Frenemies: The Epic Disruption of the Advertising Industry

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On whichever side of the argument one falls, it is inarguable that Mandel’s assault came at a fraught moment and struck a raw nerve. Taken aback by the irate agency reactions, the ANA quickly did damage control, issuing this statement: “We regret any impression that agencies in general are engaged in questionable activities and apologize to those who were offended.” A few days later it appointed a joint task force with the 4A’s to study the issue.

The ANA issued an open, competitive RFP (request for proposal) to locate a firm to conduct the study, ultimately choosing K2 Intelligence, an investigative cyber defense and compliance firm owned by Jules B. Kroll and his son, Jeremy, which employs former prosecutors and law enforcement professionals like former New York City police commissioner Ray Kelly. The ANA also chose Ebiquity, an auditing firm that has a history of challenging agency spending practices on behalf of brand clients. Seething that the ANA made this decision on its own and chose a prosecutorial firm and, in Ebiquity, what he perceived as a business adversary, Martin Sorrell declared, “They went unilateral.” Koenigsberg was equally livid, saying of K2 Intelligence and cofounder Jules Kroll, who helped build his estimable reputation by tracking down the illicit activities of dictators: “Bringing in a spy agency didn’t send the right message. It kind of sounds like a witch hunt.” The rupture between the ANA and the 4A’s ended their joint task force. By the winter of 2016, K2 and Ebiquity were deep into interviews and jittery agencies feared the worst.

Michael Kassan was not nervous; he comfortably settled into his friend-of-all-sides stance. On the one hand, he said, Mandel “painted the industry with too broad a brush. … I’m a firm believer that this industry is made up of good people.” The ANA wrongly “staked out a position” they should not have by embracing Mandel, Kassan says he told Bob Liodice. On the other hand, “If you’re a CMO and your CEO sees an allegation in the press that agencies are getting rebates and undisclosed kickbacks, you’re going to insist on knowing whether your agencies are doing this.” He encouraged clients to do so. Agencies, he agreed, were not sufficiently transparent, particularly about digital ad purchases. “Media agencies began to create trading desks for online purchases of media. And they were doing it without fully disclosing the amount of online media they bought. They did this because they were buying in bulk and reselling and taking a principal position. They were not wrong. If I’m an agency and I say to you, ‘This particular inventory is being bought on a nondisclosed basis, meaning I am not going to tell you what I paid but I am telling you I will get you a really good price, and I’m telling you I will make money on the spread but I’m not going to tell you how much’”—as long as this was stipulated in the agency contract, he thought it was OK. It would fail the transparency test, he says, if it was not part of the contract.

To conduct MediaLink’s agency reviews, Kassan leaned on Bernhard Glock, who for twenty-five years as a senior executive at Procter & Gamble orchestrated more than one hundred agency reviews, and fellow senior vice president Lesley Klein. The process they shaped began with an in-depth discussion with the client as to what was expected of an agency, after which MediaLink would help narrow the choices of prospective agencies to a handful, who were invited to meet with the client for what MediaLink vice chairman Wenda Millard calls “a chemistry meeting. It’s like a first date. If I don’t like you, no second date.”

MediaLink then prepared a dozen-or-so-page single-spaced RFP to send to the contending agencies. The RFP took time to answer, for it sketched a timeline for the review process and imposed upon the agencies a number of key requirements: specify who would staff the account; specify the fee structure the agency would employ and the methodology to be followed to arrive at a fee; delineate the proposed marketing strategy; sketch the agency’s digital, technology, and e-commerce prowess; share the agency’s media-buying capabilities and data strategy; specify the transparency guidelines to be followed to assure, for instance, that the client shares in any rebates; give a detailed account of the agency’s work on other accounts and its approach to innovation; and it stipulates the return on investment, or ROI, targets the agency expects in return for a bonus and, if the target was not met, the size of the agency penalty. After the client digested these answers, agencies were then invited to offer their proposed creative presentations and marketing plans. The RFP always specified that the agency alone is totally responsible for any costs they incurred during this process.

The process MediaLink followed was explored in the fall of 2015 during the weekly Monday afternoon staff meeting at their 1155 Avenue of the Americas office, with employees from the Los Angeles and Chicago offices joining via videoconference. On this Monday, Wenda Millard devoted the meeting to a presentation by Bernhard Glock of the agency reviews MediaLink was coordinating. Standing in the middle of an eighth-floor conference room crowded with staffers, Glock spoke of what the process taught about the changing dynamics between client and agencies. “There are six key components we hear every time from advertisers,” he said. “The first question the advertiser asks is, What are the cost savings the agency promises? Increasingly, they ask a fresh question: Will the agency agree to peg its pay to how the marketing campaign performs? More and more I see performance sneak in as part of the compensation.” Why? “Because there are more and more procurement people in the reviews.” The difference between the chief marketing officer and the procurement people, he said, is that the CMO tends to focus on building the brand and the procurement officer on cost savings.

The agency’s marketing strategy is a second key component; increasingly, he observed, the client is mistrustful of agencies, and he no doubt exaggerated when he added, “They rely on us” to help shape the strategy.

Operations and efficiencies are a third client concern. Clients ask: How fast can we move? How do we communicate with each other? How do we integrate the planning and buying and creative realms?

Partly because of the Mandel speech and the ANA inquiry, transparency became a fourth component, he said. Our clients “want to know: Can I still trust my agency? Do I get to know of kickbacks or rebates?” Are these shared with the client? Inevitably, the increased wariness of clients “leads to tighter contracts.”

The fifth component is the agency’s use of data and analytics and how it measures performance. Clients commonly ask, “Who owns my data?” They want to know the competence of the agency in new machine tools like programmatic advertising. And they want to know if they are paying for fraudulent clicks.

Finally, and as central to the client as are costs, they want to know about what talent will be assigned to their account. “What I see happening more and more is advertisers want guarantees on key people,” Glock said. They worry whether the agency has enough scale to service the client. And the client defines talent more broadly. “It used to be a given that only the creative agency sat at the table. Now that has changed. Public relations agencies sit at the table. Media agencies sit at the table. Digital agencies sit at the table.”

