Monday Note

Is advertising the next casualty of the on-going digital tsunami’s? For now, advertising looks like the patient who developed an asymptomatic form of cancer without realizing how sick he is. Such behavior usually results from excessive confidence in one’s body past performance, mixed with a state of permanent denial and a deep sense of superiority, all aided by a complacent environment. The digital graveyard is filled with the carcasses of utterly confident people who all shared this sense of invincibility. The music industry or, to some extent, the news business built large mausoleums for themselves. Today, the advertising industry is working on its own funeral monument. Same mistakes….

Before performing media oncology tests and discussing possible treatments, let me describe which soapbox I’m standing on. Each time I raise the issue of advertising trailing behind the digital train, I get two responses: media execs nod sagely, and later explain how they intend to progressively circumvent the ad food chain; advertising people breezily dismiss my remarks: ‘Anyway, you don’t like us’. Untrue.

First, I’m in the same boat with many of my friends in the news media: a significant part of my income, past and future, rides on advertising. Therefore, my pragmatic self-interest is to see digital advertising thrive.

Second, over my 25-year career, I worked with ad people in many occasions. In the late 90′s, for a year, I even worked at a large ad agency, trying to evangelize multimedia. I met interesting people there, even though I quickly realized we had little in common. And my last job as a managing editor was at a free newspaper: 20 Minutes — 100% dependent on advertising.

I am way more open to this business than most of my journalist colleagues are. No ideological posture or agenda on my part. Today’s note is the result of two years of observations and conversations with digital editors and publishers I met in Europe, US or Asia.

Let’s face it. On digital medias, advertising hasn’t delivered. In the news business, we have a rule of thumb: an electronic reader brings 15 to 20 times less in advertising revenue than a print reader does. I’ll stop short of saying this dire state of affairs is only attributable to advertising. Between inadequate interfaces, poor marketing, and the certainty that, just by itself, intellectual superiority entitles to success, medias carry their share of responsibility in this situation. But, for the most part, it is the advertising community who missed the digital target.

Digital advertising sucks. Both on the web and on mobile. Two main reasons for this.

#1: Poor design. Where is the creative talent? Not in digital, that’s only too clear. Let’s face it: most of banners, skyscrapers, sliders, pop-ups, you name it, merely act as reader repellents. Judge by yourself.

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These “creative works” end up as fodder for ad-blocking systems. Unfortunately, these defense mechanisms are thriving. A Google query for “ad block” yields 1.25 million pages which send to dozens of browser add-ons. On Firefox, AdBlockPlus is the most used extension with more than 80m downloads and more than 10m active users. The same goes for Chrome whose ad-blocking extension is downloaded at a rate of 100,000 times a week and now has over one million users. For Internet Explorer, there are simply too many add-ons to count.

I spotted this comment in an excellent Media Guardian ad blocking story.

“I work for a digital advertising agency. Along with microsites, iPhone apps and long-form digital content, I make banners. Shitloads of them. And I use Adblock Plus. I also advise my friends and colleagues to use it too. This is because most advertising, online or otherwise, is utter crap. And banners contain some of the worst of the crap. Flickering, squiriming, farting, buzzing crap”.

Another sign of the ad design failure is Apple’s decision. Not only does Apple enter the mobile ad business as a sales house, but Jobs’ company will also design ads, for a hefty $50,000 to $100,000 fee. Apple’s message is the profession needs to reboot advertising graphical standards. How strange it is to see a technology company giving lectures on design to the very people who prided themselves for their creative brilliance. If this is not a blow…

#2: badly sold, badly bought. A high-tech product sold and purchased in the most low-tech way. One after the other, most technology aspects of the advertising business have slipped out of the hands of those who were supposed to own it: ad serving, data management, behavioral targeting, analytics… All are now controlled by engineering-driven companies.

In the process, the added value of media buying outlets has shrunk to a bare minimum, in which a bunch of twenty-something are negotiating discounts with their counterparts in media. That’s the exact opposite of yield management.

Everyone laments that Google, the ultimate geek machine, has absorbed a large part of the digital advertising business, but that’s just the logical consequence of an inability to invest in technical talent.

The digital world is not the only one affected by advertising’s creative weakness. Over the recent weeks, I met some managers of RTL, the n°1 French radio. Their take:

• True, the overall quality of ads we air is falling.
• We know that such degradation contributes to the erosion of our audience numbers; listeners tends to shift to quieter listening such as public radio. (This is especially in the morning time slot where commercial stations make most of their revenue, hence their concern).
• We try to limit the damage by screening and sometimes rejecting the most inaudible ads, but economic conditions don’t help: we can’t afford to lose any campaign on the basis of aesthetic considerations.
• Fact is: because they don’t make enough money on ads, creative agencies are simply not motivated to invest in the talent needed to develop good ads.

Three trends should cause the advertising community to stop and think harder about its future.

1. The technology dimension of the business will intensify. Competence and imagination will tend to be in the hands of small companies. As they already do, the biggest and the smartest ad outlets will want to acquire such talent pools. But they will face tech companies ready for a bidding war; see what happened in the mobile ad sector with the AdMob’s acquisition by Google and Quattro Wireless taken over by Apple – with the subsequent launch of iAd, (on the subject, see this preset search on TechCrunch).
2. Media will have a strategic interest in boosting their CRM. They’ll invest in developing this crucial asset for their digital properties.
3. Media will tend to move up the ad production chain by having their own creative teams, working more closely with big advertisers; (see this Australian example mentioned in a previous Monday Note Digital Takeover, The Fairfax way).
   In that matter, Apple could give an interesting pitch: “We are the media, we spent time and money designing a good interface; we don’t want our work ruined by sub-standard advertising; let’s work directly with brands and concoct great campaigns that will benefit us, the advertiser and the reader”. This could become a broader trend, spreading to other medias, such as broadcast radio, neglected by today’s ad creatives.

Does this lead to the extinction of big advertising shops? Certainly not. First, there is the inertia factor; these companies remain quite wealthy thanks to decades of solid rainmaking. Second, agencies still enjoy profitable strongholds in which their value added is undisputed such as outdoors display, television and print — and the associated media and strategic planning. Third, they have no shortage of good managers able to organize turnaround… in due course.

It is hard to reform a fat-cat culture – from heavy margins, captive clients, cozy cronyism – to a more agile one, where technology and innovation drive the business. In this very respect (again), advertising and news media converge: both have been late in hiring developers able to understand the specifics of their business. Because of their intrinsic vulnerabilities, media have been the first to take a hit. If advertising wants to avoid a Jivaro-like downsizing, it needs to listen to the clock: it’s ticking away.

—frederic.filloux@mondaynote.com

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