Recently at Ad Stars in South Korea, Ari Halper, Chief Creative Officer at FCB New York, gave a provocative talk that everyone in the ad world might do well to give some thought to.
Halper kicked off the talk by addressing the elephant in the room – the question that so many talented people in advertising are asking themselves: “What the hell is going on in this industry. Is there a future, or should I get out?”
Let’s start with the good news: advertising is not dead, says Halper. But there is some bad news: it’s hurting.
Here’s what’s really bizarre. Creative is where the value lies and yet that’s not where the money is going. Media would have nothing to do if they didn’t have [creative ideas] to place somewhere.
Over the course of his talk, Halper gave a forensic history of the path that got the industry to where it is today, beginning with the decision to replace 15% margins with a fee-based model.
“In the old days, agencies charged a 15% margin – that is, until someone had the idea to create a fee-based model. This person felt 15% margins were a conflict of interest because if the client spends more, the agency makes more. By presenting this idea as being best for the client, other agencies still using the commission model wound up looking bad and distrustful – it led to an erosion of trust with clients.”
Next, media and creative were pulled apart.
“Once upon a time, when a creative idea was conceived, the creatives would share it with the media people who would find ways to bring it to life. Now the two are separated, and the reason they were separated was to make money – because now agencies could make money through the creative, or through the medium.”
I think it’s been our own distraction that has caused a lot of these problems. We’ve been a bit like a cat chasing a laser pointer, distracted by the shiny objects: award shows.
To compensate for the loss of 15% margins, creative agencies introduced a fee-based model, charging for creativity based on time. “It’s like paying Spielberg by the hour. It’s worse than the Stone Age. Because it’s impossible to guestimate how long it’s going to take to come up with a creative idea,” says Halper.
Next, the media industry bred further distrust from clients, leading to an age of procurement.
“Creative agencies are paying for this – yet it was the media agencies who perpetrated this distrust. Here’s what’s really bizarre. Creative is where the value lies and yet that’s not where the money is going. Media would have nothing to do if they didn’t have [creative ideas] to place somewhere.”
Meanwhile, the industry now has to create ads, entertainment, purposeful brands, they have to be creative and tech specialists. “We’re supposed to do all of this while being paid less,” says Halper.
We’ll offer up our creativity for practically nothing. We cut our prices to win pitches – this devalues what we create, and we’ve got to stop it.
Along came ad blockers and digital behemoths like Facebook and Google – all armed with killer data and Artificial Intelligence.
“Guess who gets hurt in the crossfire? Us. They’re taking some of our top talents, but the scary stuff is what’s coming. AI is going to get to a point where Alexa or Google Home or Siri are going to listen to you throughout the year – your search behaviors, your financial records – and suggest products, so there will be no need for advertising.”
On the other hand, if companies like Deloitte, Accenture, and IBM are rushing to enter the ad industry, surely this means advertising can’t be dead.
Halper concluded by saying the biggest culprit in all of this is “us” – advertising agencies.
“I think it’s been our own distraction that has caused a lot of these problems. We’ve been a bit like a cat chasing a laser pointer, distracted by the shiny objects: award shows. I don’t think there’s anything wrong with awards themselves for benchmarking talent – but they should only be a means to an end. Awards should be part of the journey, not the destination. Too many creatives think they are a destination,” says Halper.
“We’ve also been distracted by politics – the pressure of chasing the bottom line and wanting to win. We’ll do virtually anything to do so. We’ll offer up our creativity for practically nothing. We cut our prices to win pitches – this devalues what we create, and we’ve got to stop it.”
He concluded by suggesting a few different models that agencies might consider. Instead of a fee-based model, why not try a value-based model, where agencies sell ideas like products? Performance-based, IP-models and partner models (where the agency becomes a stakeholder in their client’s success) are also options – apparently, R/GA’s IP-model creates 60% of that agency’s revenue.
So what does the future look like? Despite his pessimism, Halper is hopeful that demand for creativity will grow.
“Creativity can solve nearly every problem. What we provide has genuine value. Creativity is the most valuable asset in the world – and there is positive evidence that creativity will continue to be valued.”