I really love Mediapost publications like Media and OMMA, not because they provide any relevant information about online marketing, but rather for the unintended humor. In particular, because these two magazines simply love agencies. They spend pages and pages reviewing the amazing creativity and cunning of the big online agencies.

In awarding Starcom the prestigious (sic) “Agency of the Year” – the editor writes: “We consider objective criteria such as new business wins, net media billings gains, major industry awards, and other measurable criteria. But we’ve always leaned heavily on such intangible factors as strategic thinking, innovation, creativity, and, most of all, industry leadership.”

OK, now I get it. Media magazine operates the same way a traditional agency does – hence the love affair. Sure, ‘objective criteria’ are considered, but the true mark of a star agency is ‘creativity’ and ‘industry leadership.’

Now don’t get me wrong – these big agencies are indeed very creative. I happen to really enjoy those full page rich media ads I see on the Yahoo homepage – they’re clever, they’re funny, they often include sweepstakes with really big prizes! But, have I ever bought something as a result of one of these uber-chic ads? Um, no. And I suspect I’m not alone. Sure, I did become aware that “Hulk” was being released nationwide, but I didn’t go to the movie.

Nonetheless, some agency somewhere made a beautiful PowerPoint with words like “lift”, “unique visitors” and “branding” that clearly demonstrated that the $500,000 they spent on one day of Yahoo advertising was more than worth it. And, of course, that agency most definitely picked up some nice awards from the likes of Media magazine.

My advice to the account rep who got the gold statute – melt it down, sell it for scrap, and start saving your money – your industry will be dead in ten years. The age of branding is over.

To put it bluntly, branding is dying and being replaced by direct marketing, specifically search engine marketing, email, infomercials, and direct mail. There are so many marketing messages thrown at consumers these days that most consumers have trained themselves to ignore marketing.

This has become clear to some companies. Companies that buy SEM or direct mail optimize results based purely on the economic value of a particular campaign (this falls into what Media classified as “other measurable criteria”). If a keyword ad doesn’t work, you either delete it, lower the bid, or change the creative. And by work I mean, make money. Direct mail experts measure everything in terms of ROI – recentcy, frequency, monetary (RFM) has nothing to do with “lift.”

As Al Ries and Laura Ries point out in The Rise of PR, The Fall of Advertising, consumers have become so skeptical of branding that many now assume that whatever an advertisement says, the opposite must be true. For example, if you see an ad in the newspaper featuring a letter from a Big Oil company CEO talking about his company’s commitment to the environment, what’s the first thing you think – that company must have just had a huge oil spill or other environmental disaster and they’re trying to spin the bad news.

Similarly, the Ries’ point out that some of the biggest brand advertisers in the US – Chevy, Budweiser, etc – have continued to lose market share as their advertising budget increases.

Now consider a company like Nextag. Have you ever seen a Nextag ad with a catchy slogan, swirling lights, and a celebrity spokesperson on TV? Have you even seen a Nextag ad on TV (they do late-night infomercials, but that’s it). Of course not. Go to the Nextag Web site – they use three colors and as few graphics as possible – no branding there either. Now go do a search on Google for virtually any product in the world and you’ll probably see a Nextag ad inviting you to buy the specific product you are looking for, and buy it now.

According to the San Francisco Business Times, Nextag was the 7th fastest growing company in the Bay Area, with revenue of close to $200 million. And not a penny spent on branding. Several other companies on that list (like #9 – Adteractive) also fall into the category of “we don’t brand, we just buy ads that make money.”Oh, and neither Nextag nor Adteractive use an ad agency.

Markets are efficient. Companies that make money will succeed, companies that don’t will disappear. Traditional agencies make money, but they make this money by providing services to dying companies that do not make money as a result of their services. In other words, agencies’ clients will eventually go out of business or get rid of the agency, once they realize that their branding strategies are no longer working.

Agencies, of course, won’t give up without a fight. Inevitably, they’ll do one of two things – first, attempt to (ironically) rebrand themselves as direct marketers and two, acquire small and successful direct marketing agencies. But this won’t work long-term.

First, rebranding is not sufficient – any business model that calls for 15% of a client’s spend regardless of results is not a direct marketing business model. Direct marketing agencies need to be lean and mean, and that includes the way you bill clients. And direct marketing agencies don’t rely on impressive PowerPoints or pretty awards to measure success – they rely on bottom line economics. Bloated, inefficient agencies simply can’t survive as lean direct marketers.

Second, acquiring smaller direct marketing agencies is only a short-term strategy. To remain giant companies, agencies need to have giant profits. To have giant profits, agency have to push branding and other amorphous ideas. Direct marketing is a low margin business – despite their best intentions, no agency will ever truly accept the notion that survival means massive layoffs, massive salary reductions, and streamlined margins. And even if they do come to this conclusion, by making all of these changes they really aren’t even an agency anymore anyways – they’re just a direct marketing company.

