As promised, here’s feedback from our “Ad-volution” series, triggered by the demise of the venerable Cole & Weber, circa 1931, with a recent update from Ted Leonhardt that traces the rise of Internet ads, at the expense of advertising creative…
Ted Leonhardt, former principal of The Leonhardt Group
I was in my second job out of Burnley School when Dan Snope called and offered me a job at Cole & Weber, then the biggest advertising agency on the West Coast. I turned him down. Something unthinkable a few months earlier when I was madly freelancing nights to cover the costs of Judy’s pregnancy. I turned him down because I’d just taken a job with a small design shop…
Cole & Weber now gone, and many, many others gone, too. So what happened?
Our system encourages consolidation. Consolidation makes industrial enterprises more efficient. Corporations get bigger. Prices for goods go down, profits go up. I just heard this statistic from Richard D. Wolff on his podcast, Economic Update, in 1975, the 109 largest U.S. corporations got half of all corporate profits. In 2016, the 30 largest corporations got half of all the corporate profits.
In 1971, WPP the first global advertising agency holding company, was founded. Omnicom, Publicis and the other consolidators followed, once the formula caught favor with investors. Stocks soared. Former owners got rich overnight. WPP acquires Ogilvy. Ogilvy acquires Cole & Weber.
Talented agencies slowly start to be managed to produce quarterly profits consistently quarter after quarter. Managers who are good at producing consistent profits rise to the top. Management becomes standardized across all the holding company agencies. Soon the differences between formerly distinctly different agencies become less distinct. Creative managed for profit becomes less creative.
Then the 2008 downturn hit. Consumers stop buying so much stuff. Corporate revenue plunges. But get this, corporate profits don’t fall. Why? Because the trend of using purchasing agents to keep costs low that Walmart perfected in the ’80s and ’90s has spread to all the major corporations. So top lines suffer, but the all-important bottom line, profits, doesn’t fall. But suppliers, all suppliers, including advertising agencies, foot the bill. Agency holding companies quit growing. All of a sudden, it’s not creative that’s important at agencies, but cost. And since all agencies are very similar, or at least clients think so, cost, not creative, is how agencies are selected.
Then the Internet kills what’s left of the mass market. Now agencies that used to spend millions on creative designed to influence hundreds of millions of consumers are now creating thousands of banner ads—Facebook, You Tube and Google ads designed to influence much, much smaller numbers of people. It doesn’t make sense to spend millions on ads that are only going to be seen by only a few. The targeting of individual customers is what becomes important, not the creative message. Agencies are no longer meeting with the C-suite to guide corporate strategy. That role has been taken by the management consultancies—Accenture, Deloitte, McKinsey, etc. In 2018, P&G the biggest buyer of advertising services, announced a cut in ad spending in the billions.
Digital is the new creative growth area. The magic that Cambridge Analytica used to make Brexit happen and to get Trump elected and make Jeff Bezos the richest man in the world is the new creative that replaced the clever headline and seductive TV spot of the creative revolution. “Think Small” was hot. Now it’s not.
I still regret not taking that job at Cole & Weber.
Tracy Wong, co-founder and CCO, WONGDOODY
The Nuked Agency Wasteland: A Cockroach’s Take
When I read Larry’s piece and scanned the long list of agencies, I felt like a cockroach looking up at mountains of deceased or oddly mutated companies, laid waste by the nuclear bomb blast of the digital age.
Larry won’t come out and say it’s sad, but I will. It’s sad.
Who’s to blame? It’s not just technological progress, but also industry arrogance. The end of Cole & Weber is an exclamation point on a very long run-on sentence that’s been saying two things over and over again for years:
1 – Ad agencies don’t matter that much anymore. Ad agency moguls used to be the consigliere to CMOs. They advised on every key decision well beyond the scope of advertising. But agencies have been holding on to that belief, some to this day, while the world has moved on. Marketing in 2019 bears no resemblance to marketing in 1999. But the way some agency heads talk, you would think they’re still waiting for Y2K. Denial comes when agencies have to support a failing financial model: huge retainer accounts that subsidize huge overhead.
It doesn’t mean there isn’t a need for what agencies used to do exclusively, but it’s a small part of a 21st century marketing mix. And there’s a lot more of what agencies previously considered bottom feeders eating their lunch: production companies, in-house agencies, freelancers.
