How's the ad biz? Great, and awful

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[Southampton, Bermuda] It was the best of times; it was the worst of times.

That's the tale of the two American Association of Advertising Agencies' management conferences last week. One featured upbeat pronouncements from the association on the state of the business and several lightweight speeches. The other, revealed by a handful of more critical speakers-and the private rum-cocktail-fueled discussions of agency executives-was full of soul-searching and growing concern over a host of issues that threaten the margins, and even existence of agencies.

The 4A's platform looked on the bright side, dismissing as fatalistic pessimism the commoditization of the agency product, the shifting of dollars to more CFO-friendly disciplines and the difficulties broadcast-based models face in a fragmenting media environment.

The organization's president, O. Burtch Drake, said he does not "in any way agree with the doom-and-gloom forecasts about the future of the agency business. The empowered consumer, the Internet, and proliferation of media options are dramatic trends that make the role of advertising agencies more important than at any time in recent memory."

THE POSITIVE APPROACH

Similarly skating over the consumer-control and compensation issues, Mr. Drake's co-host, Ron Berger, CEO of Euro RSCG, preferred a motivational-speaker approach, telling people that they should "focus on all of the good advertising is and should be, and that you have the moxie to act on the faith, to listen to the inner voice and the heart that stands up to defend it."

In very different ways, figures such as Miles Nadal, Jack Klues and Andy Berlin shook the 4A's optimistic interpretation.

Mr. Nadal, founder-CEO of MDC Partners, was clearly pitching his wares, but his speech was seen by some as a refreshing confrontation to the large agency status quo. He showed a brand video that tracked the evolution of the ad agency from a kind of Eden of creatively-focused shops to a financial results-driven pit of greed-even Gordon Gekko made an appearance in the broadside against the traditional holding company model, with its focus on quarterly results.

Mr. Klues, CEO of Publicis Groupe's Starcom Mediavest Group, interjected a too-rare display of marketer thinking into the mix. He reminded the audience of Procter & Gamble Chief Marketing Officer Jim Stengel's infamous report cards at last year's 4A's media conference to implore creative agencies to deal better with audience fragmentation. He also said the industry needs to address channels such as adver-gaming, branded entertainment and video on demand-issues that barely got a mention from the podium.

What the assembled executives most wanted to hear about, though, was compensation. The person to do it was Andy Berlin, CEO of WPP Group's Berlin Cameron/Red Cell, who, despite occasionally confusing the audience by going off on tangents-at one point he appeared to cast media companies as the enemy of ad agencies-was seen by most attendees to have a clear rallying cry for a new compensation model.

He asked for a joint initiative between the 4A's and the Association of National Advertisers to replace the current cost-plus-fee structure with a system in which agencies would share in the gains of the marketers they help, while shouldering more of the financial risk in the marketing investment. While many agency heads have clamored for this, what was so striking about Mr. Berlin's address was its urgency. "Even when we do our job well, we are horribly under-compensated," he said. "The risk is that we're not going to have an industry-and that's a real risk."

While marketers were sorely underrepresented, the one who did show prompted the conference's single most dramatic moment. Agency executives fumed when Anne Belec, president-CEO of Volvo Cars North America, ended her presentation by asking the roomful of agency execs for ideas for the "Volvo for Life" campaign (AdAge.com QwikFIND aaq541).

She later said she was just looking for additional agency alliances, but numerous attendees felt she had snubbed her agency of record.

The agency in question, Euro RSCG, happens to be run by Mr. Berger, who upon retaking the podium gamely told the audience, "Those of you who think that account just went into review, that's not happened-just to be clear."

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