To survive, ad agencies must join accountability revolution

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The parlous state of Internet advertising notwithstanding, it's undeniable that marketers are in the midst of a long-term accountability revolution. The combination of scanners, computing power, modeling and, more recently, click-throughs and cookies, has transformed marketing and advertising from a discipline premised on artistry and advanced guesswork into one promising degrees of real predictability. Accuracy will only increase.

But where lies the appropriate role for the advertising agency?

The question isn't easy to answer. Agen-cies still like to consider themselves "marketing partners" with their clients. Yet most ad executives would concede the partnership has been fraying as agencies have given up one, then another, then another of the services that made them special to clients: media production, research, new-product development, marketing strategy. For the most part, the ad agency today performs two roles, media buying and creative development.

But media buying, increasingly, is a commodity business; its value to agencies and clients alike resides in the ability to scale it globally, skimming thinning margins off growing volume. This is a game only a handful of big guns will be able to play. And creative is, well, creative-an amusement, operated under the rules of entertainment. For agencies, its value-absent definitive measures, such as ticket sales-is hard to define, and thus hard to price. Moreover, there's a strong argument that agencies don't need to "own" their creative any more than Hollywood studios need to own their actors, directors or writers. Long term, it wouldn't be surprising if advertising creative, like Hollywood creative, moved to a fully outsourced model.

For agencies, then, the only way to survive the accountability revolution may be to join the fray. As Brendan Ryan, chief executive of Foote, Cone & Belding Worldwide, told me six months back, "If you can measure the results, you can participate in the growth."

That's easier said than done, of course. Marketing communications companies are typically structured by silo, with different disciplines guarding their own turf and P&L. Mr. Ryan's solution was to establish a database company, Analytici, with the hope it will become the accountability engine at the heart of all major accounts.

I had breakfast recently with Steve Horne, who runs Analytici, to see how the effort was going. A database builder from way back-he joined Dun & Bradstreet as a telemarketer in 1978, rising to run strategic planning there-he joined FCB in 1999 in order, as he puts it, "to refute John Wanamaker."

"It's a farce that advertising can't be made accountable," Mr. Horne told me. He mentioned a packaged-goods client, 5% of whose customers represent 70% of revenue. "Only 50% of their advertising touches any of those 5%. If I can turn that 5% into 6%, I can add $400 million to their bottom line." Accomplishing that, he said, means surmounting agencies' siloing propensity so that every touch with a customer has not only impact but accountability. "Every aspect of marketing should be tested and measured, so it can be turned into money," Mr. Horne said. "Awareness and preference share should ultimately translate into revenues. If you can't measure it, don't do it."

Measurement presents its own challenges. Marketers also are frequently divided into incompatible units, whose information technology systems can't "talk" to each other. Data rich yet information poor, such companies can't answer basic customer questions, and thus can't optimize their marketing spending. It's the agency's role, Mr. Horne believes, to help companies become customer-centered-a tall order, for it implies organizational, technology and cultural transformations that can be as expensive as they are difficult.

Is he-is FCB-succeeding? Mr. Horne concedes relationships with the rest of the agency are "not as good as they should be." He said, "there's a fear factor on the part of some account reps. I have to make them comfortable. `Give me your database; let me give you some gee-whizzes for your account. I add quantifiable evidence to your decision-making."' Still, he feels comfortable that he's doing God's work-if not necessarily John Wanamaker's.

"Brendan has drunk the Kool-Aid," he said of his boss, FCB's CEO and accountability zealot. "But you still have to get over peoples' discomfort with the unknown."

Mr. Rothenberg, an author and longtime journalist, is chief marketing officer at consultancy Booz-Allen & Hamilton.

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