As hundreds of high-powered advertising and media executives descend on Cannes this week for a flurry of meetings, marketing stunts, and boozy yacht parties, there’s an undercurrent of deep uncertainly about the industry’s future.
As well chronicled in New Yorker writer Ken Auletta’s new book, “Frenemies: The Epic Disruption of the Ad Business (and Everything Else),” advertising faces a crisis at every turn. People are asking scary questions such: “Do ad agencies have a reason to exist?” “Is TV advertising – and interruptive advertising – nearly over?” “Do consumers hate us?”
Business Insider spoke with Auletta about his experience writing the book and his take on the state of affairs in adland.
Mike Shields: In your career, you’re written a lot about media and tech. How much did you really know about the ins and outs of how the ad business really operates?
Ken Auletta: Not enough. One of the attractions of doing this book. Covering the media for a long time, if you adopt the Watergate mentality of follow the money, you say, my god, you’ve gotta look at advertising. There’s the piggy bank for much of the media. And I don’t just mean legacy media. I mean Facebook, Google, the internet.
The other reason I do what I do is visiting another planet, and finding the natives and how they operate. And for me I was visiting a new planet. The advertising-marketing planet. And so for me that intellectually was a challenge.
Shields: Was there anything that really surprised you in your reporting?
Auletta: Among the things that surprised me was how fast the disruption was happening. I was stunned by the idea that 20% of Americans use ad-blockers. And a third of Western Europeans have ad blockers on their mobile phones. Those are huge numbers.
And [another surprise was] how the mobile phone becomes a real impediment to advertising. It’s such a personal instrument. It’s like your wallet or your purse. You don’t lend it to anyone. And suddenly people are pinging you. Before you read what you searched for, we want to divert you for 20 second or 25 seconds. It really is annoying. So people are really turned off by ads as an interruption. And that was a punch in the nose.
Obviously you watch television, and you kept getting bombarded. You’re interrupted 19 minutes or so every hour.
Shields: Right. But TV was sort of built that way.
Auletta: The thing that makes it more annoying, even though it was built that way, is you can turn to Netflix, let’s say, and you can watch what you want without commercial interruption, and you can watch as much of it as you want. It just accentuates your feeling of being interrupted.
Shields: Are people in the ad business in a bubble regarding how turned off people are to ads? Is the great American ad something we had culturally and something we’ve lost?
Auletta: I mean, you can have it, obviously. But you have so many different platforms today. If you go back to the ’80s, 90% of the public were watching one of three networks in one night. So the ability to reach them with a single ad was accentuated. That dissipates in a world with all these platforms. Ads on Google or Facebook look very different than a 30-second ad. It’s harder with the multiplication of platforms to break through.
Shields: What about this undercurrent in the ad business – which comes up repeatedly in the book – that it’s somehow corrupt? It struck me that Medialink CEO Michael Kassan was quoted in your book saying that he thinks most people in this industry are good people. Did you find that?
Auletta: Well, the reason I began the book was the Jon Mandel speech, in March of 2015. [A former media-buying executive, Jon Mandel gave a fiery speech accusing ad agencies of taking kickbacks and profiting from their clients without their clients’ knowledge.]
Here was a guy who was standing up. He came from the agency side of the business, who was basically saying, “The agencies are tricking you, the client – they are not telling you all the things they are doing and how they are making money.” He was almost claiming criminality. His charges were pretty sweeping.
When I interviewed him over lunch, what he said at the ANA speech was that it was billions of dollars that the agencies were hiding from clients. At lunch he changed billions to millions. That’s a pretty big jump. It really undermines at least a little bit of what he was saying.
But by saying it, it helped trigger the anxiety among clients to say, “Oh, my gosh. It increases our distrust of agencies. We have to go into more agency reviews, to look at whether we have review our contracts, see if we have any loopholes.” And that’s where you can introduce a guy like Michael Kassan [who runs the prominent ad-industry consultancy Medialink], who’s a connector. But it created a level of anger and mistrust.
And then the agencies then responded and said, “Oh, my god – you’ve hired basically a prosecutorial organisation in K2 to investigate. [In 2015, the Association of National Advertisers released a report conducted by the consulting firm K2 Intelligence, which reported on a widespread lack of financial transparency in the agency business.]
Shields: It’s like the agencies were saying, “I thought we were family. What the hell?”
Auletta: Yeah. And so that just exacerbated the problems. But essentially, what I came to see is an industry beset by insecurity and anxiety and fear. “What the f— is happening to our business?” One of the reasons they turn to a guy like Michael Kassan is: “Help us. Lead us out of the tunnel.” Basically. But it’s hard to get out of the tunnel.
Shields: “Mad Men” is a great reference point in the book. What struck me throughout the book was so many people saying, “It’s not like it was in Don Draper’s day. It’s all data and analytics and tech.” Which is all true, but then, you think of how much of the industry is driven by these groups of high-powered executives who all have lunch together and go to Cannes together. It’s still relationships and chummy business. Did that stick out to you?
Auletta: Well, there’s no question when you go to Cannes, you see people, it’s like a frat party. They’re up late, they’re standing out there having drinks, they’re standing there on the beach, drinking rosé. And if the client goes, we have to go to.
Even Publicis said there weren’t going to Cannes. I was told last week that many Publicis people are going because their clients are going [Publicis is sending some staffers.] They’re next to their clients.
There is still a sense, with merit, that in part it’s a relationship business. If you trust them, or think your creative person is good, and you have a two-way communication. It matters. Like it does in anything. Do they matter the way they once did? No. Clearly it matters less.
I quote [ad legend] Keith Reinhard in the book. He had a relationship with the CEO. Very few ad agencies have that relationship anymore.
In fact, one of the reasons the consulting companies have an opening to get into the ad business, they think they have relationships in the so-called C-Suite. So they are jumping into the business. We are the people who advise you on strategy anyhow.
Shields: What do you think happens next? People joke that we are one recession from TV advertising collapsing. Or that once this generation of leaders retires, everything will radically change.
Auletta: I don’t know whether it happens whether things go off a cliff or not. Clearly things are changing. At some point I would think this would happen sooner. Advertisers will say, even though TV networks are important, we have to find alternatives.
Shields: And what about the potential consumer backlash to advertising, given all the data controversies with Facebook and now GDPR?
Auletta: That issue continues to seesaw. It’s always been tougher in Europe, and it’s becoming bigger here. If data becomes very restricted, that will hit the ad business, no doubt.
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