Forget Cannes: how well do we really do at our own business?

So first: What is the role of advertising for businesses?

We build brands, optimize sales, create conversations, do SEO etc but in the end it all boils down to either increasing turnover or market share, or increasing profitability. Now if that’s the USP advertising delivers to a business it should fare pretty well on those parameters for itself.

How well does advertising do at its own business-of building innovative brands, increasing turnover or market share and increasing profitability?

Quite badly actually. Firstly, in terms of market share, we are increasingly losing business to both strategy and technology consultancies. Secondly, we are losing business to companies doing their own advertising in-house. It started with companies doing only some artwork in-house to now setting up entire agencies in-house. Thirdly, with Google, Facebook and Amazon ad revenue growing rapidly, they are steadily poaching talent from ad agencies and getting into the business themselves.

The fourth point is that our margins are decreasing and so are the stock prices. Just in 2017 WPP shares saw their biggest drop in 17 years by around 10% and WPP even scaled back their annual organic revenue growth target to between 0% -1%. Yes, you read that right, 0–1% growth!

Another side is, in terms of innovation, for the last few years there are few (and at times none) ad agencies on FastCompany's most innovative company list. Even in terms of employee brands, whereas at one point of time we used to attract the best and the brightest and that’s increasingly becoming a challenge. Even existing agency (ad and PR) employees are typically unhappy; working for longer hours and almost the same pay with increasing stress.

As mentioned earlier, to compare this scenario to another industry would be like lawyers as a community not doing well at fighting their own cases, while someone else did a better job. Or doctors not capturing the largest share of the sick patient market. It may be a little difficult to accept, but the facts are in front of us.

The number of consumers and businesses are increasing, mediums are increasing, new economies are opening up and thus overall global marketing budgets have increased compared to a few decades earlier but unfortunately, we have allowed other players to beat us at our own game.

And how are we trying to solve this?

1. Digitals changing role:

i) Digital professionals are being promoted to senior positions.

ii) Digital is no longer the last few slides of a pitch but the apparent big change is that agencies are by leading with digital.

That’s nice. And as a person who started his career in the digital domain and teaches it, this makes me happy but somehow it seems that the entire problem is because agencies did not evolve to the digital age fast enough. Figuring out Snapchat’s new ad format or opening an e-commerce division was all we lacked. By and large, most of the big consultancies entered the digital space later than but somehow we are losing business to them.

2. New Jargon:

While there is a lot of ‘talk’ in advertising, it’s increasingly an echo chamber where we all love hearing our own voices.

We are now talking about technologies like AI, Machine learning and programmatic advertising in every other conference and creating fancier jargons along the way.

It’s almost like the ship is steadily sinking because of holes in it and you are running around with glue to seal the holes. But meanwhile, we do prepare a list of the top “50 people most creatively using glue” and celebrate this annually in Cannes.

And what should our solution be?

That is an elaborate answer and I have tried to share my perspective in earlier posts but it will take some discussion but we can start off by doing a few things:

1) Recognizing there is a problem and the gravity of it.

2) Realizing that technology or data alone won’t solve it. The solution will come from looking at things from a completely fresh perspective but also knowing our strengths - creativity and insights.

3) Not applying superficial strategies but being focused enough to solve it.

I used to run a communication agency called Brandlogist. After seeing where the industry was going I decided to shut it down and that was the time I started having more honest conversations with industry peers about their numbers and ours (not being a competition anymore obviously helped). What was surprising to see that some of the biggest players still operate on razor-thin margins and, while they rack up clients and revenue, their profitability isn’t significantly growing.

Ours is a knowledge-intensive industry, which is rapidly changing and that means a growing resource cost. Why are we still running businesses with such low margins? Perhaps we are still selling clients something they want but don’t need.

Clients are looking for solutions to business problems; the industry, except a few notable exceptions, keeps giving them creative ads  -  whether those be television, print or digital.

Even with our expansion into data, we have become better at building tools to capture and structure data but haven’t been able to build a significant business around selling brands actionable consumer insights. Consumer insights were our bread and butter but the consultancies of the world have done a brilliant job of building profitable businesses around it.

Does this mean advertising will die soon?

I don’t think so. We are too deeply embedded in the ecosystem to disappear. Perhaps that’s why we don’t feel the need to change…. Only sudden death brings urgency.

We will probably go a little at a time, steadily replaced by better ways of addressing business needs. Meanwhile earning lower margins since there is a lesser demand for our skills and the same number of agencies. Constantly increasing hours and earning lower respect. But hey, till the end we will still prepare the list of best campaigns and have some fancier metrics or jargons.

Or perhaps… We can see the challenges, not as the end or decline but a time for a structural change.

Saurabh Parmar is a consultant and trainer for brand, digital and start-up growth.