Happy Twitterversary

Eight years ago today I tweeted for the first time.

To celebrate, Twitter lost 24% of its market value yesterday.

Twitter hatches

Although I didn't remember exactly what I tweeted that first time back in 2007, nor the exact date, I very clearly remembered the circumstances.  Twitter had suddenly taken SXSW by storm the month before.  I was on a business trip to Europe, reading an article about it in The Economist and decided to give it a try.

Signing up back then was very different:  You SMS'd to 40404 and by exchanging text messages you established a username and got started.  Coincidentally, just the other day I discovered a site that will find your first tweet.  I entered @SteveS1 and suddenly it all came back to me:

(Yes, I misspelled "coffee".  So sue me.)

Twitter lays an egg of its own

Yesterday afternoon Twitter's stock price was a fairly typical $51.19, but then their (somewhat) disappointing 1st quarter results came out prematurely and a day later shares are trading at $38.98.  That's about a 24% decline, not far from where it was on Day 1.

Is that bad?  Not really, for two reasons.

First, this news puts Twitter in proper company with the rest of the tech world, subject to the slings and arrows of outrageous fortune.  Just because Twitter is famous doesn't mean its stock won't go up or down.

Second, they're still racking up some impressive ad revenue, "only" $435.9 million in 1st quarter, which was 74% above the same quarter a year earlier.  Yes, it was a drop from the previous quarter, but their chief sin seems to have been missing financial analysts' expectations, which were more like $456.8 million.

The real question is whether this news represents a real weakness in ability to attract ad revenue.  Or as Twitter CEO Dick Costolo put it, the company had a "demand problem".  Here again, they're in proper company.  Many emerging media platforms have this problem, because advertisers aren't sure how or whether a new medium fits in their overall mix.

I'm not an investor in Twitter, so I can watch this play out with merely professional curiosity — what about you?  Any thoughts on the future of Twitter?

Results Also Matter in Startup Land

Decades ago the Ad Land pioneer Rosser Reeves asked, “What do you want from me?  Fine writing?  Or do you want to see the sales curve start moving up?”  We may argue, half a century later, as to how widely Ad Land holds that sentiment.  Startup Land depends on it – or at least depends on the sales curve rising fast enough to beat the burn rate.  

Or does it?

Years ago, Eric Schmidt described Google's business strategy as “URL” -- Ubiquity first, Revenue Later.  That worked for Google, but many venture capitalists who invest in technology seem to take it literally.  There is a lot of money poured into companies that may still be in the red for years, like Amazon, Pinterest and many others.

Dollars and Cents

Sadly, most people in Ad Land are insulated from business results until the moment when agency layoffs are unavoidable.  Agencies have been slow to embrace results and accountability.  One pundit says clients are complicit.

Last of a series

Because Startup Land is for the most part small and nimble, it’s impossible to be insulated from business results.  Everything is very out in the open.  If your company hasn’t gone public, you’re still accountable to your investors, whose money you’re spending to grow the business.  Our investors hold us accountable, and I wouldn’t have it any other way.  

Traveling in these circles, however, I am struck by how few investors really do their homework on the day-to-day operations of the companies they invest in.  Some are far more interested in financial instruments – credit facilities, warrants and the like – than in what makes the sales curve go up.  Many investors love seeing stock prices rise on the possibility of future results.  (Today's news suggests that caution is order.)

Kiss a Lot of Frogs

There’s an old saying, repeated often in Startup Land, that you have to kiss a lot of frogs before getting to the prince.  It applies both to raising capital (which we recently did) and raising the sales curve (which we are always doing).  As I’ve mentioned a couple of times in this series, it’s easy to get impatient.

Impatience may be a virtue, but don’t lose focus.  Whether you’re in Ad Land or Startup Land, focus on delivering results, not just the promise of them.  It's the only way to create real value.

"Value" Messages Will Return, So Get Ready

Think back four years.

Your boss, your client or your agency was on the “Value” bandwagon, or asking you to climb aboard.  Typical trade press headline:  “How Your Value Message Can Be Heard Above the Din”.

Well, get ready, because inflation is coming back, and value messages won’t be far behind.

U.S. Inflation:  Delayed, Not Denied

This occurred to me while reading an insightful economic analysis explaining how easy money policies at central banks will eventually lead to 2% inflation in 2014 and 3% in 2015.  True, those are single-digit numbers but they will make a difference to consumers struggling with reduced take-home pay and rising transportation and housing costs.

