership opportunities have been lost. bbdo has served Apple for more than five years, yet Apple has made multi-media alliances with a host of other partners. The agency, as a source of software, is out of the loop.

When asked in 1991 which company he feared the most in the 1990s, Michael Spindler, Apple chief executive officer, named Nintendo.

That is because the technology, as happened with tv, needs software agents to make it meaningful and valuable to the broader marketplace.

Being out of the loop is an ominous sign for agencies. It means that one important source of added value that used to be provided by agencies to their marketing clients is now being sought elsewhere.

It also means that because they are not part of shaping how new technology is being deployed, ad agencies risk becoming more passive and less relevant as a source of innovative selling ideas to marketers.

This is the information age. Advertising will play an important role in how information is distributed and assimilated. Whether the existing agents of advertising will be in place to create this advertising is the question.

The economics, like the technology, demand radical change in structure, process and results measurement. After 40 years of organizing advertising to be like p&g, it may be time to reorganize it to be like Microsoft.

John Dalla Costa is an author and consultant to senior business executives. His first book, Meditations on Business: Why Business As Usual Won’t Work Anymore, came out in 1991 and he is hard at work on a second. Dalla Costa spent 16 years in advertising, and heads a new company called Catalysis, which provides strategic counsel to ceos and senior managers.