ECHOES FROM THE BIG BANG;P&G STEPS IN

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The sudden burst of megamergers among large advertising agencies a decade ago, starting with the "Big Bang" deal that created Omnicom, changed the business forever. As the story in these pages noted last week, the affiliations and mergers were in anticipation of advertiser globalization, and in this the agencies were on target. More large advertisers are consolidating agencies globally or using "lead" agencies to oversee their far-reaching campaigns.

But some unwelcome fallout remains. The megamergers resounded most loudly in the executive offices of major advertisers, where news of the amount of money changing hands in agency deals stunned some marketers. High-flying Saatchi & Saatchi Co.'s buyout of Ted Bates Worldwide, for instance, made Bates Chairman Robert Jacoby $112 million richer. That turned advertiser numbness into anger. With agency toppers often richer by far than the client executives they served, advertisers asked why they should compensate their agencies so handsomely. Many were skeptical that the mergers would benefit clients. "What's in it for me?" asked then Chrysler Chairman Lee Iacocca during a speech to an agency convention.

The 15% commission system was on the ropes before all this happened, but Big Bang and its aftermath drove a stake through its heart. Clients began treating agencies not as partners but as vendors; they angled for reduced commissions, or fee set-ups. Some asked for "proof" the advertising worked. DDB Needham became the first big agency to float a plan to tie payment to sales success. Others have since offered performance-based compensation ideas, but clients and shops continue to wrestle over how to structure such plans to protect their interests.

Yes, today's agency conglomerates can better serve the global ad needs of large advertisers. But the rupture of the bonds between client and agency resulting from some of the deals of that era has yet to be fully healed.

P&G steps in

After months of watching a fledgling economy develop based on the buying and selling of ad banners on World Wide Web pages, P&G is about to make its entry. But it wants to do it its own way.

Instead of paying for advertising based on how many times an ad is viewed (the currency of choice for now), P&G wants to pay only when someone clicks on an ad. Web publishers, understandably, are crying foul. Banners have value, they insist, even if they're not clicked. If they agree to P&G's terms, far less money comes in the door.

What they're not saying a lot about is the dirty little secret of Web publishing: Banners just don't get clicked. On many Web pages, they're mere billboards. And if they're not clicked, they're not interactive.

P&G isn't alone in its point of view. The Internet is all about interactivity. Viewing it as a place to put a pretty picture is the wrong attitude entirely. But demanding that Web sites turn upside down the way they sell advertising isn't the answer.

Two years ago, P&G chief Ed Artzt called on agencies and advertisers to band together to keep TV from becoming an ad-free environment. That's not the problem on the Internet, the biggest and brightest ad medium to come along in years.

No one is saying that banners are perfect-they're not. But marketers and media need to work together to find out what will work better.

This is a fledgling economy, remember. Birds with clipped wings will never really be able to fly.

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