Put differently:  Your $5 air freshener is going to be a much tougher sell.

What is Value?

Too many marketers think Value = Price.  In QSR, for example, most “value” campaigns are about 59-, 69- and 99-cent items.  In reality, Value = Price + Benefit.  What do I get for what I paid?  That equation is in consumers’ minds no matter what the economy.  (Here are a couple of smart posts on this topic from Bob Gilbreath.)  Our job as marketers is to figure out how we make that $5 air freshener worth it to the consumer.

Your task gets even tougher when prices in general are rising, even if you offer a discount, which is why we should worry about 3% inflation.

Dust off those recommendations from 2009

Rather than just cut prices, which admittedly may be a part of your strategy, think longer term.  The trick is not just to survive tough times, but position your business for better times.  If your competition isn’t ready when consumers start pulling back, you can aggressively steal market share, making you stronger when the economy improves.

Now THAT'S added value!

For example, if you have been looking for a way to claim ownership in the consumer’s mind of a particular category benefit, this is the time to seek it, when your competitor is more worried about short-term survival.  Perhaps it’s time to introduce a new benefit – that is, improve value by offering something new or something more at the same price.

Back in 2009, Hyundai made a brilliant offer:  Buy a Hyundai, and simply return it if you lose your job.  That wasn’t just “value”; they were telling consumers that they understood how uncertain things were, and made a bet that built longer-term brand equity.  (Unfortunately, they blew a lot of brand equity this year via a U.K. ad depicting a failed suicide attempt.)

Think ahead to 2015

The point is, think about the long-term opportunities in a short-term crisis.  And start thinking about them now, before the crisis hits.

Book Review: The Signal and The Noise

The Signal and The Noise:  Why So Many Predictions Fail -- but Some Don't

By Nate Silver

Penguin Press, 534 pages

Can you go to jail for promising your client great results?

Ask the Italian seismologists found guilty of manslaughter for underestimating the risk of what turned out to be a magnitude-6.3 earthquake that killed over 300 people.  They're one of the cases analyzed in The Signal and The Noise, a new book about successful and failed predictions.  Advertising isn't (usually) a life-or-death matter, but it is a major line item on your client's P&L.  You might not go to jail for a bad prediction, but you could get fired.  That's why I recommend this book:  It helps us understand the impact of so-called Big Data in marketing today.

The Signal and The Noise: Summary

In electrical engineering, “Signal to Noise" describes the relationship between signals that report a useful reading and random noise that makes signals hard to identify.  Similarly, as we drown in data, generating 2.5 quintillion bytes every day, it's harder to separate signal from noise.  Compounding the problem is our own subjectivity:  human beings, more than any other species, are wired to see patterns, and often in the data we see patterns that aren’t real.  Worse, we use those non-patterns to predict future events.  The solution is to embrace our subjectivity and test hypotheses, getting “closer and closer to the truth as we gather more evidence.”  Examples are drawn from pro baseball, politics, earthquakes, economics, epidemics, gambling, global warming, and terrorism.  The author, Nate Silver, knows whereof he speaks.  Years ago he built a reliable tool forecasting baseball player performance, and later gained wider fame for correctly predicting the state-by-state results of the last two presidential elections.

True to the topic, Silver’s analyses are sincere and (generally) objective.  It’s not the type of book, however, so common on the business shelf, that outlines 7 key findings or 10 ways to improve your predictive power.  In fact, buried on page 195 in one of the most hopeless cases – economics forecasting, which will destroy whatever confidence you had left in economists – are what I saw as his three keys to success:  (1) Improved computer power, (2) Better data collection, (3) Old-fashioned hard work.  Comically in a book that keeps reminding us that “to err is human”, there are some unfortunate typos like this one on page 379, quoting a NASA climate researcher:  “I finally realized the definition of rocket science is using relatively simple psychics to solve complex problems.”

Why Advertising people should read The Signal and The Noise

The book is relevant to marketing today because we have far more data than ever and, increasingly, the expectation that we can predict results.  If you think about it, our day-to-day decisions are predictions about what will succeed.  We launch that new product (and hope it isn’t in the 90% that fail this year).  We choose those three animatics for test (and pray that one of them scores).  We buy this medium over another (and look for which half of the ad budget we wasted). 