“The problem agencies have,” Millard interjected, is that cost pressures from clients “is causing agencies to pay less to their employees. Because of that, they’re not as attractive. Why would I go to an agency that looks like a dinosauric entity rather than go to Google, or Facebook, or LinkedIn? Why would I do that, and be paid what I would be paid to work in a sweatshop around lots of unhappy people?” Contradicting Mandel’s thesis that agency margins swell, Millard said, “It’s a real problem for agencies because they can’t make any money. Their margins are getting squeezed. This is a very bad scenario for everyone, including the clients who are not getting the best work out of agencies because they are not getting the best talent.”

“I remember,” she explained over a cup of tea in her office after the meeting concluded, “when I was growing up in this business the pride General Foods and Young and Rubicam would have when they’d say, ‘We’ve been in business twenty-five years with Jell-O. We built this business together. This is a partnership, a great cause for celebration.’ That’s gone. Agencies live in great fear that they’re going to go into review at any moment. Agencies are now treated as vendors.”

Millard described a meeting she had that morning with one of her clients, Time Inc. Executives there complained of not being able to “have a strategic discussion with an agency. It’s all about pricing.” She says the same is true of MediaLink’s other media clients who want to sell space to media-buying agencies. She offered this example: “If Time devises an elaborate $3.5 million sale of space for its multiple magazines, the agency says, ‘I need $1 million.’ You’re having a price conversation before you even finish telling them what the idea is. All they know is that they have to skinny you down because they’re being skinnied down. They’re being judged by how well they’re doing on pricing.”

Little wonder clients turn to MediaLink, Millard said. “We don’t have a dog in this race because we love each agency equally. And we’re going to help the brands through some of this decision making because we don’t care if they choose Omnicom or Publicis. But they can’t go to Omnicom and ask, ‘Am I in the right place?’ They are more likely to come to us and ask, ‘Should we be working differently with our agency? Or should we put our account up for review?’”

The tidal wave of accounts up for review swept through the agency business. Agencies lost part or all of the business of longtime clients. Publicis, for instance, lost Procter & Gamble and General Mills, as well as Coca-Cola, Mondelēz, and Delta; it gained Visa, Bank of America, and Taco Bell. Omnicom lost Johnson & Johnson, Bud Light, and Adidas; it gained Procter & Gamble, Delta, and Subway. WPP lost AT&T, as well as Bank of America and Coors; it gained General Mills and Coca-Cola. IPG lost American Airlines and Kmart; it gained Johnson & Johnson, Bank of America, and Chrysler; Havas and Dentsu gained slightly more client dollars than they lost.

Publicis lost more accounts than its rivals, but the loss that especially rankled Maurice Levy of Publicis was an Omnicom win. The company he had embraced as an equal merger partner in 2013, only to watch the merger collapse the following year, took what a senior Publicis executive described as “a $100 million haircut” to snatch the P&G business away from Publicis. On the other hand, Levy was overjoyed to best the man he regularly trades public insults with, WPP’s Martin Sorrell, by winning part of the Bank of America account.

More was at stake, of course, than relations between advertisers and agencies. “Advertising works as a value exchange,” Andrew Robertson of BBDO, says. “In exchange for advertising, consumers get free or reduced content costs.” Or needed information. It is easy to be cynical or dismissive about the role of advertising in a consumer economy, but its role can hardly be overstated. Commerce and most forms of communication would shrivel without it. Many retail stores would shutter, the number of new products would dwindle, financial service companies would sputter, consumers would complain they are shopping blindfolded. Google, with 87 percent of its $79.4 billion in 2016 revenues supported by advertising, Facebook with over 95 percent ($26.9 billion out of $27.6 billion) in 2016, and Snapchat with 96 percent from advertising, would—like the TV networks and most radio—cease to be “free.” A prime reason U.S. newspaper employment plunged from 412,000 in 2001 to 174,000 in 2016 is that advertising dollars—which account for more than half of all newspaper revenues—dropped from $63.5 billion in 2000 to $23.6 billion in 2014, the last year the Newspaper Association of America released newspaper revenues. Facebook’s advertising revenues alone exceeded the combined ad dollars of all U.S. newspapers. Overseas, in that same span, newspaper ad revenues sank from $80 billion to $52.6 billion.

Advertising and marketing “provides the oil for the economy’s energy,” Martin Sorrell says. Princeton professor Paul Starr, whose authoritative history of the media, The Creation of the Media, credited advertising with assuring journalism’s independence: “American journalism became more of an independent and innovative source of information just as it became more of a means of advertising and publicity.”

A 2015 study on the impact of advertising by IHS Markit, a London-based financial services company, concluded that in the United States each dollar spent on advertising alone spawned nineteen dollars in sales and supported sixty-seven jobs across many industries; they predicted that by 2019 advertising would kindle 16 percent of all economic output. A 2016 study of Western Europe for the World Federation of Advertisers, based in Brussels, concluded that each euro spent on advertising equates to seven euros of economic value. Predicting the exact impact of advertising on consumer behavior is not an exact science—though this book will demonstrate that going forward data will yield better evidence—but by anyone’s measure, advertising and marketing packs a mighty economic wallop.

Naomi Klein chose to measure the impact of advertising in a very different way. In her book No Logo,

first published in 2000, she portrayed advertising “as the most public face of a deeply faulty economic system” that promoted sweatshops to produce their often unhealthy products, and that propped up global companies that held sway over politicians to advance globalism, which exported jobs. Her harsh critique of advertising as addictively manipulative was echoed sixteen years later by Tim Wu, whose book The Attention Merchants

argues that by demanding their content be “free” and refusing to pay subscriptions or micropayments, consumers invite intrusive ads and receive inferior journalism and content.

