Despite Perfect Storm, Marketers Barrel Full Speed Ahead

Agency Mistrust, Digital Fraud, Waning Ad Effectiveness Batter Industry

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Credit: Luke MacGregor/Bloomberg

The advertising industry is being battered by the perfect storm.

Not only is the relationship between clients and agencies at a low level of trust and confidence, and not only are digital-media buys (where marketers are putting an increasing share of their budgets) fraught with phony clicks and ad blocking, but now consumer buying behavior is changing dramatically and marketers aren't even sure who their best customers are anymore.

And yet, as our editor, Ken Wheaton, pointed out to me, participants at Advertising Week were full steam ahead.

Their answer to ad blocking: Just make better ads. Their answer to ad fraud: more transparency.

As Ken said, "They're also hoping technology will help them catch the bad actors, but some of the stuff coming out of the fraud session basically boiled down to, 'Yeah, there's a problem, but we'll fix it eventually and we just need more transparency.'" Ken added that if he never hears the t-word again, it will be too soon.

The marketing world has always considered itself above the fray, above the grubby business of actually selling something to somebody. At an Association of National Advertisers conference several years ago Unilever's chief marketing and communications officer, Keith Weed, unabashedly declared: "We have to stop looking at consumers as armpits that need deodorizing!"

So it's only natural that marketers would figure that all sides of the digital fraud game would play nice and work collectively to solve the problem. But surely even they wouldn't think the fraudsters would cooperate. As Willy Sutton famously said, he robbed banks "because that's where the money is." The bad guys produce phony clicks on nonexistent websites because it's easy pickings.

When the ANA's Bob Liodice first told his board about the scope of the digital fraud problem, "there was a little bit of denial that this was going on," he said last year. "But more importantly, there was, I'd say, less of an urgency to move this forward."

So the industry has gone from initial denial to grudging acceptance to believing (at least publicly) all that's needed is a little more openness by all the players.

Fat chance, and not only because the bad guys will obviously refuse to cooperate. The good guys won't either! Listen to what Jim Kiszka, Kellogg's senior manager for digital strategy, told Bloomberg Businessweek. When his company tried to get a breakdown of costs from the various ad agencies and data companies it hired, they all refused: "It wasn't a smoking gun. It was more like a detective story where you had to piece together the evidence. And it was clear with that little transparency there was bound to be problems."

The other common theme at Advertising Week was that if only advertisers and their agencies would create better ads, consumers wouldn't be so inclined to block them.

But what makes anybody think that the ad world will suddenly start producing great ads that consumers can't wait to see? A handful of advertisers might rise to the occasion, so why should consumers take a chance?

As one reader wrote to Ad Age: "The consumer has been blocking out messages long before there were ad blockers. ... The answer: War lost."

I think the war has been lost for several reasons, not least the deteriorating relationship between client and agency. In his new book, "Madison Avenue Manslaughter," consultant Michael Farmer cites the unleashing of procurement departments and the emphasis on shareholder value as forces that are pushing hard on agency profit margins—and diminishing the role of marketing.

And now, compounding the problem, agencies have been accused of accepting rebates and kickbacks. What's really at stake here is the continuing battle of the fees that clients pay agencies. Some marketers don't care how much revenue agencies get from other sources as long as clients can keep agency fees low.

All of the above can be regarded as rearguard action compared to the really big problem: Advertising doesn't seem to be working as effectively as it once did.

At a time when consumers are shopping less often and changing long-held brand preferences when they do shop, marketers are no longer getting the expected results from their advertising and promotion. Old-fashioned brand building is becoming a relic of a bygone era.

At our CMO Strategy Summit last year, Deanie Elsner, a former exec at Kraft Foods now at Kellogg, said, "What's happening today is a transformational shift in the landscape, and it's unprecedented."

And the numbers back up her statement. The top 100 packaged-goods brands saw sales and market share slip significantly in the past year, according to a report from Catalina. The problem isn't limited to any one category. Overall, 62 of the top 100 brands had declining sales—often to smaller players with niche products.

So the ad industry's perfect storm continues to rage, and there are few signs on the horizon that the waters will calm anytime soon.

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