Silver points out that Prediction and Forecast are two different things.  A prediction is definitive, e.g., "this new product will achieve $60 million in Year I sales."  A forecast is probabilistic, e.g., BASES may tell you Year I sales within a +/- 20% range.  This once frustrated a CPG CEO who didn’t realize how his brand managers were jacking up the assumptions that went into the company’s BASES forecasts.  Of note, the U.S. Geological Survey explicitly states they can’t predict earthquakes – they work hard (and fruitlessly, to hear Silver tell it) to forecast earthquakes’ probability.  (Small comfort to Italian seismologists.)

Likewise there’s a difference between Risk and Uncertainty.  Risk is something you can put a price on, a calculable estimate.  Ipsos/ASI may report a persuasion score as having an 80% or 95% level of confidence.  That means there is a 20% or 5% risk the copy won’t be persuasive.  Uncertainty is risk that is harder to measure.  Silver’s example is the gross miscalculation by credit ratings agencies as to how risky collateralized debt obligations really were.  (The chapter on the 2008 financial meltdown, “A Catastrophic Failure of Prediction”, is worth a read if only to understand that fiasco in 28 simple pages.)

Three Lessons for Marketing and Advertising

All data is not created equal.  Silver admits that some things are easier to predict than others.  Baseball happens to have a rich set of data, whereas predicting earthquakes is virtually impossible because we can’t actually observe and record the subterranean shifting of tectonic plates.  The same lesson has historically separated direct response (did version A or version B have a higher response rate?) from advertising (which half of the budget am I wasting?).

Calibrate your crap detector.  The book is a treasure trove of ways we should not interpret data.  You’ll cringe at some of the mistakes – and realize you’ve made some of them yourself.  One of the more intriguing discussions is about “unknown unknowns” – what is it we don’t see because we would never dream of it?  Which leads to my last point.

Use your imagination.  We’re human and our subjective POV is inevitable, so why not use it? 

Silver’s personal template for prediction is called Bayes’s Theorem.  It’s essentially a way to apply the scientific method:  observe a phenomenon, develop a hypothesis to explain it, formulate a prediction from the hypothesis, and test the prediction.  To be clear, this is not a left-brain analysis that a computer could perform.  It requires human imagination.  Computers just help us calculate the possibilities.  

In other words:  It’s up to us to distinguish signal from noise.

Check out another Ad Majorem Book Review, The Shallows by Nicholas Carr.

Advertising Jumps the Shark, Gets Back on Track

Does content deliver advertising or does advertising deliver content?

Joe Mandese at MediaPost has the answer for you, in a piece headlined “Advertising Jumps The Shark: Becomes Conduit For Content”.  

But first let’s get through that headline.

Jumping the Shark

Numerous readers pointed out in the comments section that the headline misused the term “jump the shark”.  Any student of pop culture knows the story:  On the 1970s sitcom Happy Days, Fonzie water skis over a shark, a moment now seen as the point where the show lost its original purpose – a fond look back at the 1950s – and got just plain silly.

Let’s first admit that the advertising industry has jumped the shark many more times than Fonzie, before or since.  We’ve jumped the shark via pointless line extensions, bad strategies, failed campaigns and poor planning.  Mea culpa.

Conduit for Content

In this case, the alleged shark jump is the launch of a new digital advertising platform that pulls existing Internet content into online ads.  It seems like a simple concept – link ads and content – but there’s a bit more involved.

The platform’s purveyor, Kontera, claims to be able to identify the most relevant content and serve it in web display, social and mobile ads.  That’s a bit more complicated than a shark jump – and more revolutionary.

3 Reasons Why it Matters

Mandese’s right, this is an important development the entire advertising industry should watch.

1.  It makes advertising useful, informative and/or entertaining.  These are the three things audiences seek in any medium.  For some reason we’ve been relearning that lesson the hard way in the digital advertising world.  In this case, Kontera claims to be supplying content that’s already popular, and hence should make ads more relevant.

 
2.     It adds sanity to online advertising.  Most web display advertising is the opposite of shooting fish in a barrel – more a minnow in the ocean.  You run ads that get clicked at infinitesimally low rates, paying only for those very small results.  Matching truly relevant content to truly relevant ads could significantly shift the equation of supply and demand.
 
3.     It challenges the distribution model.  Whether on TV, online or in-store, content normally is a means of distributing advertising.  That is, a :30-spot interrupts the program you were watching.  Kontera allows advertisers to buy ad space and use it to distribute all kinds of content.  Extrapolating that beyond web display ads, you can see how it would change journalism, entertainment and information in general.