No question: without advertising many citizens would feel liberated from annoying and often misleading interruptions. But what’s indisputable is that advertising and marketing dollars serve as an underlying subsidy for much of the media and the Internet—in other words, for our information ecosystem and, often, for the architecture of our everyday lives. Without this free ATM machine, many companies would be doomed. But as any good advertiser knows, asking someone to sit through all the ads in the TV show they’ve recorded because those ads fund the channel the show is on is just about as thankless as asking people to pay more for a product because it’s good for the environment. Some percentage of consumers may make that choice for the greater good; many more will not. Today, the consumer is in control, and increasingly the challenge for advertisers is to create experiences that people will want to have because they will no longer have to have them. That is a tectonic shift for a once comfortable industry, and it is worth a look back at how this economically essential industry got here.

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“CHANGE SUCKS” (#ulink_2790daee-4ffa-51a5-b268-03ea64c4863e)

“I’m prepared to eat our children, because if I don’t somebody else will!”

—Martin Sorrell, WPP CEO

The word advertising derives from the verb advert, which means “to give attention to.” All markets or competitive economies rely on advertising. Thousands of years ago, advertising consisted of Egyptian, Greek, and Roman wall paintings or rock scrawls. Five centuries ago, farmers selling produce relied on word of mouth; villagers selling a service put up signs like TAILOR or BLACKSMITH. With villages transformed into cities as the Industrial Revolution swept across the nineteenth century, sellers of products turned to a better means of communicating with potential buyers. Thus advertising agencies were born.

The first full-service modern advertising agency, N. W. Ayer & Son, emerged just after the Civil War. What would become the primary means of compensating agencies, the 15 percent commission on all advertising, was also introduced in 1905 by N. W. Ayer & Son. The introduction of the automobile early in the twentieth century became an advertising catalyst. As auto companies proliferated, their reliance on ads to distinguish themselves grew, as did the use of billboards to catch the attention of drivers. Radio in the 1920s and television after World War II became inflection points for new waves of advertising. The burgeoning Internet at the dawn of the twenty-first century became another inflection point.

As population and products mushroomed, advertising made it possible for consumers to discover things they needed, or thought they needed. Advertising seduced consumers and created familiar brands. Initially, the ads for those brands were informational, often dull and dutiful. Nineteenth-century newspapers were festooned with dense rows of classified ads, occupying the entire front page of many papers. Increasingly, ads began to flirt with consumers’ emotions. In the 1920s, Edward Bernays, nephew of Sigmund Freud, became the father of the public relations industry. A hundred years after Shelley declared poets the unacknowledged legislators of the world, Bernays announced in his 1928 book Propaganda—a word he used with none of the pejorative connotations it would later acquire—that now this was true of marketers: “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.” As one might expect of one of Freud’s kin, Bernays’s mission was to discover the hidden motives for human behavior and learn how to tickle them. “Men are rarely aware of the real reasons which motivate their actions,” he wrote. “A man may believe that he buys a motor car because, after careful study of the technical features of all makes on the market, he has concluded that this is the best. He is almost certainly fooling himself.”

Today the definition of marketing extends from the damage control of public relations firms summoned when a company like Volkswagen is embroiled in scandal; to survey research before a new product is introduced; to the targeting that data companies like Oracle sell to agencies and brands; to designing corporate logos or rebranding companies, as was done when Time Warner Cable was renamed Spectrum; to corporate positioning advice McKinsey & Company offers CEOs; to direct mail, blogs, podcasts, coupons, sponsorships, naming rights, purchased shelf space, corporate Web sites, in-store promotions, membership rewards programs, exhibitions, and young influencers like the Betches, who are paid to extol products on sites like YouTube.

The tentacles of this industry reach wide and deep. It employs an estimated one million people worldwide. One hundred thousand are said to congregate in New York each September alone for the annual Advertising Week in the Times Square area. Then there are the one hundred seventy thousand or so who attend the Consumer Electronics Show, or CES, in Las Vegas in January, the hundred thousand who attend the Mobile World Congress in Barcelona in February, the armies who attend the Association of National Advertisers in different locales, the South by Southwest (SXSW) in Austin in March, the American Association of Advertising Agencies Transformation in Miami or Los Angeles in April, the Cannes Lions International Festival of Creativity in June, and the conferences that Advertising Week’s impresario Matt Scheckner has introduced to London, Tokyo, Mexico City, Shanghai, and Sydney.

It is an industry that has never lacked the capacity to take itself seriously. Jeremy Bullmore, the former J. Walter Thompson chairman, whose company was acquired by Martin Sorrell’s WPP in 1987, today sits in a small, cluttered office at WPP’s London headquarters on Farm Street, where Sorrell relies on him to write sparkling essays about the industry and to help produce a robust annual company report. “Of all the models for successful economies,” Bullmore says, looking out from under bushy white eyebrows that give him an almost cherubic appearance, “nothing yet has been able to compete with a liberal, open market. Which is not to say it’s without flaws. If you go back five hundred years to a village, there were people who have milk and carrots and there were other people in the village who want them.” Only some form of communication can close the distance between “those who want and those who have.” He thinks most of the gap is filled by advertising. “Edison didn’t actually say, ‘Who makes the best mousetrap, the world will beat a path to his door.’ If he had said it, it would have been absurd. If you build a better mousetrap and you’re in the woods, until somebody knows you’ve got the better mousetrap, there’s no point in building it.” He cites the former Soviet Union and its satellites: “Look at Communist countries. No advertising. None of the consumer goods companies thought it necessary or worthwhile to innovate because if you do something that’s quite interesting but you can’t tell anyone about it, and your competition are not doing it, why bother?”

As First Lady, Michelle Obama championed learning how to “use the power of advertising to our favor” by promoting exercise and eating healthy foods like fruits and vegetables. “We all know that advertising works, so we figured why shouldn’t fruits and vegetables get in on the action?” she said. Advertising also works in negative ways, witness the Camel ads that once successfully touted cigarettes as a health product, proclaiming, “More doctors smoke Camels than any other cigarette.” Or mentholated cigarettes were pitched as assuring improved health.

