ADVERTISING

The Advertising Industry Has a

Problem: People Hate Ads

By Tiffany Hsu
Oct. 28, 2019

1. In the predigital days, advertising agencies were ruled by swaggering creative

directors who gorged on lavish client contracts and sometimes created
campaigns that set the cultural agenda and captivated the public.

2. Nearly every piece of that equation has changed. Agencies are better informed
than ever before about consumers, having amassed huge stores of their data.
But many of those consumers, especially the affluent young people prized by
advertisers, hate ads so much that they are paying to avoid them. At the same
time, companies that hire ad agencies are demanding more from marketing
campaigns — while paying less for them.

3. As a result, the advertising industry faces an “existential need for change,”

according to a blunt report published on Monday by the research firm Forrester.
Now the agencies must “disassemble what remains of their outmoded model” or
risk “falling further into irrelevance,” the report concludes.
4. “It’s harder to reach audiences, the cost of marketing is going up, the number
of channels has exponentially proliferated and the cost to cover all of those
channels has proliferated,” Jay Pattisall, the lead author of the report, said in an
interview. “It’s a continual pressure for marketers — we’re no longer just
creating advertising campaigns three or four times a year and running them
across a few networks and print.”

5. As advertisers bombard consumers across platforms like Twitch, Facebook,

television, billboards and more, consumers are trying to get away, signing up for
ad blockers and subscription services. “People hate advertising,” said Joanna
Coles, the former chief content officer of Hearst Magazines, during a session at
the Advertising Week conference last month in New York. “And it’s all
advertisers’ fault.” Seated next to her, nodding in agreement, was Marc
Pritchard, the chief brand officer at Procter & Gamble, one of the largest
advertisers in the world. Ads, he said, are often irrelevant and sometimes “just
silly, ridiculous or stupid. We tried to change the advertising ecosystem by doing
more ads, and all that did was create more noise,” he said.

6. The industry, over all, is also struggling to adapt as Google and Facebook
reshape ad delivery and Netflix stokes appetites for ad-free entertainment,
according to a separate report also released on Monday by GroupM, the media
buying arm of the ad giant WPP. The result is “dangerous days for advertisers,”
according to the report. “With shifts in viewing habits, commercial impressions
in the most viewable, highest-attention media are in free fall across the world,”
researchers wrote. “The problem is universal, and if the viewing behavior of
younger audiences is a harbinger, things are not going to get better.”

7. Some start-ups have begun rewarding or compensating consumers to look at

ads. But to effectively reach viewers, advertisers must also “incorporate data-
driven, tech-fueled approaches and platforms into the creative process and tool
kit,” according to the Forrester report. That includes automation and machine
learning technologies, which Forrester expects will transform 80 percent of
agency jobs by 2030. In July, JPMorgan Chase announced a deal with the ad
tech company Persado that would use artificial intelligence to write marketing
copy.
Image

Some consumers opt to pay more for subscription services that allow them to
skip watching or listening to advertisements.Credit...Martin Bureau/Agence
France-Presse — Getty Images

8. Advertising has become a “very complex, sprawling marketplace,” with

agencies grouped under large holding companies like Interpublic
Group, Publicis Groupe and WPP, Mr. Pattisall said. To stay nimble, the holding
companies must centralize their operations, even if it means “the disappearance
of some pretty storied, iconic advertising brands,” Mr. Pattisall said. Last year,
WPP merged Young & Rubicam, a creative agency cited in “Mad Men,” with its
digital ad business VML. Soon after, WPP combined J. Walter Thompson, which
was founded in the 1800s, with the digital agency Wunderman.

9. The consolidation will bolster agencies as clients scale back their budgets,
according to the Forrester report. Steven Moy, the chief executive of the
Barbarian agency, said that multiyear contracts had shortened, with budgets
tightening and performance metrics becoming more stringent. “I haven’t seen a
lot of multimillion-dollar, blue-sky, five-year projects happening — it’s more
like, ‘can you deliver something in six months?’” he said.

10. Global spending is expected to grow at slower rates this year and next year
compared with 2018, weighed down by signs of a weakening economy and rising
geopolitical tensions, according to data released Thursday from the WARC
research group. For the first time ever next year, Facebook, Google, YouTube
and other online platforms are expected to soak up the majority of advertising
dollars, according to WARC.
11. Advertising giants are facing competition for clients from consulting
companies such as Deloitte and Accenture, while independent agencies such as
Wieden & Kennedy New York have beaten out legacy advertising companies for
major accounts such as McDonald’s.

12. Some advertisers, like Unilever and Bayer, are pulling business away from
agencies and handling some of the work internally. Last year, 78 percent of
members of the Association of National Advertisers had an in-house agency, up
from 58 percent in 2013 and 42 percent in 2008.

13. Smaller agencies, such as Cutwater in San Francisco, are feeling the
pressure. But Chuck McBride, Cutwater’s founder, said that changes in the
industry would allow companies to express their creativity as they experiment
with increasingly personalized advertising. “The gloom and doom is greatly
exaggerated,” he said. “Things are really messed up, but there’s opportunity in
this.”

Follow Tiffany Hsu on Twitter: @tiffkhsu.

A version of this article appears in print on Oct. 28, 2019, Section B, Page 3 of the
New York edition with the headline: Bombarding Audiences Isn’t Working
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