This is the final post in a series about the current issues facing mid-sized Advertising Agencies.
Bucking the Trend
So far, we have focused on the problems that struggling mid-sized Agencies have been facing. In my sample, two executives at mid-sized firms told me that they were doing very well, thank you, but they were sensitive to the challenges that others were facing. I know both of these gentlemen quite well. One I knew as young man. He was extremely well organized, interested in every aspect of the business, and highly ethical. The other is a creative dynamo who works well across all media types and digital platforms. We correspond regularly.
Why are they and their firms doing so well? Both firms have not forgotten that excellent creative has to be the very soul of any advertising agency. High standards are maintained. My creative director friend does not segregate digital from the rest of his creative team. They work in squads with a conventional writer and art director paired with a digital player. This cuts turf issues and they can play off one another in development of the message. Also, he makes an important point to those who speak somewhat breathlessly about Facebook. “Most people do not want to be marketed to, especially in social media. We do Facebook and other digital work as part of a campaign for visibility. Games are developed with pretty good participation but no hard selling. The goal is for creative buzz, not to sell. We make this clear to clients upfront.” The leaky barrel due to marketing director turnover could affect them at some point but in the last year they have picked up significant new business.
My other upbeat contributor says his company was fortunate to have entered the digital arena years ago due to key client acquisition. They developed the necessary skills early on and, in my opinion, probably before some of the mega-shops. Social media is still a challenge as it is for everyone but they are working on it.
I also had wonderful sessions with two old friends who have downsized their companies in recent years and are thriving and happy. Their modesty was refreshing as well.
One ran a fairly good sized shop some years back but now has a very well thought of boutique in a large U.S. city. He says that “our market has been backsliding as an advertising center for years. Right now, we are viewed as a big player in town and we are nothing”. How many chiefs would say that? “Management has shifted frequently at some of our clients but so far we have been able to hang on to the business. Our approach is starkly different than others out there. We have no huge overhead. When we have a project, we gather in senior people that we trust. They only work when we have an assignment. There is “no twelve people to screw in a light bulb” nonsense that you see even at mid-sized shops. Every time you put a layer of people on a job it costs you money. We never do that.”
Another friend downsized before the 2008 crunch and is based in a small Northeast city. Now he works mostly on a project basis. His approach is similar to my old colleague a few thousand miles away. “I have people that I can go to for TV or radio production on a short fuse. We have worked together for years.” Also, he says that the turnover is great with some clients. “Sometimes, I feel as if I am doing a new business pitch for every assignment that we want.”
I told them both that their approach is analogous to what Clint Eastwood has done at Warner Brothers for decades. He has a “boutique” studio within Warners and for film after film he pulls in the same cameramen, lighting specialists, set designers, and often actors among other disciplines. The result is films shot both on time and under budget. It has been described as a family that is very functional. Both loved being compared to the great Eastwood but said the analogy is dead on. One added “I try to explain this concept to prospects. Sometimes I am halfway through it and if I see their eyes glaze, I know that my team is toast and the prospect wants to go the conventional route.” He also is a big believer that larger shops could do well if they approached certain smaller clients with this boutique approach. The issue would be whether the team in the mid-sized or large shop could turn on a dime as he does.
My friend in the Northeast says he never worries about getting assignments. “If you are smart, good and are willing to work very hard, you can always find work even in a tough environment such as this”.
These are two great people who never whine and can teach us all something.
Conclusions
Are mid-sized shops finished or will they come roaring back when the economy someday rebounds smartly? I would say neither. There are always going to be agencies such as the two mid-sized profiled above who keep turning out first class work and keep their teams fresh and motivated. Someone will break out and become the next Crispin Porter, I am certain. But the success stories will be less frequent.
Everyone admits that we are going through a revolution as we move to the digital world. Yet some exhibit remarkable selectivity about how it will affect their firm or their jobs. To me, what is going on at mid-sized shops in simply one more case of Creative Destruction. This is a concept popularized by Joseph Schumpeter of Harvard back in the 1940’s. (For a more detailed explanation see “Schumpeter Lives in 2009 Media, Media Realism, January 30, 2009.)
Creative Destruction in a nutshell states that a new idea enters the marketplace and makes existing capital relatively worthless. The new idea tends to be innovative and radically so. Radical innovators (read digital and media fragmentation) cause some real hardship to those involved with the existing status quo companies. Layoffs rise in the obsolete companies and many suffer in the short term. Others suffer long term as they are unable or unwilling to be retrained in the new emerging world.
The mid-sized players with no niche but promised service are not long for this world. Those who have embraced the change and developed skills consistent with the new reality may outlive us all. I wish them the very best.
Finally, I wish to thank the dozens of people who gave me countless hours of often precious time to put this series together. Your honesty and passion for your business is inspiring.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Tuesday, October 26, 2010
Sunday, October 24, 2010
Mid-Sized Malaise--Part Three
This is the third installment of a series that I am writing about the current state of mid-sized advertising agencies.
Marketing Research, Strategic Planning, and Account Planning
I lump these three disciplines together because in both good times and in bad this tends to be the Achilles heel of a mid-sized agency. Most do not have the resources to buy or conduct top quality research. And the people in those positions at mid-sized shops are usually not formally trained. Their knowledge of statistics is sketchy at best in many cases. Some want to look bigger so they take an account supervisor and dub him or her a strategic or account planner. It often ends badly.
Generally, the CEO, Account Service Chief, or the Creative Director drives the bus on strategy. I have met a number who have a very good intuitive feel for what will work or not. Some get to the point where they tell the “researcher” or “planner” to write the research report to back up the creative executions that they want to present. Don’t tell me it doesn’t go on—if you are honest and kept your eyes open, you have seen it too. Maybe you still do.
Often researchers or strategists at a mid-sized shop are strapped for cash. So, they have someone in media do reams of MRI or Simmons cross-tabulations. They built a massive power-point with it, highlighted by way too many bullet points on each page. Some people have a knack for building a logic flow out of it that sounds convincing (I used to be rather good at it myself).