But neither advertising nor the industry that produces it works the way it once did. The industry is being disrupted by frenemies advancing from the north, south, east, and west. Martin Sorrell impersonates an alarmed Paul Revere, seeking to rally the traditional ad industry, summoning his WPP troops to meet the “continuous disruption threat” from various competitors. While pacing his all-white, bare-walled London townhouse office, he says, “You’ve got layers. You’ve got our direct competitors, like Omnicom. You’ve got the frenemies, let’s call them Facebook and Google principally. You’ve got the consulting companies, like Deloitte, McKinsey, et cetera. And then you’ve got the software companies, like Salesforce.com (http://Salesforce.com) and Oracle and Infosys, and Indian software companies.” He combats new threats by aggressively investing in digital upstarts and jettisoning companies whose economic performance lags. “We’ve invested in Vice. We’ve invested in Fullscreen. We’ve invested in Refinery29,” each a digital company. And, he adds, “I’m prepared to eat our children, because if I don’t somebody else will!”

It does not please Sorrell that one clear beneficiary of this tumult and fear—and the client backlash triggered by Jon Mandel’s speech—is Michael Kassan’s MediaLink. Publically, Sorrell may mute his criticism of Kassan, but he dislikes third parties getting between his agencies and his clients. It annoys him that Kassan’s varied clients flock to MediaLink—not WPP—because they seek a reassuring neutral voice and are distressed by the speed and enormity of change. Sorrell has a broader range of knowledge and business acumen than Kassan—and most contemporaries, for that matter. But Kassan is comforting, providing for his clients what he describes as a cushion, a “membrane between” the cartilage and the bone. Martin Sorrell would never describe himself as a cushion.

Like a doctor with a good bedside manner, Kassan knows his clients have reason to be insecure, and he seeks to address their fears. His clients discuss the accelerated spread of mobile phones, whose approximately six billion global users have replaced the desktop and the television as the dominant platform. They marvel at its awesome power: today’s iPhone 8 has more computing power, says Rishad Tobaccowala of Publicis, than was used for the first space shuttle. They enthuse that a smartphone platform and its embedded GPS open opportunities to track and engage personally with users. They are awed by China’s Tencent, a corporate giant focused on mobile services that connect people, providing access to WeChat. In mid-2016, Tencent had almost 800 million users, 80 percent of whom spend more than an hour a day on one of its sites, especially WeChat, to communicate with family and friends and strangers. They use simple bar codes to partake in 500 million daily transactions, employing 300 million credit cards that link to 300,000 stores, all without switching to another app. If the client does not know, Kassan can explain that WeChat is a one-stop service that combines the varied functions of PayPal, Facebook, Uber, Amazon, Netflix, banks, Expedia, and countless apps. It is clear to Kassan: the mobile future is being shaped in China, not Silicon Valley.

But this frightens his clients, because they know China is a hard market to crack, and they know the U.S. companies that control mobile will drive hard bargains with agencies and advertisers. They also know the limitations of mobile. Ads on mobile phones soak up battery life, are constricted by small screens, and are so intrusive and irksome to consumers that about one quarter of Americans and one third of Western Europeans sign up for ad blockers to prevent the interruptions. How, clients anxiously want to know, do they reach the mass audience so essential to introducing new products and to building brand identity when ads on mobile phones are not as effective and consumers are dispersed among many new channel choices and social networks? And what the hell do they do to reach the next generation—including the digitally savvy millennials age twenty-one to thirty-four, and the even younger Generation Z born after 1997, who detest being hawked to? A reason people might be annoyed by ads is because, on average, citizens are bombarded daily by an astonishing five thousand marketing messages.

Kassan’s clients and agencies do marvel at new data mining tools that offer advertising and marketing companies more weapons to target consumers. But they’re also frightened by some of Kassan’s digital clients—Facebook and Google in particular—who cooperate with advertisers but also compete by collecting massive amounts of data, which they do not fully share. These digital frenemies use this data and the marketing services they’ve acquired—like Google’s DoubleClick and Facebook’s Atlas—to become agency and platform rivals. More and more of his clients are terrified of Amazon, for Amazon has even better data than Facebook or Google, because it tells when a consumer made an actual purchase decision, and like Facebook and Google it walls off its data. Particularly worrisome to brand clients, Amazon promotes its own products, as Google is accused by the European Union of using search to steer users to its own products. For example, if you ask Alexa, Amazon’s digital assistant, to choose a battery, it will choose an Amazon battery, the reason Amazon batteries dominate battery sales on Amazon.

Kassan’s clients and agencies also worry about something else: the data that will yield rich targeting information could trigger a backlash if citizens come to believe their privacy is violated and clamor for government protection. While more data fortifies agencies with better tools to target consumers, it also unnerves them because it arms clients with information about which of their ads sell and which don’t. And technology does something else: it democratizes information, giving citizens more choices, more ability to skip ads, to voice their opinions, to vote with their fingers and flee traditional media platforms.

Everyone in the advertising and marketing business marvels at the platform choices technology enables. Consumers can be reached via an ever-expanding number of TV channels, social networks, apps, blogs, podcasts, and e-mail alerts. But they fear the miniaturization of the mass audience and wonder how to introduce a new product so that it captures people’s attention in this new world.

The advertising industry collectively worries that what they think of as their art—big creative ideas—will be replaced by machines weaponized with data and algorithms and artificial intelligence. The primary machine we increasingly rely on is the smartphone, and many in the industry would not be comforted to listen to Tim Armstrong, the CEO of AOL and before that Google’s senior vice president of advertising for the United States and Latin America. In 2015, Armstrong sketched a future in which marketers will have to talk to a consumer via their mobile machine: “And the machine is going to highly disrupt what kind of advantage and what kind of messaging and what kind of interaction you have with a consumer.” Within five years, he continued, six billion people will be connected to the Internet, meaning marketers “are going to have to interact with their machine, which we refer to around here as ‘the second brain.’ You’re going to have an advertising model that works fluidly for the consumer but also works fluidly for what that machine is.” He illustrates the machine’s power by telling of a visit he made that week to a Mastercard board reception where they displayed future products. One was a gas station pump that recognized your Mastercard and regulated the price at the pump based on whether you were a regular customer or not. “In the future, the pump pricing may change based on what type of customer you are and whether you’re in a points program. But also, the company will have a lot more information on you.” And the smartphone will “keep track of all your relationships with all the companies you deal with. The exponential power of using that data will change consumer behavior. It will shift more power into the consumers’ hands. And it will shift more power to companies that move faster into this world.”

