Commentary

Fast Forward: The Color Of Money

Fast Forward-Joe MandeseThis month's issue focuses on the role of color in media. If it's okay with you, I'd like to confine this column to just one - the color green. Let's face it, it's the color that's been on all our minds as we put this magazine to bed, though the color red also seems to be lurking in the background - not to mention hopes for the resurgence of a shade of black. Mixed metaphors aside, I'm talking money here - and/or the lack thereof. How could I not?

The economic slowdown that led up to September's financial crisis had already been weighing down on the media industry. But the back-to-back implosions of some of the financial world's biggest players - coupled with the political volley of the $700 billion U.S. economic bailout bill - has led to even lower expectations for the U.S. media economy.

The bigger question is whether we are simply experiencing cyclical economics, or whether shifts in the financial world are accelerating an even more fundamental change in the media industry's economic models. Truth is, the old ones haven't been working too well. Not for traditional media outlets like TV, radio, magazines and especially newspapers. Nor for Madison Avenue.

I heard this firsthand when I hosted a mostly off-the-record meeting with the heads of the media operations of the industry's six largest agency holding companies. All agreed that they are operating 21st century marketing services operations on 20th century compensation models, and that something has to give. The only way for big agencies to sustain meaningful growth, they said, is to reinvent their role in managing media. And in a perverse and painful way, the economic downturn may be the best medicine.

You know, they say necessity is the mother of invention, and I've become convinced over the years that the only way big agencies will change the way they do business is if they are forced to. According to the Big 6 media chiefs, they absolutely need to.

The margins for traditional media services were already eroding, and the new metric for agency media P&L has become the "FTE," or full-time employee. In other words, it's all about the cost of labor. And that's no way to run a business. So Madison Avenue is beginning to look at whether there are other media "businesses" they can be in that are both more profitable and far more sustainable.

That's a good thing, because the reality is that some parts of the economy have been expanding more rapidly than other parts. The media industry, along with the world at large, has just been doing a poor job of keeping track of them. That's because they are the parts that are growing at the fringes, and are smaller and more diffuse than the kind of mass media that we all tend to keep an eye on. You may have heard me make this observation before, but the truth is, long before the so-called "long tail" became a popular way to describe this market phenomenon, it had already surpassed Madison Avenue as we know it.

If you add up the media billings of the six agency holding companies - Aegis, Havas, Interpublic, Omnicom, Publicis and WPP - and divide it by total ad spending, you'd find that their share is something less than that of half of the total industry. That's because there has always been a long-tail aspect to the media business, and it's only growing longer.

Madison Avenue is beginning to recognize that, whether it's investments in new models like Spot Runner, or new business models by pioneers like Havas Digital's Don Epperson, or Publicis's David Kenny and Jack Klues - interestingly, all American-reared executives working for French holding companies.

It will be interesting to watch how these new models challenge the status quo of traditional mass media models, but if I had to make a bet, I'd have to say the outcome will be anything but black-and-white.
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