A friend of mine has sold research services for 30 years. He says “agencies today want research that is quick and cheap. If it is very vital new business pitch, they pay just enough to get a few bullet points for the main presentation. A few very large shops do custom work but most of it comes from big companies”. Even the media giants do surprisingly little. The two exceptions are MTV and ESPN. He described ESPN as a gem that knows the profile of everyone using each of their burgeoning platforms and cross-usage of them as well. Perhaps that is why they keep growing and get a huge premium over the competition for all aspects of their sales inventory.
Account Planning is another area that is often an absurd fiction at mid-sized shops. In my long years in the game, I have met two authentic account planners (See Media Realism, 10/13/09 "Is It Really Account Planning" for a detailed discussion of account planning).
Putting people in jobs and dubbing then strategists or planners leads to some funny situations. Not long ago, I was at a meeting where the Sr.VP, Account Planning kept scrunching her face when I spoke of Brand Development Index (BDI) and Category Development Index (CDI). Finally, she blurted out “Don, what is this BDI stuff.” For once in my life I was speechless. The CEO put his palms up in resignation and told me to explain it. The client was not amused and collared me afterwards. It was a very uncomfortable conversation to put it mildly.
So, marketing research and strategic planning are areas where the mid-sized shops fall way short in most cases. They can use smoke and mirrors plus good instincts and common sense with small or mid-level advertisers. They are, however, naked in front of major corporations who have in house teams that would not consider hiring the strategic planner of the agency.
There are a few exceptions to this out there in the mid-sized world. And I mean FEW.
Media
This is where I spent much of my career so you might expect me to obey the 11th commandment and not speak ill of my media brethren. I actually will not attack them but there are some structural issues that put them at a real disadvantage in many cases.
The biggest thing that I notice from media people these days across the U.S. is very simple—fear. Here are some comments from sales executives widely scattered across the country that I have known for years and respect deeply:
“The operative term is scared to death. I can see the fear in their eyes at many mid-sized shops. The smallest are more often morphing into specialty/niche outfits as they are more successful focusing on the best burger in town, instead of banging out an entire menu…..It’s the mid-sizers who are not big enough to truly be all things to all people, and that grew too large, too fast that are indeed suffering. They swallowed hard and down-sized themselves over the last two years (like everyone else) but are now trying to super-serve clients with a skeleton staff. One by one the shingles are disappearing from above the office doors and good people are calling weekly asking “do you know anybody who needs an experienced media planner.””
When I asked a sales director in a major market if people are frightened, the response was “my observation is that many in media in mid-sized agencies are still fearful of the potential SECOND WAVE which could result in yet another downsizing at the agency level. People are guarded, cautious; playing everything close to the vest. Many in media have experienced the unthinkable—the larger than life Media Maven (boss) let go due to downsizing….the slash and burn of some entire media departments which has put many experienced media people on the street. No one wants to go out of his/her way and take chances on anything out of the norm. It is all SO MUCH about the post—now more than ever. I also get the feeling that no one wants to ask the boss to hire on new workers—even if there has been a big pick up with new account work. The attitude out there is that I have got to do more to keep my job.
A charismatic media research salesman whom I often find hilarious in private soberly weighs in: “What I am hearing at mid-sized shops is that larger agencies have cut fees or commissions and it is harder for medium sized shops to hold accounts or even stay in business. So to be competitive for less revenue means less money to pay top quality employees, less perks, less of everything. So the medium sized shops which once had a warmer feel to them and were attractive to the seasoned executive are now becoming places to avoid because the pay and resources are becoming too scarce….I don’t believe that the medium sized shop will evaporate all together but you will see consolidation and unfortunately some will go away. It is just a fact of contracting markets.”
Another media researcher sales maven says that the media teams are nervous but keep plugging along. They are overworked and not paid enough but seem happy to have jobs. He did add grimly that “there are no stars left in media departments. These people do not teach me anything I don’t know.”
A very thoughtful cable executive tells me:" I believe that the media buying community at all levels is scared to death for their jobs. A friend who is a buyer started looking for a job when she did not post on one of 13 markets last quarter. This is symptomatic of being overworked; she needs to understand that she is a much needed commodity….NO ONE IS HAPPY OR OPTIMISTIC RIGHT NOW".
From the world of sports, a seasoned pro says that the overwork is affecting the back office. He told me of a game being cancelled by rain and he had to move 18 advertisers. Immediately his team sent out an e-mail telling people that their schedule had been re-allocated. Two got back to him and one took a credit as the new spots were out of flight. He asked “is anybody checking anything but matching dollars. Twenty years ago, I would have had a dozen calls arguing about the make goods. Admittedly, the ratings are smaller today, but I think good people may be cutting corners”. This man has the ethics of a St. Thomas More but what if he did not?
The big problem facing the mid-level media teams over the next year or two will be the integration of digital and traditional media. Some make them separate mini-departments which can cause a knife fight for budget dollars. It is better for one Solomon to digest both recommendations, allocate the funds, and let each group optimize. Working together as a team is even better! Many, as we have mentioned in an earlier post in this series, fake digital. They buy ad networks and claim to have worked out an integrated on line strategy that optimizes delivery. “The publishers hate ad networks as it diminishes their product”, says a leading media researcher but if you have a digital team of one 27 year old, you play the game.
There are still a few people out there who do as little new media as possible. Most admit that they are having a hard time with social media especially for brands with mature customers. This is okay as all thinking people are struggling with it these days. You know that you need it but in what proportion of total dollars? With each passing year digital will earn a larger place in media plans. To those dinosaurs that resist it, there is no way that they can survive the crunch.
Some media people are not being trained well at all due to overwork of the senior team. Young planners are not learning about marketing like they used to. Some are scrappy negotiators by instinct but do not know the mechanics of where the Nielsen/Arbitron and now digital research comes from. Media planning disciplines don’t come up much as no one has the time to instruct. The proportions of each medium in the overall mix is key issue that gets little attention these days. Youngsters appear to guess at it as they have never learned the benchmarks or quantitative guidelines for it. When the old people go, a lot will be lost.