Marketers will have to befriend the machine, he continued. “The phone or machine will be as powerful as a second you, with a lot more ability to use software to simplify things for you. Today, the consumer does all the work. You have to get in your car and drive to the store. You have to go online to Amazon and figure out what you want to buy. But in the future if you have this machine that has a deep understanding of what you do, when and how you do it, the things that may be helpful for you, it’s likely that the onus on the consumer to do all the shopping will shift to the corporation.” Information for the consumer will be screened and presented by your smartphone’s digital assistant, which will be more sophisticated versions of Amazon’s Alexa, Apple’s Siri and its HomePod speaker, Google Home, and Microsoft’s Cortana. “It may watch how you behave over the course of a year and say, ‘Here are all the things you’re doing and here are three or four products that may help you live a longer life, may help you save twenty percent of your income.’” The digital assistant becomes your agent, potentially supplanting the middleman, including the agency middleman.

Agency employers stewed over all this. And as they also stewed over Jon Mandel’s claims in 2015, Michael Kassan heard a new drumbeat from various clients: trust. Or mistrust. Kassan was all too aware of the views of a frequent client, Beth Comstock, who was promoted to vice chair of General Electric after the innovations she instigated as their CMO. “You hear this time and time again, a lot of people are frustrated that there’s a disconnect between their agency and what they want,” she says. “I think we want more media properties to come to us,” to bypass the agency and collaborate directly on creating an ad campaign, as the New York Times did in creating an award-winning virtual reality campaign for GE. Over the years, she says, the mistrust between client and agency intensified because the media-buying agencies came to see themselves as the customer. “They gathered all the clients together. They negotiated the sales.” They, not the client, directly paid for the ads. They didn’t always assign their best people to a client’s account. They were sometimes opaque about rebates or why they placed bets on different media platforms. To Comstock the trust issue boils down to this: “Are you working for me or for the media company? I’m paying you!”

Agencies are naturally anxious not to become superfluous middlemen, supplanted by clients who seek lower costs by building their own in-house marketing departments, or by turning to advertising platforms that retain MediaLink—like the New York Times, the Wall Street Journal, or Vox, which double as ad agencies, going directly to brands and offering to craft their ads. Agencies worry that as consumers shift to the convenience of online buying and do it on their iPhones, reliable advertising clients like department stores and retail outlets will do more than contract—they will perish. Big agency holding companies “are dinosaurs,” thinks Bob Greenberg of R/GA, a thriving digital agency, because they grow by buying companies and become hobbled by an inability to harmonize disparate cultures, while at the same time being challenged by formidable consulting companies with deeper pockets and intimate relationships with the CEOs of major brands. They are collapsing, he says, because “everything is run by accountants and bean counters.” Greenberg obviously makes an exception for IPG, the holding company which acquired his R/GA.

“Change sucks,” sighs Rishad Tobaccowala, the resident futurist for Publicis. “I hate change. I work for the same company I joined thirty-four years ago. I live in the same area of Chicago for thirty-six years. I met my wife in India when I was twelve. I hate change. The reason why change sucks is if you do something different, you don’t know what you’re doing. Therefore you make mistakes. You make a fool of yourself.” Senior executives don’t want to look foolish, or admit they don’t have answers. “So what people do is they put out press releases pretending they know what they’re doing. And they hope this will go away before they retire. But it is happening faster.”

In human terms, what marketing execs like Tobaccowala, Sorrell, and Kassan know all too well is that many of the jobs held by their employees are threatened by technology. They know that new technologies like programmatic or computerized buying of advertising eliminate jobs. They know personalized ads dispatched by Instant Messages (IMs) or e-mails can be created by machines. They know algorithms and machines powered by AI increasingly decide what we see or read. They know, as Kassan says, “Technology is the number one threat to agencies. Technology allows for a more direct relationship between a buyer and a seller, with less need for an intermediary.”

Deep down, Kassan, like most media executives he advises, fears that marketing dollars will not just be redirected, they will actually shrivel. Their fear calls to mind this brief exchange between two friends in Hemingway’s The Sun Also Rises:

Bill Gorton: “How did you go bankrupt?”

Mike Campbell: “Two ways. Gradually and then suddenly.”

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GOOD-BYE, DON DRAPER (#ulink_44702e30-dcb8-55f2-a6fb-dc3a185e7ab8)

“Today clients are not married to an agency. They are only dating.”

—Michael Kassan

Mad Men’s Don Draper was a fictional stand-in for midcentury advertising executives like David Ogilvy, Bill Bernbach, and George Lois, who reigned at a time when the creative departments ruled agencies, when a single street—Madison Avenue—was synonymous with advertising. In those days, there was no need for a company like Michael Kassan’s MediaLink. In fact, Kassan and MediaLink would have been treated as an interloper, for the ad agency, as Jon Mandel and clients like GE’s Beth Comstock claimed, was the agent of the client.

Newspapers starting in the late nineteenth century began to compensate agencies with a fixed 15 percent commission on all advertising placed in their pages. Magazines followed, then radio and television. It was an unusual compensation system—the ad was paid for by the advertiser, but it was the seller of the advertising, not the buyer, that paid a percentage of the fee to the agency. In addition, agencies were paid a 17.65 percent commission on all ads created, and were separately reimbursed for production costs. The arrangement “was pretty lush,” concedes Miles Young, the CEO of Ogilvy & Mather until 2016.

