Madison Avenue Reaches a Tipping Point
The evidence is overwhelming: Madison Avenue's performance is chronically deteriorating. "Who Cares?" a powerful group of industry thinkers and writers, will soon meet in London , forging new ideas.
Credit: Tom Cheney, The New Yorker, The Cartoon Bank
Madison Avenue has become a money machine that focuses more on maximizing share price than growing advertised products.
This has been going on for decades, but the problem is particularly acute today.
Advertisers and their ad agencies are complicit in the shift.
What is the evidence?
Moribund sales growth. Despite a trebling of ad spend and a trebling of creative deliverables since the global financial meltdown of 2008, advertiser sales growth has been very depressed. Nearly half of the Top 50 advertisers saw their sales grow by less than 2% between 2008 and 2023, a 15-year period. This is much slower than GDP growth, which was 31% during the same period. The underperformers include major FMCG advertisers like P&G, Colgate, Unilever and Nestle.
Questionable SOWs. How much effort is going into ensuring that SOWs actually deliver results? The SOWs cover every possible media channel. Why don’t the SOWs seem to work?
Doubled share prices. These underperforming companies more than doubled their share prices, focusing on financial engineering — increased dividends, share buybacks, cost reductions, etc. — ensuring that their C-Suite executives continued to receive high remuneration and bonuses. Share price growth, rather than their revenue growth, is the dominant driver of Madison Avenue’s efforts. Finance and Procurement executives are heroes. CMOs, by contrast, get a C+ for their work.
Agency downsizings. To achieve margins, ad agencies and their holding companies downsize their staffs, or cost-reduce them by merging agency operations. Additionally, they hold the line on salary levels to keep costs low.
Depressed salaries. Agencies are now woefully behind in salary levels for new recruits. University grads can expect starting salaries of $40-50,000 from ad agencies in New York, whereas management consulting firms currently offer $85-110,000 plus a 5-25% bonus, according to consulting firm C-Suite executives.
Declining price for agency services. Prices paid for agency services have been declining for more than 30 years, declining by 43% since 2008 despite a massive increase in SOW workloads.
High relationship turnover. At the same time, agency-client relationships are no more durable than Kleenex tissues, with typical relationships lasting about 3 years, forcing agency C-Suite executives to focus more on new business development than managing their agency strategies and operations.
Threat of AI for paid man-hours. AI, which is much touted in today’s trade press articles, will replace 20% of agency man-hours, threatening agency and holding company revenues. Yet, C-Suite executives are doing little about changing pricing strategies. Agencies still do not document or measure their SOW workloads, so the amount and type of work they do for their fees remains unknown to the C-Suite. It will be difficult for them to be “paid by deliverable” when the number and type of deliverables is not known.
On September 12, 2024, Brian Jacobs and Nick Manning will deliver a half-day conference for interested parties to explore pro-active responses for the industry crisis. As Brian described it on Linkedin:
Who Cares? — the movement, started by Nick Manning and Brian Jacob a few short weeks ago has hit a nerve. It's being talked about, and volunteers are joining us (in many cases anonymously, for reasons I'm sure you can imagine) from as far afield as NZ, Australia, China, Canada and the USA.
The common ground is that the ad business is in a mess, riddled with fraud, lacking in trust, no longer relevant for most consumers who at best tolerate what we produce and at worst just ignore it. We've lost the creative spark, in all aspects of the business, and that was what not only made it fun, but far more importantly made it effective.
We are trying to do something about it, starting with an event in London, not sponsored but paid for by ticket sales to interested parties, with tickets going for as little as £200.40.
You can join us and show your support by emailing brian@bjanda.com, or even better, become a part of the movement seeking to reset advertising. You can buy a ticket to our event in London on September 12th here:
Who Cares tickets: https://lnkd.in/eReMzn2x
Join us in London for a half-day discussion about what Madison Avenue needs to fix its deteriorating situation.
See you there!
It's the end of the Advertising Age.
The biggest problem is that nearly no one of any talent wants to work in the field any longer. It's perceived as a shallow career choice for Woke losers who couldn't hack it in legitimate creative industries. Arrogance & ignorance have always been a deadly combination; same as it every was, and with the same ultimate result.
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