This should be the most exciting time since 1953 to work in media? Why 1953? That was when over 50% of America had a TV and television became a truly viable national medium. Today, another revolution is going on and smart youngsters should be able to ride the wave into brilliant careers via digital. At mid-sized shops, the financial squeeze will make that difficult.
Finance
Several people harked back to the good old days of the 1980’s when interest rates where high and agencies made a bundle on the “float.” The client paid you and you deposited the money, and paid it out to the media later, pocketing a tidy sum of interest. Well, others disputed that saying that the mega-shops were real sharks with cash management but the mid-sized guys never really made a lot out of it or were that great at it. The question is getting moot today as many advertisers pay networks, stations, cable players and publications directly. Also, the clients are smarter. Why should they give their agency an interest free loan?
To be continued in about 48 hours.
If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com
Marketing Research, Strategic Planning, and Account Planning
I lump these three disciplines together because in both good times and in bad this tends to be the Achilles heel of a mid-sized agency. Most do not have the resources to buy or conduct top quality research. And the people in those positions at mid-sized shops are usually not formally trained. Their knowledge of statistics is sketchy at best in many cases. Some want to look bigger so they take an account supervisor and dub him or her a strategic or account planner. It often ends badly.
Generally, the CEO, Account Service Chief, or the Creative Director drives the bus on strategy. I have met a number who have a very good intuitive feel for what will work or not. Some get to the point where they tell the “researcher” or “planner” to write the research report to back up the creative executions that they want to present. Don’t tell me it doesn’t go on—if you are honest and kept your eyes open, you have seen it too. Maybe you still do.
Often researchers or strategists at a mid-sized shop are strapped for cash. So, they have someone in media do reams of MRI or Simmons cross-tabulations. They built a massive power-point with it, highlighted by way too many bullet points on each page. Some people have a knack for building a logic flow out of it that sounds convincing (I used to be rather good at it myself).
A friend of mine has sold research services for 30 years. He says “agencies today want research that is quick and cheap. If it is very vital new business pitch, they pay just enough to get a few bullet points for the main presentation. A few very large shops do custom work but most of it comes from big companies”. Even the media giants do surprisingly little. The two exceptions are MTV and ESPN. He described ESPN as a gem that knows the profile of everyone using each of their burgeoning platforms and cross-usage of them as well. Perhaps that is why they keep growing and get a huge premium over the competition for all aspects of their sales inventory.
Account Planning is another area that is often an absurd fiction at mid-sized shops. In my long years in the game, I have met two authentic account planners (See Media Realism, 10/13/09 "Is It Really Account Planning" for a detailed discussion of account planning).
Putting people in jobs and dubbing then strategists or planners leads to some funny situations. Not long ago, I was at a meeting where the Sr.VP, Account Planning kept scrunching her face when I spoke of Brand Development Index (BDI) and Category Development Index (CDI). Finally, she blurted out “Don, what is this BDI stuff.” For once in my life I was speechless. The CEO put his palms up in resignation and told me to explain it. The client was not amused and collared me afterwards. It was a very uncomfortable conversation to put it mildly.
So, marketing research and strategic planning are areas where the mid-sized shops fall way short in most cases. They can use smoke and mirrors plus good instincts and common sense with small or mid-level advertisers. They are, however, naked in front of major corporations who have in house teams that would not consider hiring the strategic planner of the agency.
There are a few exceptions to this out there in the mid-sized world. And I mean FEW.
Media
This is where I spent much of my career so you might expect me to obey the 11th commandment and not speak ill of my media brethren. I actually will not attack them but there are some structural issues that put them at a real disadvantage in many cases.
The biggest thing that I notice from media people these days across the U.S. is very simple—fear. Here are some comments from sales executives widely scattered across the country that I have known for years and respect deeply:
“The operative term is scared to death. I can see the fear in their eyes at many mid-sized shops. The smallest are more often morphing into specialty/niche outfits as they are more successful focusing on the best burger in town, instead of banging out an entire menu…..It’s the mid-sizers who are not big enough to truly be all things to all people, and that grew too large, too fast that are indeed suffering. They swallowed hard and down-sized themselves over the last two years (like everyone else) but are now trying to super-serve clients with a skeleton staff. One by one the shingles are disappearing from above the office doors and good people are calling weekly asking “do you know anybody who needs an experienced media planner.””
When I asked a sales director in a major market if people are frightened, the response was “my observation is that many in media in mid-sized agencies are still fearful of the potential SECOND WAVE which could result in yet another downsizing at the agency level. People are guarded, cautious; playing everything close to the vest. Many in media have experienced the unthinkable—the larger than life Media Maven (boss) let go due to downsizing….the slash and burn of some entire media departments which has put many experienced media people on the street. No one wants to go out of his/her way and take chances on anything out of the norm. It is all SO MUCH about the post—now more than ever. I also get the feeling that no one wants to ask the boss to hire on new workers—even if there has been a big pick up with new account work. The attitude out there is that I have got to do more to keep my job.
A charismatic media research salesman whom I often find hilarious in private soberly weighs in: “What I am hearing at mid-sized shops is that larger agencies have cut fees or commissions and it is harder for medium sized shops to hold accounts or even stay in business. So to be competitive for less revenue means less money to pay top quality employees, less perks, less of everything. So the medium sized shops which once had a warmer feel to them and were attractive to the seasoned executive are now becoming places to avoid because the pay and resources are becoming too scarce….I don’t believe that the medium sized shop will evaporate all together but you will see consolidation and unfortunately some will go away. It is just a fact of contracting markets.”
Another media researcher sales maven says that the media teams are nervous but keep plugging along. They are overworked and not paid enough but seem happy to have jobs. He did add grimly that “there are no stars left in media departments. These people do not teach me anything I don’t know.”
A very thoughtful cable executive tells me:" I believe that the media buying community at all levels is scared to death for their jobs. A friend who is a buyer started looking for a job when she did not post on one of 13 markets last quarter. This is symptomatic of being overworked; she needs to understand that she is a much needed commodity….NO ONE IS HAPPY OR OPTIMISTIC RIGHT NOW".