Randall Rothenberg has been immersed in the industry for more than a quarter century. He wrote one of the most instructive and entertaining books about advertising, Where the Suckers Moon: An Advertising Story,

and today serves as the spokesman for digital companies as president and CEO of the Interactive Advertising Bureau. He believes the commission system fortified the agency business, boosting their profit margins. “There was collusion between the agencies and the publishers to keep prices high. The myth was that the client was the marketer. In fact, the client was the publisher. The ad agency acted as a broker for the publisher.” Ad agencies did not often haggle with publishers on price. The more ad dollars publishers received, the more the agency got paid.

Doyle Dane Bernbach’s Bill Bernbach—the creative decision-maker behind such iconic ad campaigns as Volkswagen’s “Think Small,” and “You Don’t Have to Be Jewish to Love Levy’s”—reigned at a time when ad agency execs and their place in the world was secure. When the CEO of fledging Avis offered his account to Bernbach, he qualified his acceptance by telling him, “But you must do exactly what we recommend.”

The campaign Bernbach crafted—“When You’re Only No. 2, You Try Harder. Or Else”—changed Avis’s fortunes. George Lois, like Bernbach a Bronx-born maverick, had won a basketball scholarship to Syracuse, and his hulking physicality and booming voice could be menacing. More than once, Jerry Della Femina, a creative colleague, recalls Lois screaming at clients, “I’ll jump out this window if you don’t approve this ad!”

“In the old days, creative guys were the only ones in the room to pitch clients,” recalls Michael Kassan, whose advertising career started in media buying. “They never met Harry”—Harry Crane, media buyer and head of Sterling Cooper’s TV department—“who was treated as a nerd in Mad Men. But in the late 1970s, independent media buyers spun off as companies, and in the ’90s they gained respect. The suede-shoes guys challenged the power of the white-shoes guys.”

A recurring debate within agencies in the Mad Men era was over what constituted a great ad campaign. In the 1950s, Rosser Reeves, the chairman and creative head of Ted Bates & Co., argued that advertising was a quasi science. He promoted what he called a “Unique Selling Proposition,” claiming that one idea that consumers could latch on to foretold whether an ad campaign would succeed. It had to be unique, but it also had to win the approval of survey research predicting it would sell. Colgate ads for toothpaste that “comes out like a ribbon and lies flat on your brush” was unique, but it wouldn’t sell, he said. Colgate ads for toothpaste that “cleans your breath while it cleans your teeth” was both unique and successful. Recruited to pioneer thirty-second TV ads for Dwight Eisenhower’s 1952 presidential campaign, Reeves ordered a Gallup poll that identified three issues on which the Democrats were vulnerable: corruption, the economy, and the Korean War. Reeves coined the phrase “Eisenhower, Man of Peace,” and portrayed Ike as a war hero returned to America to bring about domestic and international peace. His opponent, Adlai Stevenson, who didn’t own a television and thought TV ads talked to citizens as if they were second graders, countered by spending 95 percent of his TV ad budget on a half-hour telecast of his speeches. He reached a minuscule audience.

Reeves’s peer Bill Bernbach had a very different view. He was not a slave to research, relying instead on gut instinct. Research, he told Martin Mayer,

“can tell you what people want, and you can give it back to them. It’s a nice, safe way to do business.” But it usually produced pedestrian ads. “Advertising isn’t a science, it’s persuasion. And persuasion is an art.” Another legend, David Ogilvy, was both Reeves’s protégé and at one point his brother-in-law, but their philosophical differences grew so intense that they stopped speaking to one another. Ogilvy extolled the value of a consistent brand personality shaped by what he called “trivial product differences.” In many an Ogilvy print ad, the headline and graphics were followed by short essays touting the brand. In one famous ad, after the bold headline—“At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock”—the text enumerated thirteen reasons to buy the luxurious car. In the consumer’s mind, he believed, the brand stood for something.

Ogilvy broke with Bernbach as well, albeit less vociferously, asserting that Bernbach’s “art” got the better of his content. “What you say in advertising is more important than how you say it,” Ogilvy declared.

Bernbach firmly disagreed. “Execution can become content,” he replied. “It can be just as important as what you say.”

It was an argument without end.

Whatever differences divided the industry’s titans, however, they were united in the belief that it was the companies doing the buying—the advertisers—that ultimately wielded the power. Fearful of offending white viewers, initially advertisers vetoed the idea of an all-black variety show starring Sammy Davis, Jr. With tobacco ads making up almost 10 percent of their ad revenue, network newscasts rarely reported on smoking’s health risks. Over the years, when program schedules were decided, the head of network sales was always in the room, for no network wanted an ad to appear in what was deemed an unfriendly environment. A medium dependent on advertising for its revenue knows that its primary business obligation is to corral an audience for its ads. Bill O’Reilly seemed to be surviving his sexual harassment scandal at Fox, until a group launched a successful boycott campaign against his show’s advertisers. When advertisers fled The O’Reilly Factor in April 2017, Fox News quickly pulled the plug on cable TV’s top-rated anchor.

Over time, for industry-specific reasons and also due to a larger shift in American business culture, ad agency clients began to bring more and more scrutiny to bear on the whole cost structure. Jon Mandel’s j’accuse moment did not come out of a clear blue sky. After the 2008 economic crisis in particular, CEOs increasingly turned to their chief financial officers or chief procurement officers to more closely monitor marketing spending. Inevitably, the power of CMOs, who hired the agencies, eroded. “In Don Draper’s days there was never a procurement department,” says Wendy Clark, who has been a CMO of Coca-Cola and AT&T and is today the North American CEO of Bill Bernbach’s former agency, DDB Worldwide. “In new business briefs,” she says, in addition to the CMO “we have two procurement officers in meetings.”

Irwin Gotlieb saw this beginning to happen in the early 1990s, when procurement officers would hire auditing firms like Accenture and Ebiquity to monitor agencies. They became the agency’s adversary, he explains. “They got compensated for generating savings,” and they had a built-in “conflict of interest. They ran around saying, ‘The sky is falling!’ And then they sold you umbrellas.” By slicing marketing costs, they boosted short-term company earnings at the expense of the long-term health of companies, he argues, correlating marketing dollars with growth. An inevitable consequence, he says, was a loosening of the bond of trust between client and agency.

