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Everybody Talks About The Demise Of Advertising Agencies. But Are We Seeing The Demise Of Brands?

Aug 15, 2008
Advertising agencies, especially the big holding companies, are buying up every type of communication companies just to stay in the game. And the name of the game is betting on the future. But it can be a dangerous game.

If you happen to know the way in which it is going, you can safely place your bets. But if you do not, you are in for a very expensive ride. And according to reliable sources, 86% of us will get it wrong. So you do not have to be a palm reader or look into a crystal ball to see which way the business is going.

But brands cannot afford to go through the next several years making mistakes especially in this economy. And it is our job not to make any. Will brands survive into the future? Yes, if we stop looking in all the wrong places. The value of the communication is still in the value of the brand.

Maybe it has not happened yet, but brands and their agencies are likely to follow in the footsteps of the music industry. But agencies will not be the real victims, brands will. Brands now bear the risk of losing power both domestically and globally,which is transitioning from high power brands to low power brands. So what needs to be done to keep brands alive? At the very least, we need to understand how these brands were built and what is happening to them now.

Are consumers falling out of love with their brands? Are they replacing their favorite brands with other resources? With the sudden deluge of content, are brands becoming the parasites of content, feeding off every piece of entertainment that comes streaming across your screen? Have brands simply lost their grip on successful communication?

Remember when commercials were fun? When no one minded that they were sprinkled among your favorite shows? You and the advertiser had a clear understanding: You watch the following program for free if you agree to let us also run commercials. Under those terms, both you and the advertiser benefited. Occasionally, as a sign of gratitude, you were willing to go out and actually buy the product. How nice!

This economic model exited for decades. It is the stuff that held the advertiser, the consumer and the TV stations together. But this model, this wonderful quid pro quo that was built through the power of communication is breaking down. In those days, commercials had a chance of being more enjoyable: 85% were used for brand building and only 15% were used for promotions. Today, it is the exact opposite. And the economy certainly is not helping things.

In fact, according to new WSL Strategic Retail poll, to save money, 48% of consumers have traded down from their usual brands to lower-priced brands. Sixty percent said they are now more likely to wait until something goes on sale rather than buy it at full price. And 33% of the poll's respondents said they now haggle for lower prices in stores. And if that is not enough to dampen the spirits of the most perverse sync, Ford just cut their budget by $200 million.

Advertising, to a large extent, is finding its analogy in the music business. In much the same way Napster has impacted the music business, so are YouTube, Facebook and MySpace impacting brands. Once music was free, consumers felt there was no reason to pay for it. Now that content is free, well, you get the point.

To combat this, new media companies like Google and Yahoo wax eloquent about clicks. But be careful before you join in the euphoria. Take a look at this: when you consider clicks, 50% of the clicks come from 50% of the users, and 80% of the clicks come from 16% of the users. This is for display ads. And of the 16%, the average income is slightly under $30K.

Further, this past March, there were over eleven billion videos viewed by online visitors. How does any brand ever begin to break through this clutter? As you know, clutter on television was always considered a problem. But clutter on the Internet? Did I hear someone just say eleven billion videos? And the wear-out factor is but one exposure.

Today, no one argues with the fact that the consumer is boss. Brands have always been co-created. Smart brands have always known who the boss is. But there are more important issues that are suddenly leading back to the crux of the business: What is the value of the brand? And what is the value of its communication? What meaning are they receiving from its commercials? And what value do they receive when they purchase the brand?

Right now, when it comes to brand communication, consumers seem to have no reciprocal obligation. The brand is making no demands upon them. They have walked away from the communication equation. How they evaluate and respond to brand communication is changing.

It is little wonder that Sergey Brin of Google keeps repeating the point that ads have to get better, and he is right. A new value equation has to be created. A new deal has to be struck with consumers.

Like self-believing merchants hawking their wares on a summer boardwalk, everyone claims to have the answer. As yet, no one has created a new value matrix. Everyone wants to stop talking and start doing. I could not agree more.

I have been exploring new ways to glean brand meaning and new ways to create brand narrative. It is not about storytelling, but it is about finding a new way to define a brand, which is finding the language of cinema as opposed to the language from the printed page. Narrative is meant to be reinvented Godard would be amused.

But brands cannot afford to go through the next several years making mistakes especially in this economy. And it is our job not to make any. Will brands survive into the future? Yes, if we stop looking in all the wrong places. The value of the communication is still in the value of the brand.
About the Author
Gad Romann is a brand consultant who is all about ideas. Gad is a frequent speaker on CNN, ESPN, Fox, The NYU School of Business and Wake Forest University Babcock School of Management. He has held senior positions at Saatchi & Saatchi, Y&R and JWT. Gad believes in pushing the envelope. His articles are experiments in thinking about media and communication. Visit his blog to see more of his insights.
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