From the world of sports, a seasoned pro says that the overwork is affecting the back office. He told me of a game being cancelled by rain and he had to move 18 advertisers. Immediately his team sent out an e-mail telling people that their schedule had been re-allocated. Two got back to him and one took a credit as the new spots were out of flight. He asked “is anybody checking anything but matching dollars. Twenty years ago, I would have had a dozen calls arguing about the make goods. Admittedly, the ratings are smaller today, but I think good people may be cutting corners”. This man has the ethics of a St. Thomas More but what if he did not?
The big problem facing the mid-level media teams over the next year or two will be the integration of digital and traditional media. Some make them separate mini-departments which can cause a knife fight for budget dollars. It is better for one Solomon to digest both recommendations, allocate the funds, and let each group optimize. Working together as a team is even better! Many, as we have mentioned in an earlier post in this series, fake digital. They buy ad networks and claim to have worked out an integrated on line strategy that optimizes delivery. “The publishers hate ad networks as it diminishes their product”, says a leading media researcher but if you have a digital team of one 27 year old, you play the game.
There are still a few people out there who do as little new media as possible. Most admit that they are having a hard time with social media especially for brands with mature customers. This is okay as all thinking people are struggling with it these days. You know that you need it but in what proportion of total dollars? With each passing year digital will earn a larger place in media plans. To those dinosaurs that resist it, there is no way that they can survive the crunch.
Some media people are not being trained well at all due to overwork of the senior team. Young planners are not learning about marketing like they used to. Some are scrappy negotiators by instinct but do not know the mechanics of where the Nielsen/Arbitron and now digital research comes from. Media planning disciplines don’t come up much as no one has the time to instruct. The proportions of each medium in the overall mix is key issue that gets little attention these days. Youngsters appear to guess at it as they have never learned the benchmarks or quantitative guidelines for it. When the old people go, a lot will be lost.
This should be the most exciting time since 1953 to work in media? Why 1953? That was when over 50% of America had a TV and television became a truly viable national medium. Today, another revolution is going on and smart youngsters should be able to ride the wave into brilliant careers via digital. At mid-sized shops, the financial squeeze will make that difficult.
Finance
Several people harked back to the good old days of the 1980’s when interest rates where high and agencies made a bundle on the “float.” The client paid you and you deposited the money, and paid it out to the media later, pocketing a tidy sum of interest. Well, others disputed that saying that the mega-shops were real sharks with cash management but the mid-sized guys never really made a lot out of it or were that great at it. The question is getting moot today as many advertisers pay networks, stations, cable players and publications directly. Also, the clients are smarter. Why should they give their agency an interest free loan?
To be continued in about 48 hours.
If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com
Friday, October 22, 2010
Mid-Sized Malaise--Part Two
This is the second installment of a series that I am writing on Mid-Sized Advertising Agencies.
Staffing and Compensation
Here is an area that may get less press than other agency issues but, to me, appears to be the biggest source of frustration.
A longtime agency CEO put it bluntly—“including me we have four senior people left and about 45 kids. There are a few old clerks in accounting but almost everyone else is under 30. Those of us who are senior are really stretched. The kids are eager and some have great potential. But one of us graybeards has to be at virtually every meeting. We are tired and too old for this stuff.”
The idea of having a handful of old pros and a large roster of rookies percolates through many conversations with agency chiefs. Advertising has always been a young person’s game but now many shops do not have the next generation of top managers waiting in the wings as they cannot afford to keep them on staff. A few admitted that there is not going to be a next generation unless things change and quickly.
With money tight, raises are getting really scarce except for those at the very bottom of the pyramid. One chief said “Raises? Forget about them. I haven’t had one in years and all senior people have been frozen for several years as well. This may sound cynical but where can they go? We are virtually the only game in town and our competition, if you want to call them that, is in worse shape than we are. I would like to give increases but we are barely breaking even these days”. A few others told me that they and their partners have all taken pay cuts but kept the employees salaries flat.
The feeling of being trapped is very real. A copywriter in his 30’s told me “my boss is a liar. He tells new employees, interviewees, and school groups that he has never cut anyone’s salary. That is not the whole story. Four years ago I had a $60,000 salary and a $15,000 bonus. He told me that I had a bright future. So, with pressure from my wife and in-laws, I bought a nice house. The next year my bonus was $5,000 and I have not had one since. There is no other place in town that I can work and get my current salary. I can’t move as I am under water by $100-120K on my mortgage. So he has me right where he wants me. I know he is not totally to blame but I feel as if I am in prison”.
The feeling of indentured servitude is surprisingly widespread. A radio rep with whom I am quite friendly may be the dean of all salespeople nationally. He told that when he started over 50 years ago in newspaper sales, there were dozens of agencies in his fairly large city with meaningful billing. Today, he says, there are only five left standing and only one media director who knows what she is doing. Others echoed similar comments particularly those from the Midwest. One cable executive called it “The Incredible Shrinking Agency Base.”
Hiring youngsters makes sense from another perspective. “We don’t pay re-location expenses anymore for anyone. Maybe I would for someone I hand picked to replace me”, said a CEO. “Taking on young kids is great. They fill their car full of stuff and maybe have a U-Haul attached. I pay for their gas. They get a small apartment and if they get a chance somewhere else, they leave. Or, if it doesn’t work out, they do not have to worry about a mortgage. Our local talent pool is pretty slim, but there is no shortage of people wanting that first break with us”. Many people echoed this sentiment.
Salaries are interesting. A few recruiters and CEO’s told me that some jobs are paying 65-70% of what they did several years ago. And, there is no shortage of applicants. The problem said one is that “you get a kid who is not ready for the job, someone with a family who is desperate but bitter about the low pay, or someone on the skids who cannot possibly work out.”
