+ Grey sale marks the end of an era. This article takes a look at how going pulic and having to deal with shareholder's demands of high profit margins are effecting advertising. They point out that "ad agencies are behaving like big publicly traded companies in other lines of business - companies that constantly need to push their profit margins to keep the stock market happy. In fact, one reason for the focus on costs, advertising executives say, is that their clients are also trying to squeeze them ever harder." And the recent years have shown clients that there are ways to do advertising on string budgets. But then are they happy with the results?
As for advertisers, they often seem dissatisfied with their agencies' work regardless of how efficiently the bottom line is being monitored. Jim Stengel, the chief marketing officer at Procter Gamble, the world's biggest ad spender, gave the industry a grade of C-minus during a speech earlier this year. P&G's main ad agencies are Grey, with its skimpy profit margin, and Saatchi Saatchi, part of Publicis Group, a company known for its fatter margins; in the first-half of 2004, its profit margin was 14.4 percent.Which all seems rather inane to me. If you prefer the work coming out of smaller and more creative agencies maybe there's something to be said about the focus being on the work and not on profit margins.
What advertisers say they want are refreshing, creative ideas and innovative ways to reach elusive consumers in a fragmenting media market.
For that kind of inspiration, however, they increasingly turn to outsiders: small creative "hot shops" run by gel-coifed hipsters, whose ideas are then implemented globally by the big agency networks. Meanwhile, outside communications consultants are being used to provide an overview of media strategy.
There's a big disconnect somewhere in here. Clients are paying money for big conglomerates to do advertising for them. But they are dissatisfied with the work. So they turn to small shops who aren't as restricted in their creativity because of budget or other financial or whatever restraints, where they pay more money. It doesn't seem to be a very cost effective business pattern. But what do I know, I'm just a copywriter. ;)
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