Speaking at an industry conference on Monday, Rob Norman, the North American CEO of WPP’s GroupM, likened ad agencies to the Denver Broncos NFL team. After losing most of their games in the first half of the current season, the Broncos have managed -- against all odds -- to win seven of their last eight games, most in come-from-behind situations. Many in the advertising marketing community, he said, believe that “the agency business is completely screwed up, but here we are in the fourth quarter somehow winning,” said Norman.
More seriously, he said that contrary to those who believe that agencies run the risk of disintermediation in the digital world, there is no reason why the outlook for agencies should not be rosy if certain fundamentals are executed properly.
“Allocation, optimization and attribution will sit at the heart of the agency business,” Norman told attendees at a Digiday conference in New York. “It will be informed by better acquisition processing, and interpretation of data with an overlay of creativity to find new ways of engaging consumers with brands.”
That said, Norman stressed, “those are all big challenges. But due to demand for new formats and channels, if we’re smart we have a future and a good one.”
Norman dismissed the notion that brand advertisers aren’t committed to the Internet. It’s true, he acknowledged, that it makes less sense for some brands to spend heavily on the Web -- at least for now. He cited Campbell’s Soup as one example. One of the reasons the company spends less, he said, is that the “weight-to-shipping price ratio for a can of soup is pretty inefficient.” The product, he added, “won’t become a big e-commerce item for quite a long time.”
As for the battle of the big digital companies for Internet supremacy, Norman said that for now, Google has the model to beat. It’s a model “unified by one continuous golden thread of data that’s woven around behavior and intent.” Compared to Facebook, Norman asserted, Google’s model is “stronger, more significant, and one that has significant growth upside still.”
While Facebook has a potentially decent advertising business ahead of it, "the jury is still out" on how successful its current model will be, he mused.
Norman noted that marketers want other vendors to emulate at least one facet of the search giant's model. Before Google came along, “no media vendor sold all of its own inventory at risk. No one paid Google until there was an outcome. That’s very seductive for advertisers [and they] would like the vendor community to be more of a stakeholder in success.”
When asked about the alliance between AOL, Microsoft and Yahoo, Norman replied that “big is only good if big is smart.” Elaborating, he added that vendors of size “have to prove that bigness in and of itself creates value, or you have to translate that bigness into something else” -- such as a cost-effective transaction.
As to Amazon’s play in the advertising game, Norman said that “if it's more than 5% of their gross revenue in three years. I’d be surprised.”