Fond Look Back at the 1950s

If you read further down in the comments section of Mandese’s article, you’ll see an arcane conversation between him and me about whether it was also true in the 1950s that “advertising (was) a means for distributing content,” much like Kontera.  My point is that Radio and TV shows of the period, like soap operas and Texaco Star Theater, were also examples of brands delivering content.  (Mandese disagreed.)

It doesn’t really matter.  The only thing it proves is that for the past fifty years we’ve been force-feeding audiences our advertising when they wanted to see their content.  Up to now web display ads have followed that same model.

If, as an industry, we succeed in reversing that, and make advertising a means for distributing content, we won’t be jumping the shark.  We’ll be back on track.

Foursquare: Ready to think outside the box?

I quit Foursquare, cold turkey, on March 28th. This after a year and a half, 22 badges, and dozens of mayorships, including my client’s headquarters. Since quitting I’ve had an email about every two or three weeks telling me I’ve been ousted as Mayor of one place or another.

My biggest Foursquare accomplishment was the mayorship of a large metropolitan ad agency. Competition was fierce; it seemed like all 1,300 employees were playing Foursquare.

A couple of these colleagues even invented a fun Foursquare app, called HeatTracker, which you can read about here.

So why did I quit?

The thrill was gone. Or, rather, the thrill was merely a compulsive check in. Mrs. Ad Majorem was getting annoyed and Ad Majorem, Jr., age 4, was reminding me to check in almost everywhere we went. I realized that I was checking in for the sake of checking in.

Originally I started using Foursquare in an effort to keep up with the latest in social media. It seemed like an idea that could actually be monetized. Retailers could offer deals to regular customers who checked in on Foursquare.

Except very few did.

Check In and then Check Out

Foursquare had a couple of hopeful headlines in the news last week.

On Wednesday, Foursquare and American Express announced a deal where cardholders who check in can enjoy discounts when they check out. It’s limited to certain establishments, but Amex is hoping to appeal to consumers under 35, which isn’t their typical demographic.

Then on Friday, venture capitalists invested $50 million in Foursquare, which certainly seems to validate the Amex deal.

On Second Thought…

Maybe Foursquare will find its ideal business model. I hope so, if only because it will help other social media ventures to crack the code. The concept seems right even if no one has really leveraged it yet.

I may not be checking in on my mobile phone, but will definitely keep an eye on them.

"Net Neutrality"

Following Wednesday's post about the role of government at the intersection of Marketing and the Internet comes the latest news about "net neutrality".

Net Neutrality

The actual term is "network neutrality", a concept where all Internet access would be treated equally. All access to all content would be available at the same speed. There's a complete article on Wikipedia describing it fully. In any case, it sounds like an appealing concept, doesn't it?

Not so fast...

The U.S. Federal Communications Commission tried to enforce net neutrality last year, but the courts ruled that the Internet falls outside their jurisdiction. The FCC regulates broadcast communications only, not even cable television, while the Internet counts as an "information service".

You get what you pay for

The opposite of net neutrality is a tiered system, where Internet users would pay their service providers a premium to access certain content faster. This would depend on an arrangement among Internet service providers such as Verizon, content providers and users willing to pay more.

The latest news

Since the FCC is powerless (for now) to enforce net neutrality, those who own the networks are starting to arrange tiered systems. This week the New York Times reported that Google and Verizon are close to such a deal; today Google and Verizon denied it, saying they were continuing to talk to the government. The FCC says that the talks are on hold for the moment.

What's my position on net neutrality?

No one can say how this will play out. The starry-eyed idealist in me wants to believe in net neutrality because it sounds fair and equal. Yet the Internet is not a government program, it's a commercial enterprise. Said differently, it's publishing.

If net neutrality had been applied to newspapers and magazines, then every consumer would have paid the same price for each magazine they received, no matter how premium the content or how many pages it required.

You may perceive that I haven't decided what I think about this. Please use the comments section to sway me to one side or the other.

How to know "which half of my advertising budget is wasted"

The biggest change in the advertising business today isn’t digital, social media or even the tectonic plate shifts of retail. It’s the measurement and accountability of marketing programs.

Measurement and accountability have been an issue for at least a century, as evidenced by the John Wanamaker quote, “I know half my advertising budget is wasted; I just don’t know which half.

We’ve written about this here, here and here, and made it a central theme in The History of Advertising, which is posted here on SlideShare. Today’s post won’t be the last one on this subject.

How do you know which half of the budget is wasted?

The simple – but not easy – answer: “do your homework”. Just by slogging through data and analyzing it you will learn a lot. So far there is no magical data processing program that can calculate the ROI of everything together.

