ANA 2008

CMOs Annoyed by Agencies, Ad Networks

HP, Charles Schwab Mull Going Direct to Media Companies; Verizon Takes Online Partners to Task

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ORLANDO, Fla. ( -- Agencies and ad networks came in for some rough treatment at a CMO roundtable during the Association of National Advertisers' annual conference on Saturday as executives vented their dissatisfaction with agency models and ad-network performance.
Becky Saeger, John Harrobin and Gary Elliott
Becky Saeger, John Harrobin and Gary Elliott Credit: Art Beaulieu

The chief marketing officers of Hewlett-Packard and Charles Schwab openly mulled the attractiveness of bypassing agencies to work directly with media companies and other experiments as they look to fix an agency model they see as broken.

"The overall message, I would have to say, with HP, is that I don't think any of these [agency] relationships are satisfactory enough that we would continue them without having some degree of experimentation," said Gary Elliott, VP-corporate marketing at Hewlett-Packard. "We've been experimenting with different agency relationships where we're looking at agency partners and vendors in ways that connect them loosely with each other. We're looking at models where we have everything with one of our key partners."

Speed to market
What's lacking in agency relationships now is speed to market, Mr. Elliott said. "I don't think with our current system we're achieving that. ... We're going to pilot a number of different relationships where we go direct with media companies."

He pointed to publisher Meredith Corp. -- noted in remarks earlier by Booz & Co. consultant Chris Vollmer as Kraft Foods' agency of record for customer relationship marketing -- and Time Warner as candidates for such relationships.

John Harrobin, senior VP-marketing and digital media for Verizon Communications, echoed Mr. Elliott's thoughts on going direct to media companies.

"I don't think you can be a top-20 or -30 advertiser and not have that relationship with media companies," he said.

"If I were an agency, I would be really worried about being disintermediated," said Becky Saeger, CMO of Charles Schwab. "More and more the agencies are almost in the way sometimes. So there are people in this room who were at a talk this week where we had started to do strategic briefings for media companies so we know that they understand what we're trying to do with our brand so we get higher quality input and not have to rely on our media agency to be in the middle all the time."

Erratic performance
Not that media companies got unconditional love. Verizon's Mr. Harrobin pointed to the erratic performance of online advertising networks as one of the biggest hurdles to more media dollars going online and recounted some tough love Verizon recently visited upon the networks.

"We in late July saw three of our banner ads on sites that we absolutely would not want to associate with," Mr. Harrobin said. Verizon asked for a full report and assurance it wouldn't happen again, but in August it happened again, and Verizon pulled all of its online advertising except ads placed through AOL's Platform-A, where Mr. Harrobin said a process was already in place for preventing such problems.

Then Verizon called in representatives from 20 ad networks and laid down the law, which included no reselling, serving ads only on sites that have a direct relationship with the publisher and full transparency, and the ability to audit every site where its banner ads appear.

After Verizon gave the networks 30 days to comply, 18 of 20 did, Mr. Harrobin said, and Verizon resumed its online advertising Oct. 1.

Impeding growth
"Managing context of where your ad appears online with these networks is really vital," he said. He added that online video sites' refusal to allow pre-roll advertising is another major impediment to growth of online media.

"There are still doubts that [online is] as effective at telling a story as TV or has the reach," Mr. Harrobin said. "Thankfully, Hulu and MTV and others have proven that you can do this effectively without disrupting the customer experience. So I think that's going to help the market."
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