In many ways, the advertising business is like the investment business, where salespeople or advisors solicit you to invest in advertising, or stocks and bonds. Both sell assets, who’s price can fluctuate on the whims of the market, and from supply and demand.
However, in the investment world there is a class of advisor known as a fiduciary, who is legally bound to act in your best interests. They aren’t allowed to make money in ways that create a conflict of interest. For example, encouraging you to constantly buy and sell stocks to earn more commissions. Fiduciaries earn money based on performance.
But in advertising, there are no fiduciaries.
The advertising world is literally the wild, wild west. And it thrives on dumb money; rivers of cash, billions of dollars flowing from privately held and publicly traded corporations all pouring into a bottomless pool of media, with no clear expectation for performance.
The sources of this river are the advertising agencies, consultants, and salespeople who get paid a percentage of every dollar, regardless of the return on investment. Incentivized not by performance, but in most cases by activity and volume. The more money you spend, the more they get paid.
In the investment world there are laws and government agencies like the SEC protecting investors, and a laser like industry-wide focus on performance, with comparable benchmarks, and reams of accessible data and research.
You can visit any number of investment websites, like Vanguard or Fidelity, and find an array of helpful tools and research – all free of charge. There are dozens of publications, newsletters, websites, and other sources of information enabling just about anybody to become a competent investor.
There are no similar sources of reliable, objective, and readily available information available in the advertising world. Access to the most important research, like demographics, ratings, readership, and purchasing data is prohibitively expensive, guarded over by a handful of monopolistic corporations like Nielsen, marketed to professional buyers and advisors who won’t readily share it – unless you spend some dumb money with them.
Even if advertising research were affordable and accessible, the data would be incomprehensible to the average business owner, or even a scholar, with an endless sea of acronyms like GRP’s, CPM’s, and GRIP’s – a dialect even more confusing than the accounting-based language of the stock market.
And the reliability of advertising research is questionable at best, because most of the information collected about media consumption comes from surveys of small sample groups, where the results are based on people’s memory of their own behavior.
Do you know how radio and television ratings are still largely determined? When I worked in television 2004 – 2011, the information was 100% compiled from handwritten diaries, from small groups of unsuspecting residents, asked to write down – from memory – their day’s viewing and listening habits. The results from these tiny sample groups were tabulated and then extrapolated to somehow represent an entire viewing audience.
Billions of dollars are influenced by the ability of random people to remember what they watched or listened to that day. Would you invest in a stock if your only guidance of its merit were the recollections from a small group of investors? Probably not. But it doesn’t stop anybody from spending money on advertising.
In the Spring of 2004, researchers from Ball State University published the results of extensive research on media consumption, called the Middletown Media Studies. They used three methods to gather information on media habits; telephone surveys, diaries, and actual shadowing and observation of people while they consumed media.
They concluded that observed media usage exceeded perceived media use – often by large margins. Diaries picked up some of the usage, but well below what was observed. People simply spent way more time with various media than they remembered, perhaps out of embarrassment. Would you admit to watching 5 hours of TV every day?
In the past decade new technology has been introduced, like electronic monitoring of radio and TV viewing, but the sample sizes are still alarmingly small, and outside of large markets the technology hasn’t been deployed, especially in TV, leaving cities as large as Indianapolis beholden to projections from other markets who do have it. This would be like buying stock in General Motors based on guidance from Ford’s financial records because they are similar companies.
Also, amazingly, there is zero measurement for any media consumed outside of the home, like at bars and restaurants.
Digital advertising offers the most accurate data on consumption in the media universe, and that’s part of its popularity. There are clicks, impressions, views, downloads, actual transactions, and more. Still, it’s all very confusing to a lay person. And the landscape is so vast and overwhelming it has spawned cottage industries of specialists who focus on specific categories like social media, or search engine optimization.
Still, these specialists can’t be counted on for objective advice outside of their area of expertise, because they lack a macro view of the entire media universe. In fact, they often shun anything outside of digital media. Ask a digital specialist to prepare a comprehensive media strategy for a bricks and mortar type business, and you will get nothing but a digitally focused media strategy.
I have been a gatherer of dumb money for most of my professional life. I’ve sold every form of advertising starting in newspaper, then local and national magazines, then radio, then television, and along the way all forms of digital advertising.
Just like stocks during a bull market, when the economy is good – and business is good – then the advertising business is good, further reducing any focus on accountable results, fueling and compounding the river of dumb money.
For several years I worked for one of the largest advertising firms in the world, managing media and soliciting clients for new business.
What I learned is the advertising agency business is 100% ruled by personal relationships. Agencies are rarely, if ever, ultimately chosen based on merit, or specific performance. This is the polar opposite of how you would choose an investment advisor. Ad agencies, or consultants are chosen based on relationships and referrals.
All of our clients could be sourced to a personal relationship within our leadership team. During this time, I took part in dozens of pitches for new business, and unless we had a relationship inside the company, we never had a shot. It essentially was just practice, and a waste of time and money.
We were once invited to pitch to the holy grail of advertising accounts; Coca Cola. But not for their giant global consumer business, this was to manage their trade marketing efforts that influenced the retailers who sell their products to the public.
We spent weeks preparing, brainstorming ideas, investing thousands of dollars into presentations, videos, mock-ups, and travel. When we arrived at their monolithic headquarters in downtown Atlanta, I was in awe just to be there. And our presentation went great, we really did our homework and presented ideas they genuinely liked. We could have been the best agency on merit alone.
But we didn’t win the business, never had a chance. Essentially, we were there to give free advice and ideas, and give them a better negotiating position with their incumbent agency, who could then steal and implement our ideas.
Whether I was selling advertising space, time or services, I’ve always had the best intentions in mind, and on the whole, people in advertising want their clients to be satisfied and get results. But most people in advertising are delusional about their ability to get results. I was one of those people too, focused solely on whatever I was selling at the time.
I think everyone in advertising has a soft spot for the local or regional business owner, who live among us, and have to compete against better-financed national goliaths. These multi-national corporations spend the most dumb money on brand and image advertising you see on TV. I don’t feel bad for them, they can afford it. But they’d be better stewards of their shareholders money by demanding more accountability and response.
On the whole, getting advertising right can be complex and tricky. It’s far from glamorous, and the work required to be a successful advertiser can be just as boring and mundane as the work it takes to be a successful investor in stocks and bonds.
Here’s what I would advise a business owner or entrepreneur when seeking to hire an agency, or work with a consultant, or attempt to buy media themselves.
- Accept full responsibility for your marketing. While operations are important, marketing is more important. In any business, the attraction, retention, and maximization of customers should be the focus, and accountability in those areas ensures all areas of your business – including operations – must operate at a high level.
- If you want to hire an agency or consultant, I would seek out someone who can demonstrate specific results and performance in your industry. And if they can’t, should have enough confidence in their abilities to work on commission based on sales performance.
- For starters, read these three books, I learned more about how to get results from advertising from these 3 books than I did in 20 years of selling it.
No B.S. Direct Marketing, Third Edition, by Dan S. Kennedy; Outrageous Advertising That’s Outrageously Successful, by Bill Glazer; Ogilvy on Advertising, by David Ogilvy