The national advertising review Council decision to resume issuing National Advertising Review Board policy papers on important issues in advertising is a good one. We applaud it. Success, however, will be measured in great degree by the courage NARC and its NARB panels bring to this exercise.
Courage is what will be required if these papers are to be more than simple defenses of the way things are done in advertising today. Calls for change are not always welcome.
One policy paper should look at the advertising of age-restricted products (tobacco, alcoholic beverages, casino gambling, and so on). Executives in those industries don't necessarily want to open this up for discussion, and NARC itself beat a hasty retreat from the issue in late 1996 when some affected advertisers balked. But it's an issue that is not going to go away and is certainly worthy of a policy paper.
NARC, representing major ad industry organizations and the Council of Better Business Bureaus, is well placed to initiate these policy papers. Created to help oversee national ad self-regulation through CBBB's National Advertising Division, the council's NARB panels are made up of industry professionals and representatives of the public. The panels normally rule on disputes between advertisers and the NAD. But the same panel structure can, and has in the past, produced thoughtful examinations of contemporary advertising practices.
If they succeed again, the NARB policy reports will help advertising change to address the concerns of today. That kind of thinking, from people inside this industry, should always be welcome.
State of Y&R
As young & rubicam moves toward its debut as a publicly traded company sometime this May or June, speculation and analysis has zeroed in on its low profit margins and whether, as rivals charge, they are the result of cutting commissions and fees to amass new-business wins. But too much focus on just some of the details in Y&R's Securities & Exchange Commission filings can give a flawed picture.
When Y&R undertook its 1996 recapitalization in preparation for going public, it wrote off virtually every business sin ever committed. It did so with such fervor that its recent financial performance becomes an imprecise tool for predicting the future as this holding company moves from what it was to what it will be. Y&R also probably has more executives on its payroll than it will need in the future, the result of the old guard having to stick around until the deed of going public is done. At the same time, Chairman Peter Georgescu has recruited a number of new executives to help prepare for the stock sale and insure Y&R's success after that event. Once the sale is completed, the executive redundancies will be gone, as will the expense of carrying them.
Less certain is the future of Burson-Marsteller. Though considered the world's largest PR agency, last year insiders said the unit's surprisingly poor profit performance in Asia dragged down Y&R's overall profit margins. Until that point, those margins were said by executives close to Y&R to have been improving and hovering at an estimated 9% to 10%. While that's still below Omnicom Group's 12.9% margin, it's nowhere near as low as the current 6% being cited by analysts based on the Y&R's recent SEC filing.
Over the last two years, there were rumors Burson would be sold. As part of a public company, it now will have to step up to the plate and turn in better financial performance. If it doesn't, the market will demand its own solution.