“Today clients are not married to an agency. They are only dating,” observes Kassan. Clients who previously conducted agency reviews every ten years now accelerated their review cycles, sometimes dramatically. Keith Reinhard, the chairman emeritus of DDB Worldwide, retained Anheuser-Busch as a client for thirty-three years, and he dealt directly with the family patriarch, August Busch. “We had a top-to-top relationship,” he says. “But when product managers came in under CMOs, that diminished, and in some cases eliminated, top-to-top relationships.” Today, many CMOs are not members of their CEO’s C-suite or top executive team—CEOs, COOs (Chief Operating Officers), CTOs (Chief Technology Officers), and CFOs (Chief Financial Officers)—and their tenure is often just a few years. David Sable, the CEO of Young & Rubicam, laments, “The biggest difference between our day and Don Draper’s is the relationship between agencies and clients. In those days, you had a problem and you called your agency. You were partners.”

Connected to the rise of procurement officers was the end of the 15 percent commission to compensate agencies. “The agency did not have to put forward a proposal for agency compensation, justifying how many people worked on the account or what they did. Compensation was worked out by how much money the client was prepared to spend on media,” Michael Farmer writes in his book, Madison Avenue Manslaughter.

The first major client to rebel was Shell, which in 1960 decided to abandon its agency, J. Walter Thompson, and replace the commission system with a fee system. The new agency was Ogilvy, whose head, David Ogilvy, claimed credit for the new form of compensation, which would over the next three decades spread almost everywhere. “Experience has taught me that advertisers get the best results when they pay their agency a flat fee,” Ogilvy explained in his memoir. An agency is “expected to give objective advice,” and may not be able to when its compensation is based on how much the client spends on advertising. “I prefer to be in a position to advise my clients to spend more without their suspecting my motive. And I like to be in a position to advise clients to spend less—without incurring the odium of my own stockholders.”

Ogilvy was correct about aligning the interests of the agency and the advertiser, but he was unmindful of the consequences for agencies. The 15 percent commission system plus a commission on all production costs did undermine trust; but the fee system undermined the creative agencies. “The commission system was an absurd system,” admits Jeremy Bullmore. “But it worked. What it did was make agencies compete on services, not price.” A fee-based system invited CFOs and their procurement officers to drill down on costs, to question why a high-priced copywriter could not be replaced by a junior copywriter. Over time, says Miles Young, it slashed the earnings of agencies “by maybe one third or half.”

Of course, no change was more disruptive to the advertising community than the proliferation of consumer choices brought about by new technologies. “In Don Draper’s days you had probably six media channels to engage with the consumer,” Bill Koenigsberg of Horizon Media says. “You had television. You had print. You had radio. You had newspapers. And you had out-of-home”—outdoor advertising, for example. There was also, he said, “below-the-line direct marketing,” including direct mail. “Today the ability to engage with consumers lives in hundreds of different media channels. That channel explosion is a huge difference.” It lives, as well, in billions of smartphones, personal devices with our own apps that we carry everywhere, sometimes to bed, and that allows advertisers to reach, and often to annoy, consumers. People spend more time on their mobile phone than watching television, says Carolyn Everson, Facebook’s vice president of global marketing solutions. Armed with more data that yields more information about each consumer, instead of spraying the audience with a TV shotgun ad and not being sure who has been hit, digital companies like Facebook say they let advertisers aim a rifle at individual consumers. This innovation is promised by every digital platform. “As opposed to marketing at people, it is marketing for people,” she says. “The biggest difference from Don Draper days is data,” says Keith Weed, a three-decade Unilever veteran who oversees marketing and communications for the world’s second largest advertiser. “Data has always been there. The difference is the ability of the computer to analyze the data.”

But even with the data, the marketers are not in control. “The single biggest difference between today and Don Draper days,” thinks Rishad Tobaccowala of Publicis, “is that consumers are increasingly determining what they want to interact with, and when.” Today, the consumer is the real king. Tobaccowala dates the empowerment of consumers to 2007, the year Apple introduced the iPhone, the first smartphone, the same year Facebook shifted its audience focus from college students to everyone, and the same year Amazon’s Kindle was introduced. In years past, advertising was based on a premise that information was scarce. Advertising informed us of products. We traded our attention for information, industry observer Gord Hotchkiss has written on MediaPost, an online marketing publication. Today we are glutted with information and have “too little attention to allocate to it. … This has allowed participatory information marketplaces such as Uber, Airbnb, and Google to flourish. In these markets, where information flows freely, advertising that attempts to influence feels awkward, forced and disingenuous. Rather than building trust, advertising erodes it.” Evidence of advertising fatigue is found in ad blockers and in Nielsen data that says half of those who watch TV shows they have recorded on their DVR devices skip past the ads.

The anxiety of the advertising community is revealed in the gibberish or verbal smokescreens they now employ. Just before the millennium, advertisers began to refer to themselves as “brand stewards,” as if the brand had a soul. Nike, as an amused Naomi Klein observed, announced that its mission was to “enhance people’s lives through sports and fitness”; Polaroid said it was selling “a social lubricant,” not a camera; IBM was promoting “business solutions, not computers.”

All this begs a fundamental question that comes up often in the advertising and marketing community: Are they sufficiently alarmed about the menace they face? There is a lot of brave talk, but it’s reasonable to wonder to what extent much of the community is simply kidding itself, living, as Robert Louis Stevenson once wrote, not “in the external truth among salts and acids, but in the warm, phantasmagoric chamber of his brain, with the painted windows and storied wall.”

At advertising confabs like Cannes, Unilever’s Keith Weed will often wear ostentatious chartreuse sports jackets. He is less the showman when seated in his London office in jeans and a long-sleeved grey button-down shirt. “There’s been more change in the last five years than in the previous twenty-five,” he says. In his early days, a media plan consisted of a couple of pages. Today it is as thick as a book. “The complexity of choice is brilliant, but equally challenging.”

