I wrote this Viewpoint thing for the current issue of the ONECLUB magazine.
You can also see it on their website.
You Download What Do Advertising Agencies Do? TIGS as a convenient portable document for Kindle viewing, perhaps.
Or read it here>
VIEWPOINT / FARIS YAKOB
WHAT DO ADVERTISING AGENCIES DO?
Outside of the industry, it is little recognized that advertising agencies do not actually make television commercials—this is outsourced to production companies.
Agencies germinate, direct and manage the processes of advertising production.
However, the question is more fundamental than what do they do, but rather, what are advertising agencies for?
In 1975 Theodore Levitt wrote one of the classic texts of marketing. “Marketing Myopia” is the “quintessential big hit HBR piece”, to quote a later article about it from the self-same Harvard Business Review.
In it, Levitt points out that every industry was once a growth industry but that never seems to last, not because the market is saturated but rather because companies misinterpret the fundamental question:
“What business are you in?”
One of his key examples is the American railroads—once a mighty growth industry, it declined steeply because it failed to recognize the threat presented by the emergence and eventual affordability of cars and what was once described as:
“100 ton tubes of metal moving smoothly through the air 20,000 feet above the earth, loaded with 100 sane and solid citizens casuallydrinking martinis.”
The railroad tycoons thought they were in the business of railroads when they were really in the business of transport—they were myopically product focused instead of being customer focused.
This idea has become an adage of marketing, aphoristically captured by Levitt himself in a later article:
“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”
It’s the same logic that might have prevented Kodak from its ignominious fall from grace. Kodak wasn’t in the “film” business that digital cameras abruptly decimated, it was in the business of capturing memories—it just didn’t realize until [possibly] too late.
Advertising agencies “make” advertisements and this is a surprisingly healthy business considering how often its demise has been trumpeted.
Indeed, television advertising in the USA grew 9.7% in 2010 according to eMarketer, bouncing back after the recession, and growth is projected to continue.
Despite time-shifting ad-skipping digital video recorders, the death of the 30-second spot has been greatly exaggerated.
That said, it’s important to remember that advertising is a drill, not a hole.
Advertising is a means, not an end, a lever designed to effect consumer behavior leading people to pay price premiums and buy more things and more often, due to the dimly understood interactions of persuasive symbols and human cognitive, social and economic behavior.
Thus, should better, more efficient, more effective solutions to the business problem of marketing products to the masses manifest, companies would be well advised to pursue them.
Advertising agencies then, either make advertising, which is a service that can be displaced, or they help corporations solve business problems with creativity, which will remain an ongoing need as long as there are corporations, but puts “advertising” agencies into a much larger competitive set alongside other business consultants, albeit with a specific competitive advantage of being able to effectively house and manage commercially creative people. Large management consultancies struggle with this for the same reason – the environment isn't usually very palatable to them.
The business of advertising remains robust for now but the business of ideas that drive business growth is evergreen.
The industry is bifurcating along these lines.
It’s a good idea to work out which business you want to be in and act accordingly.
Pure play advertising agencies should defend and leverage their core competencies inside the extant market.
Agencies that want to explore the possibilities outside this definition of the category must be willing to invest in developing new competencies to service emerging needs, increasingly at the intersection of technology and storytelling.
This blurriness is perhaps best evidenced by The One Club awarding Nike+ as one of the Best Campaigns of the Digital Decade despite, or because of the fact that it isn’t a campaign.
A technology driven product/ service extension attracts and earns attention for a brand, solving a problem with something other than “advertising.”
Both strategic routes are sensible to consider, depending on an honest analysis of the business and its strengths and assets, including its key and often overlooked intangible asset, the agency brand.
The danger comes from attempting to be all things to all customers—the essence of strategy is trade-offs, since finite resource requires finite offerings.
Worse than not making decisions is falling symptom to the “Shirky Principle”—an idea established by Clay Shirky in his book, Cognitive Surplus, and elevated to the status of principle by Kevin Kelly, founding editor of Wired.
Shirky points out that
“Institutions will try to preserve the problem to which they are the solution.”
Rather than solving clients’ problems, agencies that succumb to the principle spend their energies trying to maintain that the world of business and media hasn’t changed, or attempting to stymie symptoms of the change when they encounter it.
As with any corporate strategy, the road ahead for advertising depends on knowing what business you are really in and acting accordingly.
25 responses to “What Do Advertising Agencies Do?”
Brilliant!
thank you!
Very succinct analysis, nice writing.
Nice stuff Faris. Love the Shirky principle quote. Interesting the way the ‘death of advertising’ narrative was used by digital to over state the problem to which they were the solution as much as orthodox agencies understated it in order to preserve the problem to which they were the solution.