Another whom I have known for years told me that the quality of candidates is declining. “Too many young people have not fully embraced their discipline. They are bitter that they cannot move up the ladder and, along with their seniors, have adopted a hunker down mentality. They have lost any sense of vision that I saw in people years ago. If you want to staff an agency properly you need to get into peoples' hearts and heads. Today, many candidates know enough buzzwords to fool the H.R. person and sometimes the CEO. This is especially true in digital. Out of 100 people that I speak with, only 3-5 really know the nuances of new media”.
With several people I raised the issue that has bothered me for the last five years. Young people come for informational interviews or are my students at the two universities where I am an adjunct professor. They ask me about a future in advertising. It is a tricky issue. How do you answer an earnest young person honestly? They almost definitely cannot have the kind of career that many of us have had nor is it likely they will have anywhere near the fun that I and many of you have experienced. So, I have been guarded and say that starting in advertising will teach you a lot about sales, marketing, being able to handle pressure and to stand on your own two feet. But, I never talk of the long term.
I posed this issue during an interview with someone who I admire tremendously. He gave the best answer that I heard and an honest and practical one at that. “I would tell them to go to work for a mid-sized agency. If you are any good, they will get you in the mix fast and in front of the best clients they have. You will learn a great deal. After a few years, I would encourage them to go client side where things are really happening these days.”
A few people admitted that they could lose some great people if the economy bounces back and bigger shops will raid them and offer a great deal more money. But the consensus was “I don’t see that happening for several years.”
All of this is typical of America today. Teachers, police, fireman, civil servants, bankers, and scores of fields have seen wages stuck for the last few years. Advertising was always different. Talent and achievement were rewarded early and often. Not so any longer.
For those of us with a long term view, it is clear that the people in advertising have changed. During the Mad Men era, many of the best and brightest went in to the ad game. When I started in the early ‘70’s, management at many shops was full of Ivy Leaguers or those from the top NESCAC schools (Amherst, Williams, Colby, and Bowdoin). Copywriters were erudite and quietly working on novels on weekends. Advertising was very lucrative, sexy, fun, and considered important. Today, the cream of the crop goes into investment banking or law.
To be continued—look for the next installment in about 48 hours
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Staffing and Compensation
Here is an area that may get less press than other agency issues but, to me, appears to be the biggest source of frustration.
A longtime agency CEO put it bluntly—“including me we have four senior people left and about 45 kids. There are a few old clerks in accounting but almost everyone else is under 30. Those of us who are senior are really stretched. The kids are eager and some have great potential. But one of us graybeards has to be at virtually every meeting. We are tired and too old for this stuff.”
The idea of having a handful of old pros and a large roster of rookies percolates through many conversations with agency chiefs. Advertising has always been a young person’s game but now many shops do not have the next generation of top managers waiting in the wings as they cannot afford to keep them on staff. A few admitted that there is not going to be a next generation unless things change and quickly.
With money tight, raises are getting really scarce except for those at the very bottom of the pyramid. One chief said “Raises? Forget about them. I haven’t had one in years and all senior people have been frozen for several years as well. This may sound cynical but where can they go? We are virtually the only game in town and our competition, if you want to call them that, is in worse shape than we are. I would like to give increases but we are barely breaking even these days”. A few others told me that they and their partners have all taken pay cuts but kept the employees salaries flat.
The feeling of being trapped is very real. A copywriter in his 30’s told me “my boss is a liar. He tells new employees, interviewees, and school groups that he has never cut anyone’s salary. That is not the whole story. Four years ago I had a $60,000 salary and a $15,000 bonus. He told me that I had a bright future. So, with pressure from my wife and in-laws, I bought a nice house. The next year my bonus was $5,000 and I have not had one since. There is no other place in town that I can work and get my current salary. I can’t move as I am under water by $100-120K on my mortgage. So he has me right where he wants me. I know he is not totally to blame but I feel as if I am in prison”.
The feeling of indentured servitude is surprisingly widespread. A radio rep with whom I am quite friendly may be the dean of all salespeople nationally. He told that when he started over 50 years ago in newspaper sales, there were dozens of agencies in his fairly large city with meaningful billing. Today, he says, there are only five left standing and only one media director who knows what she is doing. Others echoed similar comments particularly those from the Midwest. One cable executive called it “The Incredible Shrinking Agency Base.”
Hiring youngsters makes sense from another perspective. “We don’t pay re-location expenses anymore for anyone. Maybe I would for someone I hand picked to replace me”, said a CEO. “Taking on young kids is great. They fill their car full of stuff and maybe have a U-Haul attached. I pay for their gas. They get a small apartment and if they get a chance somewhere else, they leave. Or, if it doesn’t work out, they do not have to worry about a mortgage. Our local talent pool is pretty slim, but there is no shortage of people wanting that first break with us”. Many people echoed this sentiment.
Salaries are interesting. A few recruiters and CEO’s told me that some jobs are paying 65-70% of what they did several years ago. And, there is no shortage of applicants. The problem said one is that “you get a kid who is not ready for the job, someone with a family who is desperate but bitter about the low pay, or someone on the skids who cannot possibly work out.”
Another whom I have known for years told me that the quality of candidates is declining. “Too many young people have not fully embraced their discipline. They are bitter that they cannot move up the ladder and, along with their seniors, have adopted a hunker down mentality. They have lost any sense of vision that I saw in people years ago. If you want to staff an agency properly you need to get into peoples' hearts and heads. Today, many candidates know enough buzzwords to fool the H.R. person and sometimes the CEO. This is especially true in digital. Out of 100 people that I speak with, only 3-5 really know the nuances of new media”.
With several people I raised the issue that has bothered me for the last five years. Young people come for informational interviews or are my students at the two universities where I am an adjunct professor. They ask me about a future in advertising. It is a tricky issue. How do you answer an earnest young person honestly? They almost definitely cannot have the kind of career that many of us have had nor is it likely they will have anywhere near the fun that I and many of you have experienced. So, I have been guarded and say that starting in advertising will teach you a lot about sales, marketing, being able to handle pressure and to stand on your own two feet. But, I never talk of the long term.
