January 4th, 2004
Five Key Issues Could Alter The Ad Industry
By Brian Steinberg and Suzanne Vranica
Wall Street Journal
One of the worst eras in advertising is drawing to a close, but 2004 will present
a host of new challenges.
U.S. ad spending is expected to grow 6.9% to $266.4 billion in 2004, with world-wide
ad spending set to rise 5.8% to $498.3 billion, according to Robert J. Coen,
director of forecasting at Interpublic Group of Cos.’ Universal McCann. Still,
marketers are operating lean and mean and demanding more creativity and strategic
thinking from their ad shops.
Five key issues have the potential to alter the marketing landscape. Each could
serve as a catalyst for other shifts in this volatile industry:
-- TV’s annual bazaar: Last year’s "upfront" market—where the
major television networks line up sponsors for their prime-time programming
—brought in a record $9.3 billion, with marketers begrudgingly paying double-digit
price increases. But soon after the prime-time season started, few marketers
were pleased. Ratings for many top shows were disappointing, and young men—
a valuable demographic—appear to have wandered elsewhere.
Will big-name advertisers rebel in 2004, either by refusing to pay another
increase or by taking their ads elsewhere? TV prices are expected to stay high
because broadcast-TV remains the most cost- efficient means to reach a mass
audience. But some marketers may think—and act—differently. And the question
remains whether TV executives can come up with the kind of programming that
brings back the audiences advertisers want.
-- ‘Advertainment’: Frustrated with the limitations of the traditional 30-second
TV commercial, and fearful of gadgets that let viewers skip ads altogether,
marketers have begun to find new ways to drive their messages home. Walt Disney
Co.’s ABC is teaming up with WPP Group PLC’s MindShare, a media-services firm,
to create programs that can incorporate product placement and other sorts of
brand alliances.
Once relegated to the screens of reality programming, in-show product plugs
have made the leap into comedies and dramas. Ford Motor Co. vehicles, for example,
are turning up in the drama "24" on News Corp.’s Fox network. Will
consumers respond favorably? Or will they throw in with groups like Commercial
Alert, a nonprofit organization co-founded by Ralph Nader, that has asked government
regulators to investigate and possibly regulate such practices?
-- In-your-face antics: With commercial clutter skyrocketing and media audiences
fragmenting, some marketers are taking their messages to the streets, hoping
to integrate them into the fabric of our lives. Last year, for example, Coca-Cola
Co. opened lounges for teens at malls. Campbell Soup Co. has unveiled "Soup
Sanctuaries," which offer weary shoppers a chance to relax while enjoying
free soup. AT&T Wireless staged buskers at transportation centers, singing
spoof versions of famous songs that included amusing lyrics about cellphone
courtesy. Are such approaches informative or annoying? The debate will continue
in coming months as marketers turn up the heat on this hard- to-miss form of
advertising.
-- The Return of the Web: As broadband penetration increases, marketers will
have more opportunities to show off their creativity with ads that have TV-commercial
quality, plus all the bells and whistles that Web-based advertising already
uses. Some advertisers are on board now. German car maker Bayerische Motoren
Werke continued to make strides in 2003, for example, with short Web-based films
about its BMWs by major movie directors. And presidential candidates Howard
Dean, Wesley Clark and others are the envy of many marketers with Internet-based
efforts that include a Weblog that anyone can join and techniques that urge
people to hold their own house parties and communicate among themselves.
Universal McCann’s Mr. Coen sees national advertising via the Internet rising
10% over 2003 to about $6.2 billion in 2004. Already, one media-services firm,
Publicis Groupe SA’s Starcom MediaVest Worldwide, has put forth the notion that
the broadband platform ought to have its own "upfront," which could
theoretically let marketers lock up advertising time in advance on the most
desirable video programming shown online by Internet service providers such
as the AOL unit of Time Warner Inc.
Will marketers take advantage of the new capabilities and come up with Web
advertising that will actually work without ticking off surfers with ever more
pop-up ads? The Internet has proved difficult to master in the past, but as
more households embrace broadband, the potential is too great to ignore.
-- Pay Pressure: Times are getting better, but the nation’s top marketers are
still keeping a tight grip on the agencies they hire and the ad dollars they
spend. Clients are increasingly calling in executives from their purchasing
departments to help choose which agency would provide the best work at the most
attractive price. Those decisions were once determined over a handshake and
a martini, and frequently were based on longstanding relationships between an
agency honcho and the client. Now much of that intimacy is gone.
Last year, for example, chemicals titan DuPont Co. put ad agencies through
a multi-step process that included an online auction in which five rivals had
to compete on pricing. Other marketers are examining numbers of agency employees
on accounts and even going overseas to examine foreign offices. How will agencies,
unaccustomed to such intense scrutiny, deal with even more of it this year?
Few on Madison Avenue are eager to find out.