Gold. As usual.
‘Campaign of the Decade’ – I immediately had the same thought myself upon hearing that.
One despairs at the (still) vast majority of the industry who don’t get that it’s about the behavior not the tools/tech.
I’m also constantly drawn to this Beaudrillard nugget:
‘Systems are inherently brittle and retain authority only as long as we treat them as having authority’, he said. ‘But once you lose the fear of systems, or conventions, the status quo, they lose the hold they have over you.’
It’s a simple lack of any sort of mindfulness that means the (for all intents redundant) language of the ‘system’ is repeated verbatum and ad nauseum (c*nsumers, campaigns, targeting etc)
Nice analysis Faris. I think the advertising agencies will also be in a tough battle considering that there are now different mediums of advertising proliferating in the market.
Love this, as usual.
The only bit I’m not sure you’ve nailed is the actual business we are in – “help corporations solve business problems with creativity” is too vague, and I don’t think it’s accurately what we are best-placed to do. For example, production processes or logistics issues are refined and improved by “creativity” of a sort, but no ad agency would be able to do this.
358 (the agency I work for here in Finland) puts it like this: “To keep it short, 358 is an advertising agency. But for us anything that helps people like a company is advertising.”
Anyway, great post as always 🙂
Great summary.
I appreciate that you mentioned the competition with other consulting agencies, as I see a fine line there.
I always wanted to believe that advertising was helping a corporation in the most important issues (after the product, or service itself). The truth is, we often have to negotiate or canalize our participation. A bit like managing alcohol intake at a party, while on medications.
Hello mate! thank you. and yes agreed – it’s a narrative that provided uncertainty and opportunities. but it’s not true. or, more accurately, it isn’t yet, but there are other things you can do that might achieve the same ends.
rock ON FX
I love Beaudrillard. thanks!
hello dude!
thank you. and yeah i kind of agree – but i think that’s part of the evolution in question.
some agencies will evolve the idea of advertising.
some will evolve into things like Naked and CO; and Undercurrent that are something different.
but i also agree that supply chain logistics isn’t something we should pretend to do. 😉
thanks!
FX
thanks!
and indeed – I think agencies had a partner consulting role once upon a time but no longer seem to. marketing in its broadest sense became the single p of promotion.
we do indeed. often our clients simply aren’t capable of system or product level changes.
cheers! FX
Nice Information
Thanx for this! Perhaps we should be in the business of helping people to listen to, and follow, what their heart is saying. (Thoreau)
Have come across this article a bit later than everyone else here – would firstly just like to say – well written, Faris!
It prompted me with thoughts about how “advertising work” is curerntly being honored, namely the award ceremonies. I can’t help but think the genres/categoriy definitions are contributing to this piegeon holed perspective of advertising and the agencies capabilities.
Just wanted to see what people think?
Hello Nicola!
thanks! very nice of you to say.
so – in some ways yes absolutely – but it’s a mirror reflecting back at a mirror if you see what I mean. The shows want to accomodate everything – they look each year to see how they might expand / change the categories.
The fact that modern work doesn’t fit into the the boxes of the past is why I worked with The London International Awards to create the NEW category –
http://www.liaawards.com/winners/juryComments.cfm
http://www.liaentries.com/winners/?id_medium=13&view=icons&range=w
for things that don’t fit, that might show us an evolutionary mutation, highlight new roles for agencies.
FX
Advertising agencies for some business do a lot of benefits in fact i seen it before,in Finland most of the business stick to some advertising stand and display and they seen it very nice as an outdoor advertisement.
Faris, I particularly enjoyed your comments about circular problem/solution road blocks. Is the industry really perpetuating their own mundane existence? A friend who worked at BBH, was in a specific new product design department where the goal was to pursue change and new media. Except, they only had three people in the department. Why is this such a small part of the business?
@faris great post. I worked at Naked London for 18 months in 10/11, brilliant experience creating non traditional ad solutions for Fosters, but the agency was trying to turn itself into an ad agency, to the point we started pitching against JWT and Fallon with traditional ad solutions to the brief because the business of creative business solutions couldn’t be sustained. A shame as if more agencies like Naked were to start up, advertising as the solution would start to be seriously challenged and we’d create a need in clients for something different as the default solution, not a TvC. I now work in a large global media agency as a strategist and whilst content is king and creative, innovative solutions to distribute that content are order of the day, clients still obsess over the TV plan.
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well said about advertising agencies and what are they meant for, really a lot of useful information and you unpacked it very beautifully. Thanks for sharing the information
this is one of the best post i have read so far
Great post…… Very informative
The M Agency