I posed this issue during an interview with someone who I admire tremendously. He gave the best answer that I heard and an honest and practical one at that. “I would tell them to go to work for a mid-sized agency. If you are any good, they will get you in the mix fast and in front of the best clients they have. You will learn a great deal. After a few years, I would encourage them to go client side where things are really happening these days.”
A few people admitted that they could lose some great people if the economy bounces back and bigger shops will raid them and offer a great deal more money. But the consensus was “I don’t see that happening for several years.”
All of this is typical of America today. Teachers, police, fireman, civil servants, bankers, and scores of fields have seen wages stuck for the last few years. Advertising was always different. Talent and achievement were rewarded early and often. Not so any longer.
For those of us with a long term view, it is clear that the people in advertising have changed. During the Mad Men era, many of the best and brightest went in to the ad game. When I started in the early ‘70’s, management at many shops was full of Ivy Leaguers or those from the top NESCAC schools (Amherst, Williams, Colby, and Bowdoin). Copywriters were erudite and quietly working on novels on weekends. Advertising was very lucrative, sexy, fun, and considered important. Today, the cream of the crop goes into investment banking or law.
To be continued—look for the next installment in about 48 hours
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, October 20, 2010
Mid-Sized Malaise
The agency world is changing faster than ever before. Some people are adapting to it beautifully and are thriving. Many are not. This begins a series of posts that will cover current issues with mid-sized ad agencies. We define mid-sized roughly as 40-120 employees and independently owned. Some of what we say will apply to companies that are smaller and somewhat larger.
Over the last several weeks, I have interviewed 43 professionals. They included agency CEO’s, creative directors, writers/art directors and media directors. On the sales side, I spoke with cable, TV and radio salespeople as well as several media research sales executives who call on mid-sized and mega agencies. Finally, I talked to executive recruiters, consultants, former CEO’s, and a few clients. The cooperation rate was over 90% and people tended to be VERY candid. I covered my tracks quite well and I doubt if you can figure out who said what. Here are my findings:
Overview
In broad terms, there are three types of advertising agencies:
1) Mega-shops (giant holding companies)
2) Mid-sized agencies
3) Boutiques
Almost everyone agrees that the mega-shops and the boutiques will always be with us. The giants are beautifully positioned for the future. If you agree with me that there will be a massive relative wealth shift from the West to the East over the next decade, the holding companies are in great shape. Most already have beachheads throughout Asia, and a major study released two weeks ago projects that Asian advertising spending will surpass that of North America by 2014.
Boutiques will always bubble up. Disgruntled writers and artists will hang out a shingle and form a firm and some people with entrepreneurial zeal just have to be their own bosses. Many small players are specialty shops that are helping greatly as we move in to a digital age. Others can grind out work quickly. It may be a bit down and dirty at times but they are experienced pros who are dependable and capable of turning out very workmanlike creative on a moment’s notice. For many small advertisers and for special projects by larger ones, these firms are essential.
Agencies in the middle are in a very different place. These shops, largely regional in nature, had several things going for them for a long time. They did not have the resources of the giants but they could give more hands on service. Clients got a lot of attention from the mid-sized players. The CEO was not someone with whom you played golf once a year, shook hands with at an agency visit, or dined with every holiday season after a new contract was signed. He or she was someone who was actively involved in your business, guided strategy, and showed up for all big meetings. If you were not a large advertiser, he might actually serve as your de facto marketing chief.
Their creative was often fresh and fit your needs. A good media team at a mid-sized shop would take the time to craft a plan that took into account your unique needs and geographic coverage.
In recent years and especially since the financial crisis, things have gone south for scores of mid-sized shops. This post and a few to follow will delve into these issues in great detail.
Let us start by looking at the situation analysis from some existing and former mid-sized agency CEO’s. Here are some remarkably candid verbatim comments from several people whom I know and respect:
“Guys in the middle with no niche in our new world have no way to stand out. They can no longer afford to hire really good people. Over the years I have learned that strong people do not like to work on crap business. If you bring someone in really good, he/she will not stay as he sees that little progress can be made. The result is that the agency business is in for a very hard time for many years to come.”
“I built this agency from nothing. For over 30 years, it has been my baby. Fifteen years ago, I dreamed of selling out to Omnicom by now, collecting big dividends and dabbling a bit here and there. Today, I am working harder than ever just to keep even. I cannot sell the place to a major shop and my staffers cannot afford to buy it. And these days, they can never get a loan from a bank to buy me out. If I let them take over and give me a note, I know that I will never get my money back. This may sound arrogant but I remain the glue that holds this place together. If I get out, the place will likely break into a few boutiques and some out of town shops will grab my two remaining big accounts. It breaks my heart.”
“I can last maybe four more years. Each year, I cut my compensation sometimes by deep five figures. A few staffers get nominal raises but most have been frozen for the last several years. I feel a bit guilty because some are trapped here. There really is no other place in this city where they can work. Several are getting past the age where relocation is a good idea. We pitch less new business of any meaningful size as the cost of pitching is getting way too high for us. And, our existing business is not growing much. We had a nice bank that was sold a few years back and our auto business has bounced back a little but is still weak. I have never been more discouraged, but I am comfortable financially. None of my staff is.”
“For years, package goods were the lifeblood of mid-sized shops. Now, most are sold to big household products companies or food processors who take the business to a New York giant. My attitude is to believe that our salvation is in maintaining great relationships with clients. That can keep you going along with never stop learning new things” (I mentioned the average marketing director lasts approximately 19-22 months and he sadly nodded. One has to re-pitch a lot of existing business and you are always struggling to build a relationship with a new player). He added that there is growing tension between digital and conventional media people. Neither knows the other's discipline so plans are often badly integrated.
“We are totally faking our digital capability. A young enthusiastic kid in media comes in to meetings and says a few buzzwords and we have a halfway decent designer whom we call our digital creative director. It is nonsense. Our clients are not all that sophisticated so, for the moment, we get away with it. We are hundreds of miles away from an advertising hub so our people do not talk with anyone. I know we need to address this soon. But say “Facebook” in a meeting and everyone smiles and nods.”
