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Theorizing an open future for the ad industry
Why the future of advertising is open
The marketing industry is at a crossroads. But a truly open model for creative work at a global scale can ensure a prosperous future.
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Sir Martin Sorrell, perhaps the single most powerful person in the advertising industry, recently said that the "new normal" for the global advertising industry is that of "low growth." I think that is not necessarily true—if we examine the underlying assumptions about the source of growth for the industry.
The advertising industry currently works on a pre-digital era assumption: Individuals and small businesses cannot be a sustainable source of business. Most agencies work almost exclusively for big corporate brands (apart from the token CSR/ NGO work that can help them win creative awards at Cannes). This strategy worked for the industry in the 20th century, since much growth was yet to come from globalising markets, increasing consumptive lifestyles, proliferating capitalist economies, etc. So agencies didn't need other sources to grow.
But now, as the world stands (almost) completely globalised, consumptive lifestyles have maxed out and capitalist economies are struggling from one bailout to next, the advertising industry is finding that growing with only big-spending corporate brands is much more difficult than it used to be. Creative agencies are being squeezed by competitive pressures and demanding clients, who prefer to work on project basis rather than on retainer basis. Agency business was never as uncertain as it is now.
But what if advertising agencies actually embrace this uncertainty? What if we expand our horizons to embrace a wider set of branding efforts?
An open approach would be key to this. And in a two-part series, I'll explain why.
In this article, I'll discuss why "open source" is the answer for higher growth (and how we've so far gotten it wrong). The second article will articulate exactly what it means for agencies to go "open source," and what will that entail.
The advertising business' long tail
Let's begin by examining two potential sources of growth for the advertising industry.
First, consider that 95% of enterprises across the world are small or medium enterprises (SMEs). If advertising is about helping businesses grow, then why don't we help this 95% do that?
Yes, this would require a fundamental shift in the business model of advertising agencies, but would it not be worth it? Let's look at the possible worth we can tap into.
SMEs contribution to GDP varies from 16% in low income countries to 51% in high-income countries. Let us assume they spend 10% of their revenues in marketing, out of which, say, 2% goes in creative/ strategy services. That is the 2% not coming to organised advertising industry right now. That is the 2% spent on work by either amateurs, freelancers, or in-house part-timers—often inefficiently, unprofessionally, and with hit-and-miss results.
Second, note the rise of "personal brands." To help them grow in their careers, people want to build brands for themselves. At present, this expanding pool of potential customers can only look at self-help books, blogs, and other "gurus" for help. They don't have access to professional services that can help them grow their personal brands.
Combine these two long tails and you'll see the potential source of growth for global advertising agencies. The potential is huge, but no one has yet attempted to create an integrated offering for the three broad segments of customers: individuals, small enterprises, large corporate brands.
Change is difficult and scary for everyone, especially (it seems) for advertising leadership. Advertising professionals spend a lot of time bemoaning the death of the agency of record, shrinking margins, and frequent pitches. One gets the sense that everyone sees what the problem is and wishes to turn back time—return to the good old days.
But such nostalgia is a form of denial. And it doesn't bode well when many in the industry fall back on nostalgia to make sense of their present.
In order to adapt the advertising industry to new challenges and new opportunities, we need to embrace a new idea. It's not a new idea—just a rather a poorly understood one. The idea is called "openness."
We've seen several attempts to create an "open" marketplace of creative ideas. For example, places like Adhack hoped to be a "marketplace for ad creatives."
It no longer exists.
The "marketplace metaphor" gives the impression that "open" simply means "a venue for frictionless exchange." But that's actually problematic in the case of advertising, because it treats ideas and creative people as commodities. When one exchanges a physical item for a certain sum of money, the exchange is complete—expectations met. Exchanging ideas, however, is more complicated.
An advertising client does not simply want any idea; she wants an idea that she thinks will help her business grow. Many variables are at play here: a client's expectations, the client-agency relationship, an understanding of current market dynamics, shared creative sensibilities, an understanding of consumer's emotional needs, cultural mores, etc. The final expression of an idea is almost always a result of a series of discussions, where the objective gets sharpened and creative work undergoes various iterations as it courses through several feedback loops. It's nothing like a single transaction.
This mode of working is inevitable in creative businesses; any creative work eventually requires this kind engagement with feedback loops. A "marketplace" of either ideas or people can unfortunately never quite capture this kind of interaction, which is necessary for creative businesses. Advertising must embrace a different, broader, and more effective sense of openness.
Some companies have adapted crowdsourcing (which is not an open source approach) to varying degrees of success.
For example, 99designs.com solicits designs from hundreds of designers for a client. Unfortunately, this model is exploitative in the sense that a designer is not paid for her time; she's only paid if her design is selected. In this way, the system is only useful for budding artists who are testing their skills, building their confidence and portfolios. It cannot sustainably scale to win bigger businesses or attract established creative talent.
Curated and crowdsourced ideas
A third example of crowdsourcing advertising agencies is Victor and Spoils (V&S). V&S is essentially a "normal" advertising agency with a "plug-in" for crowdsourced ideas. They open up some client projects to a set of strategists, creative directors spread across the world who have registered with them.
This idea has obvious limitations for sharing strategically important projects, speed of delivery, feedback mechanisms, and more. As such, V&S cannot sustainably scale because not many clients typically have the kind of patience that is required for the crowdsourcing process. Neither do they have the willingness to experiment. They want effective solutions quickly; they don't care if those solutions come from within the agency or from consumers.
A better approach to 'open advertising'
Small businesses know that advertising can help grow their businesses but are unsure about its effectiveness. They don't have enough money for "experiments." Before committing money for an ad campaign, they need some amount of assurance that their campaign will indeed deliver business results.
This assurance is possible now with big data analytics. Look at how Google shares some data about user behavior and campaign effectiveness. What if that was available for integrated campaigns—TV, print, digital, outdoor, everything. If a global advertising agency puts together data about the campaigns it has conducted across the globe over the last few decades, big data analysis can provide confidence level "thumb rules" that clients can use to make decisions real time. That is an important development waiting to happen. However, even this is only a part, even if an important part, of the bigger "open" possibility.
Surprisingly, there is no existing body of theoretical or practical work that explores the potential of open values in advertising. But I have a few ideas—and in the spirit of openness, I will explain them in the second part of this series.
An earlier version of this article originally appeared at Truth About Branding.