2 – Technology is more important than creativity. What technology hasn’t eaten whole it has assimilated, like the Borg in Star Trek. Creativity is no exception. Jeff Goodby of GSP & Partners/SF, a very wise man (and my ex-boss), commented about Cannes and the business:
“It used to be that the business was about doing things that were big and famous and mind-blowing. Everybody knew about them … Now we do things that are technically popular and important. Nowadays, Cannes is more like a plumbers’ or industrial roofing convention. No one knows what we do any more.”
Our priority used to be creating something crazy and cool that sets people’s hair on fire. Now it’s about how we infiltrate people’s lives with customized, yet creepy, AI-powered content and/or data-rich experiences. It’s more about the tech platform than the wow factor.
The pendulum may swing back, but not back to 1999.
We heard these drumbeats years ago, and after two failed attempts to futureproof WONGDOODY, we finally got it right and live to tell the tale as a subsidiary of global tech giant Infosys. We got to keep our name and, a year-and-a-half into the relationship, our culture.
I have always said starting and owning a company is like parenthood. It’s the hardest thing you’ll ever do. You never stop worrying. Ever. And when you see other parents struggle and their kids along with them, you feel it too. We’re all just trying to keep it together.
So when I heard the news about Cole & Weber, the former NW creative titan, I felt it in my bones — as the list of our deceased heroes gets longer and longer by the day.
Rick Stanton, former creative director/principal of Stanton & Everybody
I think your analysis is pretty spot on. When there were clear lines of division in the disciplines, there was some order and respect for what each other brought to the party. Then, design shops began poaching advertising accounts and especially the brand-development concept. And shame on the ad agencies for letting it happen, but it did.
Now, everyone says they do everything. Consequently, everything is compromised. It seems few value the quality of their message, which is their brand. How cheap? How fast? And will it work today, or you’re fired tomorrow?
I got out of advertising in the nick of time in 2015, it wasn’t fun anymore. Ideas and thinking ceased to matter in favor of perceived instant gratification (Ooh, someone clicked on my banner ad. They didn’t buy anything, but they clicked.) How cheap and how fast became more important than how good, and NOBODY knows how to write a good radio ad anymore.
And get off my f&^%$#@ lawn!
Jim Copacino, creative director & co-founder, Copacino+Fujikado
Pat Hansen, founder & principal of Hanse Design Company
Indeed, things are much different now than they were “back-in-the-day.” Slowly but surely, and then later quite drastically, the boundary lines have largely disappeared.
When I founded Hansen Design in 1980 (yes, a million years ago), there were much clearer lines among ad agencies and PR firms and design firms. Each prided itself on specializing in their main purposes. Agencies did advertising, campaigns, TV, radio and media placements. PR ran campaigns for information dispersal for branding, special events and causes. Design firms did design, which used to encompass branding until is became a thing of its own.. Occasionally, we crossed over or collaborated. But larger companies utilized the services of all three.
For Hansen Design, one of the biggest changes, is the near-death of printed materials. GONE are the beautiful brochure days, the expensive tactile promotional packages. IN are the digital needs, from websites to banner and print advertising, from online presentations to promotional videos and from social-media planning to implementation and graphics. Over the last 10-15 years, we have worked in all areas of creative—with the exception of radio and TV.
The concept of “one-stop-shopping” is alive. Our clients come to us first for their creative needs, and if we need outside help—we find it. Most of these clients have been with us for 15+ years and are more mid to small companies that don’t have the big budgets the larger agencies require. And we’ve seen some of the larger design firms be purchased by larger organizations.
The question I wonder about: Is the work as good? Or are we happier with less? Have budgets gotten much tighter? Remember the days we hired photographers, illustrators and calligraphers for most projects? Are we becoming a group of creatives that accept “good enough” far more often than we used to?
Mike Mogelgaard, founder and principal of Mogelgaard & Associates
HOW IT WORKED: In the ’80s and ’90s textbooks, business articles and college class rooms spelled out exactly how the advertising business worked. Ad Agencies took a 15% commission, charged hours for account and creative time and, if full service, took a 15% media commission. Every agency operated with that understanding.