A consultant and very astute observer says: “all the mid-sized agencies say the same thing—we are media agnostic, have insights into social platforms, our team has specific skills in digital, and we do not sell. We create a conversation with the consumer”.
He goes on to say: “there was a time when agency people were the key to consumer insight. That is not true today. Insight rests almost completely with the client. The people entering advertising today are not as good as those we saw years ago. They have little business training; there is little understanding of financial structure and even operating income.” He conjured a great quote often attributed to Keith Reinhard of Needham—“At one time the agency was the architect, now they are the carpenters.”
Another chief says “Everyone thinks that they are a great negotiator. So they squeeze us on fees. Some young kid is a newly minted marketing director. He is worried for his own hide (average tenure of 19-22 months) so he puts the account into review. If we are to truly look at a fully integrated plan blending conventional and digital we need more money and more people. But someone that we are competing against drops his pants and offers to do the work for $250,000 less than we are willing to take. They get the business and the young hotshot tells his boss he saved him a quarter of a million. A year later the kid is gone and so is the new agency. We told the truth and still are out of a nice account. It is so unfair. We have tried incentive based compensation which worked well once. With private firms, they can fudge numbers and say that you did not quite hit the agreed upon guidelines for a bonus. It is hard to prove and we have been burned a few times.”
To be continued. Look for the next installment in about 48 hours.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Over the last several weeks, I have interviewed 43 professionals. They included agency CEO’s, creative directors, writers/art directors and media directors. On the sales side, I spoke with cable, TV and radio salespeople as well as several media research sales executives who call on mid-sized and mega agencies. Finally, I talked to executive recruiters, consultants, former CEO’s, and a few clients. The cooperation rate was over 90% and people tended to be VERY candid. I covered my tracks quite well and I doubt if you can figure out who said what. Here are my findings:
Overview
In broad terms, there are three types of advertising agencies:
1) Mega-shops (giant holding companies)
2) Mid-sized agencies
3) Boutiques
Almost everyone agrees that the mega-shops and the boutiques will always be with us. The giants are beautifully positioned for the future. If you agree with me that there will be a massive relative wealth shift from the West to the East over the next decade, the holding companies are in great shape. Most already have beachheads throughout Asia, and a major study released two weeks ago projects that Asian advertising spending will surpass that of North America by 2014.
Boutiques will always bubble up. Disgruntled writers and artists will hang out a shingle and form a firm and some people with entrepreneurial zeal just have to be their own bosses. Many small players are specialty shops that are helping greatly as we move in to a digital age. Others can grind out work quickly. It may be a bit down and dirty at times but they are experienced pros who are dependable and capable of turning out very workmanlike creative on a moment’s notice. For many small advertisers and for special projects by larger ones, these firms are essential.
Agencies in the middle are in a very different place. These shops, largely regional in nature, had several things going for them for a long time. They did not have the resources of the giants but they could give more hands on service. Clients got a lot of attention from the mid-sized players. The CEO was not someone with whom you played golf once a year, shook hands with at an agency visit, or dined with every holiday season after a new contract was signed. He or she was someone who was actively involved in your business, guided strategy, and showed up for all big meetings. If you were not a large advertiser, he might actually serve as your de facto marketing chief.
Their creative was often fresh and fit your needs. A good media team at a mid-sized shop would take the time to craft a plan that took into account your unique needs and geographic coverage.
In recent years and especially since the financial crisis, things have gone south for scores of mid-sized shops. This post and a few to follow will delve into these issues in great detail.
Let us start by looking at the situation analysis from some existing and former mid-sized agency CEO’s. Here are some remarkably candid verbatim comments from several people whom I know and respect:
“Guys in the middle with no niche in our new world have no way to stand out. They can no longer afford to hire really good people. Over the years I have learned that strong people do not like to work on crap business. If you bring someone in really good, he/she will not stay as he sees that little progress can be made. The result is that the agency business is in for a very hard time for many years to come.”
“I built this agency from nothing. For over 30 years, it has been my baby. Fifteen years ago, I dreamed of selling out to Omnicom by now, collecting big dividends and dabbling a bit here and there. Today, I am working harder than ever just to keep even. I cannot sell the place to a major shop and my staffers cannot afford to buy it. And these days, they can never get a loan from a bank to buy me out. If I let them take over and give me a note, I know that I will never get my money back. This may sound arrogant but I remain the glue that holds this place together. If I get out, the place will likely break into a few boutiques and some out of town shops will grab my two remaining big accounts. It breaks my heart.”
“I can last maybe four more years. Each year, I cut my compensation sometimes by deep five figures. A few staffers get nominal raises but most have been frozen for the last several years. I feel a bit guilty because some are trapped here. There really is no other place in this city where they can work. Several are getting past the age where relocation is a good idea. We pitch less new business of any meaningful size as the cost of pitching is getting way too high for us. And, our existing business is not growing much. We had a nice bank that was sold a few years back and our auto business has bounced back a little but is still weak. I have never been more discouraged, but I am comfortable financially. None of my staff is.”
“For years, package goods were the lifeblood of mid-sized shops. Now, most are sold to big household products companies or food processors who take the business to a New York giant. My attitude is to believe that our salvation is in maintaining great relationships with clients. That can keep you going along with never stop learning new things” (I mentioned the average marketing director lasts approximately 19-22 months and he sadly nodded. One has to re-pitch a lot of existing business and you are always struggling to build a relationship with a new player). He added that there is growing tension between digital and conventional media people. Neither knows the other's discipline so plans are often badly integrated.
“We are totally faking our digital capability. A young enthusiastic kid in media comes in to meetings and says a few buzzwords and we have a halfway decent designer whom we call our digital creative director. It is nonsense. Our clients are not all that sophisticated so, for the moment, we get away with it. We are hundreds of miles away from an advertising hub so our people do not talk with anyone. I know we need to address this soon. But say “Facebook” in a meeting and everyone smiles and nods.”
