Are ad agencies being re-invented?

Or is all of media being re-invented, asks Ajit Balakrishnan.
Illustration: Dominic Xavier/Rediff.com

In the period from 1971, when I graduated from IIM Calcutta, till today, I have lived and worked through seven recessions and my learning has been this: Governments usually avoid the word 'recession' till it is over and newspapers, magazines, and TV pundits (and now Web sites) also look the other way as if an active discussion about a recession, while you are in the middle of one, can only make it worse by frightening business-people.

But, for me, there has in the four-decade period an unfailing indicator: Empty hoardings on Marine Drive, Mumbai, the stretch from Nariman Point in the southern end and Chowpatty in the northern end, got acknowledged later as a recession.

I have also found that once the Marine Drive hoardings start filling up again, general business activity is also picking up: Companies start reporting vigorous sales and profits.

The worrying thing for me based on this background is that as I write this column, practically all the hoardings on Marine Drive are empty for nearly a year now.

Recently, on my daily trek through Marine Drive on my way to work, thinking of such things and glancing at the empty hoardings and flipping through Ad Age, the industry publication, on my mobile phone, I hit on an astonishing news item about the top 10 advertising agencies in the world.

The first five were no surprise -- WPP, Omnicom, Publicis, Interpublic and Dentsu. But just below that were the names Accenture, PWC, IBM and Deloitte. I rubbed my eyes in disbelief: Had some scribe mixed up a story about ad agency rankings with a story about management consultancy rankings? Or, if true, does this mean that some deeper structural change is underway in the marketing services arena than just a recession?

To fully understand this bewildering turn of events, it is worth looking back in history. Advertising as an industry originated in the United States at the turn of the 20th century to differentiate products that had become commoditised with the arrival of mass-production techniques.

The innovator, apparently, the Quaker Oats Company began using the image of the Quaker male instead of a trademark. Pears' soap, Campbell's soup and Coca-Cola were the others who quickly followed suit by putting apparently unconnected visual imagery in association with their product names to create 'brands'.

The concept of a 'brand' created an image for a product unconnected with the product's physical features. Clever marketeers, thus, imbued goods and even services with a personality. Soap manufacturers did this to such an extent on radio and then TV that the whole genre came to be called 'soap operas'.

The 'advertising agency' arose out of all this excitement as an organisation that had the expertise to create print layouts and radio jingles to communicate the desired 'brand values' to consumers as well ensure that these layouts and jingles were placed in newspapers, magazines and radio, first and then in the emerging cinema and television medium.

The first disruptive change was in the mid-1980s when the founding icons of the industry, people like Mr Ogilvy, Mr Young and Mr Rubicam wanted to hang up their boots, and a new breed of finance-oriented entrepreneurs best exemplified by Martin Sorrell appeared and used highly leveraged debt to buy them out.

This inaugurated the era of ad agency 'holding companies', which saw as their top priority, the making of enough profits to pay back the loans they had taken to buy these companies.

The management discourse in the ad agency business was no longer 'brands' and 'positioning', but profits and cost management.

The next step was that the 'full service' agency 'disaggregated', clients started to contract with separate service providers for creative services, media-buying services, public relations services and so on.

The advent of Internet media companies has added an additional wrinkle. Search engines, social networking sites and others (that present users with own or aggregated content, a role that 'publishers' used to do in an earlier era) are attempting vertical integration: Taking up the planning and buying role that media agencies do currently, posing one more challenge to traditional ad agencies and publishers.

And publishers like The New York Times newspaper have now full-fledged departments that create ads and offer their services directly to advertisers, bypassing the ad agency.

It is also possible that the marketing services world is experiencing another example of the disintermediation, which the Internet has brought to many other industries: Travel agencies have given way to travel sites, recruitment agencies have given way to recruitment sites and sharebrokers have given way to online trading sites.

Then there is the massive shift of audience from all other media to the mobile phone as all of us spend many hours a day staring at our mobile phones.

And there may be more challenges ahead for advertising and the media as a whole: The current preoccupation with 'truth' and 'post-truth'.

For example, if Amitabh Bachchan appears in a print ad or TV commercial for, say, an auto brand, questions may arise whether this amounts to post-truth: Has Mr Bachchan actually bought that automobile with his own money, driven it around and established its features and quality before he can legitimately recommend it ('endorse it') to the public at large?

If this test is used, the source of prosperity of cricket and sports stars, as well as Bollywood stars, will vanish overnight.

Is it possible that not only ad agencies but also all of media is in the process of being re-invented?

Ajit Balakrishnan, founder and CEO, Rediff.com, is the author of The Wave Rider, A Chronicle of the Information Age. You can reach him at ajitb@rediffmail.com. He blogs at http://blogs.rediff.com/ajitb