The challenges of the advertising and marketing world and the erosion of trust between agencies and clients are often the subjects discussed at MediaLink’s weekly staff meetings. President Wenda Millard sits at the head of a long, rectangular, reddish-stained white oak table facing two large wall screens, one of MediaLink employees in Los Angeles and one in Chicago; in New York, MediaLink staffers occupy black leather swivel chairs and stand along every inch of wall space. At sixty-two, Millard is the elder in this room, but her dark, pixieish pageboy and exuberance are that of a much younger person. JC Uva, a MediaLink managing director, thinks of Wenda as Felix to Michael’s Oscar. “Felix was the neat one. That’s Wenda. You can literally tell time by Wenda’s schedule. Michael is a moving target.”

Millard called this February 2016 staff meeting to order at precisely 2:30 P.M. About four dozen MediaLink execs gathered in the glassed conference room. Michael Kassan was to be present via video feed from Los Angeles. After attending the Mobile World Congress in Barcelona, he had slipped away with his wife to a spa in Germany. Not seeing him on the screen, Millard said, “We’ll wait for Michael.”

“The spa did me good because you don’t see me!” Kassan announced. He was smiling from the Los Angeles table, casually attired in a grey crew-neck sweater over a pale blue shirt.

Millard asked him to share his interpretation of the bad blood that Jon Mandel’s 2015 speech had inspired.

“It reminds me of the gallows humor of being at a spa in Germany and of how the world has changed,” Kassan said. “Now Jews are paying Germans to put them in rooms and not feed them!” Kassan’s humor does not bat one thousand, but it is always enthusiastic. He went on to explain the unease MediaLink’s ad clients were feeling about what they believed to be a lack of agency transparency. “More of our clients are saying, ‘I’m getting screwed by my agency. At the end of the day I might want to deal directly with publishers.’” He cited how programmatic ad buying, run by machine algorithms that target desired audiences, “may be able to cut out the agency. The agency/client/marketing model is being challenged now the way it has never been challenged before, based not only on technology potentially disintermediating … but when you break down the trust barrier,” because the client doesn’t know how its money is being spent, the disintermediation accelerates.

So what stance, an executive asked, should we take with clients?

“I harken back to my baseball days: get a cup,” Kassan answered. To protect MediaLink, their task is to serve as “a bridge between the buyer and the seller. We shouldn’t harbor any side here. We’re on all sides. We are also very close to all of the agencies.”

“I get calls every day,” interjected another executive, “from people at agencies saying they want to leave the agency.”

“They’re all running for the exits,” Millard observed. “It’s extraordinary how many people want out. Their margins are all getting squeezed. One of the big issues we have is, if I can make forty thousand dollars at an agency as a media planner but I can make sixty thousand at Facebook, what am I thinking? This is not a happy industry.”

Millard could have cited results of a 2016 survey by Campaign US, a global business magazine focused on the marketing world, that found that 47 percent of those who’ve worked in advertising and marketing more than five years say their morale is low, the primary reasons being “inadequate” leadership, “lack of advancement” opportunities, and “dissatisfaction with work.” A LinkedIn survey the same year, with a vast sample size of three hundred thousand, found that when nine industries were ranked by ten questions, advertising came in last in “work/life balance” and “long-term strategic visions,” and next to last in “comp & benefits,” “strong career path,” “job security,” and “values employee contributions.” Advertising had mediocre rankings in each of the four remaining questions.

Dark clouds may hover over agencies, but Kassan saw only azure sky for MediaLink. “I would hope you all see,” he concluded, “why that continued chaos and disruption is kind of a blessing in disguise for us. Actually, I don’t think it’s in disguise. It’s a blessing.”

What Kassan saw as bright sky, others would describe as the eye of the storm, but that didn’t faze him. The current turbulence was nothing compared to some of the ordeals he’d endured in the past, which on some days seemed like another lifetime and on others, he would admit, seemed like a shadow still chasing him in his rearview mirror.

4. (#ulink_0ccf18fa-518a-58b8-b8ef-0d2545c25f12)

THE MATCHMAKER (#ulink_0ccf18fa-518a-58b8-b8ef-0d2545c25f12)

Michael Kassan is advertising’s Dolly Levi, the matchmaking lead character in the musical Hello, Dolly!, whose score he loves to hum.

Wenda Millard likes to say of her partner that he believes that everything is a yes, symbolized by the two-word sign above his desk: ALL GOOD. Millard has more shoes than Imelda Marcos, she says, “but my shoes have dents in the toe from shoving my foot into his shoe because I know he’s going to say yes.” An oft-told MediaLink story illustrates Kassan’s skill at pleasing others. He carries in his black Tumi backpack multiple portable devices—a Samsung Galaxy, two iPhones, a BlackBerry, an iPad, along with phone chargers and connector wires. Several years ago, the brand stamped on the back of his cell phones was either Verizon or AT&T. The latter was a client, and he had flown to Dallas for a dinner meeting with an imposing AT&T senior female executive he barely knew. After dinner, as they stepped outside the restaurant his phone rang. Reaching into his bag, he pulled out the Verizon phone.

“Michael, you didn’t just take a Verizon phone out of your pocket, did you?” she exclaimed.

“I think to myself, ‘You fucking idiot, Michael Kassan!’” Instantly, he flung the Verizon phone to the pavement, smashing it into pieces with his heel. Turning to her, he exclaimed, “Excuse me, was there a question?”

She smiled. He smiled. He explained that he needed a Verizon phone in Los Angeles because AT&T service there was patchy. “It was a bonding moment,” he recalls.

It is also a moment shared by more than one MediaLink executive as emblematic of their boss. “He has this perpetual smile on his face,” says Robert Salter, who was Kassan’s second chief of stuff, as he calls his chief of staff. “When he does something that is so clearly wrong, he does it with a smile and in a way that somehow earns the affection of the person on the other end. He manages to charm them. He’s able to make awkward conversations very easy.”