WHAT WAS I REALLY SELLING? It occurred to me that the business model was the same as an accounting firm or law office. Everyone is selling hours. Hell, I’m in the idea business. How do you put hours on an idea that may take days to develop—or come to you in the shower?
So I put a value on ideas. I’d meet with the client and show him several ideas, with a price tag that took it through to completion. The faster our team executed the project, the more money in the team member’s pocket. The client got a bill for the project, not the hours.
HOW DID WE MAKE ANY MONEY? Now that we were selling ideas and each team member knew what he or she would make on the project—everyone began making money.
I’d look at rivals that had up to four principals and wonder how in the world that many people could make any real money, just selling hours. They didn’t. The hope was that a new piece of business could be spread amongst existing employees, resulting in more profit—at the expense of good work and employee burnout.
MAKE EVERYONE A REAL PARTNER: Mogelgaard & Associates wasn’t a virtual agency in today’s way of thinking, where the idea is to bring in hourly freelancers to cut expenses. Each Mogelgaard team member was a partner on the accounts they worked on. The quality of the work directly influenced their income. Needless to say, you could drop by our shop on any evening and see the lights burning. (I took a lot of prospective clients to dinner, after which we’d mosey over and let the client see folks happy and hard at work. Then I told him to swing by his current agency and see if any lights might still be on.)
“All ships rise with the tide” was a truism for our form of “virtual agency.” Of course, our being structured differently was derided each time other agencies presented against us.
But we must have been doing something right. The accounts we served from 1975 to 2000: Seattle SuperSonics; Red Robin; Bank Of America (Seafirst); Eddie Bauer; Group Health; Eagle Hardware; Metro Transit (remember, “Metro, It’s Easy”?); Longacres; Lincoln Mutual Savings; Cedar Homes Inc.; People’s Bank; Skippers; AAA of Washington; Cellular One; Princess Cruises; Ben Bridge Jewelers.
John Brown, former Cole & Weber employee and later owner of his own shop.
Funny thing about Cole and Weber in the ’60s.There was a bit of magic in the atmosphere around there in those days. The people who worked there all seemed to enjoy each other slightly more than you could have found in the average ad agency in the 1960s. And the one person who was responsible for it all was a guy named Hal Dixon. Here’s just one example of the kind of things he did.
Mike Doherty, former president, Cole & Weber
With regard to your columns about the shakeout within the agency landscape, I believe there is another factor that should be considered. It’s the fragmentation of media.
There was a long period of stability after Cole & Weber was formed in 1931 that lasted through the “Madmen” era. However, since the early ’90s, the exponential increase in media fragmentation led to the proliferation of specialist agencies. Clients quickly realized that generalist agencies were not equipped to be all things to all people (even though they marketed themselves as such). The downside for the brand was that working with numerous specialist agencies required the client to become the strategic integrator across all the resources. Their biggest challenge became the strategic fragmentation that resulted from having too many hands in the marketing pot. (As an aside, Cole & Weber thrived not by being all things to all brands, but rather, by being the lead strategic and creative partner that could integrate a client’s marketing agencies.)
The need to reduce fragmentation led to two shifts within the industry. The first is that clients began to reduce fragmentation by building some of the resources in-house. It seemed natural since the brand already was leading marketing integration. And second, holding companies like WPP grew by acquiring a plethora of specialist agencies and insight companies. No matter what a client needed, it was available within the holding company. What’s happening now is that the holding companies are continuing to reduce fragmentation and increase profitability by consolidating P&L’s and brands, and I expect the shakeup to continue for a few more years.
Given that most brands are either local/regional or global, with little in between, some local agencies are doing well by focusing on the needs of local/regional brands and being open to integrating with their client’s other partners. For larger global brands, marketing will likely be a mix of in-house and global-agency resources, the exact nature of which will remain in flux and limit agency growth for some time.
Jacque Beamer, owner/principal BrandQuery
This series is challenging to read, for the truth if it all. Given our smaller market, we crossed over much earlier. I believe clients were better and more consistently served under the older model. However, change is imminent and there has been a lot of good as well. We just need to evolve in a way that keeps us both true to our beliefs and creates value for our clients. If we are open to it, there is always a way. Unfortunately, it can’t be done comfortably.