A consultant and very astute observer says: “all the mid-sized agencies say the same thing—we are media agnostic, have insights into social platforms, our team has specific skills in digital, and we do not sell. We create a conversation with the consumer”.
He goes on to say: “there was a time when agency people were the key to consumer insight. That is not true today. Insight rests almost completely with the client. The people entering advertising today are not as good as those we saw years ago. They have little business training; there is little understanding of financial structure and even operating income.” He conjured a great quote often attributed to Keith Reinhard of Needham—“At one time the agency was the architect, now they are the carpenters.”
Another chief says “Everyone thinks that they are a great negotiator. So they squeeze us on fees. Some young kid is a newly minted marketing director. He is worried for his own hide (average tenure of 19-22 months) so he puts the account into review. If we are to truly look at a fully integrated plan blending conventional and digital we need more money and more people. But someone that we are competing against drops his pants and offers to do the work for $250,000 less than we are willing to take. They get the business and the young hotshot tells his boss he saved him a quarter of a million. A year later the kid is gone and so is the new agency. We told the truth and still are out of a nice account. It is so unfair. We have tried incentive based compensation which worked well once. With private firms, they can fudge numbers and say that you did not quite hit the agreed upon guidelines for a bonus. It is hard to prove and we have been burned a few times.”
To be continued. Look for the next installment in about 48 hours.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Sunday, October 3, 2010
Broke, USA--A Review and Some Comments
Today, I just finished a new book by Gary Rivlin. It is called "Broke, USA, From Pawnshops to Poverty, Inc.: How the Working Poor Became Big Business" (Harper Business, 2010). The book is an interesting and at times rather disturbing read.
Rivlin gives a stark description of how the underclass is provided with financial service. Most of us in advertising, media sales, or marketing lead comfortable lives. Certainly we would like to earn more but we do not live a life of constant strain bordering on desperation that the players in Rivlin’s narrative do. Many of us study and work with demographics from a computer printout. This book humanizes that data and brings it to life. A lot of his examples take place in towns such as Toledo, Ohio and much of Michigan which were in Rust Belt decline for years and are now in a depression.
Using the umbrella term “Poverty, Inc.” as a catch all term, Rivlin takes us through an array of products such as sub-prime mortgages with huge hidden fees that are hidden in the fine print of the loan agreement. There are instant tax rebates that hit the cash strapped and very impatient for 30% of their actual tax return check, and payday loans that have interest rates as high as several hundred percent. There is not much new here except for two things:
1) Major financial companies are getting in to the act of serving the financial needs of the underclass and their rates are not lower that what we used to refer to as loan sharks.
2) The business is booming as millions struggle to hang on to being members of the middle class. Many are not succeeding.
Now, please do not misunderstand me. I am a capitalist and will very likely die one. People who are credit risks should pay a higher interest rate than those with a pristine track record. And, government should not protect people from themselves. Interest rates as high as 500% on a payday loan are excessive, however. Will the new financial reform bill featuring the Consumer Financial Protection Bureau put an end to such predatory practices? A noted journalist said that financial institutions are dealing with it “like mosquitoes adapting to a new bug spray.” And the longer unemployment remains stubbornly high and real estate values continue to buckle or bump along at the bottom, the more people will have to use these non-traditional banks.
What does this mean to us as marketers? Most of us live miles away from those dreary strip malls with pawn shops, consumer loan offices, or specialists in pay day loans. But we do have to sell to consumers in places like Rhode Island, Ohio, Michigan, Florida, Illinois, Nevada, Arizona, and California that will be suffering for some time to come. Advertising on a TV/Radio station or cable system will not work as well in these states as in the past as each month more and more people fall in to the underclass to whom conventional avenues of credit are no longer available.
So set realistic expectations and choose spot markets to support very carefully. There are structural difficulties in some Nielsen DMA’s that will remain in place for the forseeable future.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Rivlin gives a stark description of how the underclass is provided with financial service. Most of us in advertising, media sales, or marketing lead comfortable lives. Certainly we would like to earn more but we do not live a life of constant strain bordering on desperation that the players in Rivlin’s narrative do. Many of us study and work with demographics from a computer printout. This book humanizes that data and brings it to life. A lot of his examples take place in towns such as Toledo, Ohio and much of Michigan which were in Rust Belt decline for years and are now in a depression.
Using the umbrella term “Poverty, Inc.” as a catch all term, Rivlin takes us through an array of products such as sub-prime mortgages with huge hidden fees that are hidden in the fine print of the loan agreement. There are instant tax rebates that hit the cash strapped and very impatient for 30% of their actual tax return check, and payday loans that have interest rates as high as several hundred percent. There is not much new here except for two things:
1) Major financial companies are getting in to the act of serving the financial needs of the underclass and their rates are not lower that what we used to refer to as loan sharks.
2) The business is booming as millions struggle to hang on to being members of the middle class. Many are not succeeding.
Now, please do not misunderstand me. I am a capitalist and will very likely die one. People who are credit risks should pay a higher interest rate than those with a pristine track record. And, government should not protect people from themselves. Interest rates as high as 500% on a payday loan are excessive, however. Will the new financial reform bill featuring the Consumer Financial Protection Bureau put an end to such predatory practices? A noted journalist said that financial institutions are dealing with it “like mosquitoes adapting to a new bug spray.” And the longer unemployment remains stubbornly high and real estate values continue to buckle or bump along at the bottom, the more people will have to use these non-traditional banks.
What does this mean to us as marketers? Most of us live miles away from those dreary strip malls with pawn shops, consumer loan offices, or specialists in pay day loans. But we do have to sell to consumers in places like Rhode Island, Ohio, Michigan, Florida, Illinois, Nevada, Arizona, and California that will be suffering for some time to come. Advertising on a TV/Radio station or cable system will not work as well in these states as in the past as each month more and more people fall in to the underclass to whom conventional avenues of credit are no longer available.
So set realistic expectations and choose spot markets to support very carefully. There are structural difficulties in some Nielsen DMA’s that will remain in place for the forseeable future.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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