Eric Schmidt -CEO of Google – told a crowd at Berkeley that “corporate marketing departments were the last bastion of corporate unaccountability” (as quoted from John Battelle’s book, The Search). Eric probably should have included agencies in his assessment but since Google is currently devoting much of its sales team to courting agencies, I can understand why he didn’t.

In the end, though, Eric is right. Corporate marketing departments will die – either because smart management understands that they don’t provide value, or because management isn’t smart enough to stop the bleeding and the company goes under. Once the corporate marketing departments fall, the mega-agencies won’t be far behind. Oh, and (sadly) those humorous “agency of the year” stories in Media will also disappear, along with the trophies, award ceremonies and probably Media magazine. I guess I’ll have to find my daily chuckle somewhere else . . .

2 Comments

  1. Anonymous February 27th, 2006

    A very good analysis.
    Major ad agencies will depend on developing markets such as China and India to drive growth, while their base in the major developed markets erodes. At some point, the developing market clients will get smart, in which case their growth will slow down, and they will eventually have to close down.
    At that point, the SEM agencies will have succeeded in using their metrics to completely replace “branding”.

  2. Swans G Paul April 20th, 2006

    You’re right on target.
    I totally agree with you. Branding doesn’t make the cash register ring. Direct response advertising does.

    Actually, here are some other thoughts I’ve had about the subject of branding and why it hurts businesses. I had these thoughts on my blod. Here they are.

    The Lies Of Branding Exposed For The Benefits Of Serious Advertisers
    March 13th, 2006
    The Lies Of Branding or Name Recognition Exposed:

    What’s Wrong With Branding And Why Businesses Are Being Cheated

    So here we go.

    The other night I was watching a commercial. The commercial is about a tire by a famous tire manufacturer. And guess what they did in the commercial?

    They showed couples dancing Rumba, Meringue or whatever music they thought was creative. The commercial was a tribute to DANCING. It has nothing to do with advertising tires

    This commercial completely missed the boat. C’mon. If I want to buy new tires, I want to know how long they will last. I want to know why it’s better than the competition. I want to know the offer. Can I buy the tires, try them for 90 days and if they don’t live up to my expectations, return them.

    Commercial Was A Loss Of Money: Confused Viewers

    Sorry. The commercial said absolutely nothing about the tire. It was all about showing good-looking people dancing. And believe me, when I am in the market for a tire, I couldn’t care less about dancing.

    So why 80% of the commercial was spent on showing people dancing? Why didn’t they mention the benefits I’d get if I bought the tire? Why didn’t they invite me to call for more info or see distributors? Why? Why?

    C’mon I need tires. I don’t need you to arouse my desire to become a great dancer. After all I am quite clumsy, so I am not interested in learning how to dance. And if I were I’d google dancing schools and I’d find many dancing schools in Brockton, MA.

    What Is Advertising ?

    This commercial once again shows why branding goes against the very meaning of advertising. The very meaining of advertising which is : Advertising is Salesmanship in Print.

    Look if you had a tire store and a prospective customer walked in, would you start talking about dancing Rumba or other interesting dance styles. Of course, not. You would inquire about his needs for tires. You would tell him why this specific tire will meet his needs. And you tell him how many scientific trials were conducted to verify the claims. You would tell him of the thousands of people who are using this tire. And you would ask him to buy NOW.

    Wouldn’ You Fire A Salesman Who Sings Songs About Nothing To Your Customers

    Imagine how quickly your company would go bankrupt if all your salespeople did was singing to your customers. You would ask them:” Is this American Idol going here. I don’t see Simon.” You would fire them, and show them the way to the psychiatrist…because you’d think them mad. And rightly so.

    Imagine yourself walking in a store and you see two young adults, in their prime twenties, dancing elegantly like swans. What would you think? You would think they’re out of their mind. Dancing in a store as a way to sell? Sell what? I beg your pardon.

    What Is your Advertising For Again?

    This is selling. And this is what your advertising should be about. The creative proposition is a way for ad agencies to deny their responsability toward you, the buyer of advertising. The branding excuse serves them well, since they don’t have to tell you, ” Our ad didn’t work…or the ad is pulling like crazy.”

    All they need to do is to impress you with some fancy words, some fancy graphics, some cute faces. And voila, your ego is satisfied. You pay their bill. And everyone is happy, except for your customers who are still wondering what you were trying to tell them. For your customers have need and perhaps,what you have can solve their needs.

    And if only you could be clear, straightforward, and human they would be buying from you. I tell you: your customers hate it when you give them funny ads that say nothing. These funny ads don’t tell them what they need to know to make a buying decision. These branding madness is a disservice to the buying public.

    Before this day ends, make sure you get a copy of Scientific Advertising, by Claude Hopkins. And you will see for yourself why your agency or your “creative” people don’t understand the first word about advertising. And why until today, your advertising was a maze, beyond your power to grasp. A maze that is costing you thousands if you’re a small advertiser and millions if you’re a big boy.

    Do it now. And stop burning money on branding. Every dollar you spend on advertising should work to bring you more customers. And Hopkins will show you that. At least read the book to know what to expect, when you order advertising. This book will save you thousands of dollars.

Leave a Comment

David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.