You can still learn, however, by sitting down and concentrating on Nielsen data, costs-per-lead, et cetera, and figuring out what’s really going on. There is no shortage of data, just time to sort through it all.

Lesson from the world of Economics

Recently two economists published a book about financial bubbles throughout history titled “This Time is Different”. Their thesis is that every time an economic bubble grows, the market’s participants believe “this time is different” – and it never is. We’re always surprised when the bubble bursts.

What’s amazing about their work, though, is how comprehensively they collected and analyzed data. They reviewed economic records across five continents, sixty-six countries – and over a time period of 800 years. 800 years.

You’re a lot less likely to doubt their findings when they’ve put that kind of work into their analysis. (If you’re interested in what they did, you can buy the book here and read more about it here and here.)

Lesson for the world of Advertising

Surprisingly, economists seem to have the same aversion to data as many in our industry. In an interview about “This Time is Different”, the co-authors both observe that modern economic thinking emphasizes theories over actual analysis. Their 800 years of homework is apparently not the norm for economists.

This was reflected in one of Ronald Reagan’s better lines: “An economist is someone who sees something that works in practice and wonders if it would work in theory.”

We run a similar risk, relying only on theories and never sitting down with the data to understand what actually happens. Doing your homework will help prove your worth, and perhaps which parts of the budget are being wasted.

Latin America: Cannes, World Cup, and the Economy

I've been thinking about Latin America, my former home, a lot this week, partly because Mrs. Ad Majorem is in Guatemala on a missions trip helping run a medical clinic.

A few other things keep Latin America top of mind.

Cannes

Every year at Cannes the Latin American countries win recognition for their work, and this year was no exception. This morning AdLatina.com published a rundown of festival performance, with Brasil and Argentina leading the pack. (They list Spain as #2 because AdLatina represents an Ibero-American perspective.)

World Cup

Going into this weekend's games, four of the eight quarter-finalists are from South America. I'll be cheering for Brasil over Holland, Uruguay over Ghana, Argentina over Germany, and Paraguay over Spain.

The Economy

Beyond Cannes and the Cup, the region enjoys some economic success, at least for the moment. NYTimes.com has a good roundup this morning. Also see this article on Brasil's tax policies.

Reducing Assortment

In the past year or so you may have read about retailers “reducing assortment”, which in English means taking some brands and products off their shelves. You may also have heard about Walmart’s Project Impact, which sought to de-clutter their stores of signage as well as low-velocity SKUs. All retailers are doing this to some extent, so watch out, because if you really like Brand X, it might be gone when the store you shop reduces their assortment.

Why reduce assortment?

Why do this? Retailers say it makes shopping easier for their customers. In an interview with MediaPost this week, Stuart Taylor, VP/Customer Analytics for Nielsen, highlighted the ease-of-shopping rationale, saying 60% of the retail chains they surveyed “are doing it to reduce shopper confusion.” Research would seem to back him up. In comments to analysts last year, P&G’s then-CEO, A.G. Lafley, cited store tests where reduced assortment had no negative impact on sales or consumers’ sense of variety. In fact, he said, consumers believed they had more choices. I don’t doubt his research.

Real-world experience, however, hasn’t been so rosy. The most recent press about reducing assortment has focused on the consumer backlash. What? You mean I can’t buy Ben & Jerry’s here anymore? Walmart shoppers loyal to a delisted brand would have to complete their shopping trip at Target.

Reduce this!

Taylor admits in the interview that “as variety goes down, sales go down, too.” He’s not the only one to have noticed this correlation, which is why you’re hearing about retailers reconsidering reducing assortment.

It’s important, though, not to overlook Taylor’s bit of analysis on why sales went down. “Instead of thinking of this just as a cost puzzle,” he advises, “we need to bring the consumer into the picture.” (Maybe he's read this, this and this.)

Don't kill the golden goose

My observation is that retailers focused less on consumer choices and more on which manufacturers would give them the best deals. Buyers know that if you tell four brands you are only going to accept two of them, you'll start a negotiation where at least one of the winners reduces price.

The case for reducing confusion and streamlining store operations is a good one. If it’s strictly financially-driven, however, it won’t benefit anyone.

"The changing media landscape" ... of Retail

The other day at an offsite conference center, my client was running two big meetings, one focused on Marketing and the other on Sales. (Marketing and Sales are really the same thing, but exist as separate departments in most companies.)

I was in the Marketing meeting where we strategized about how to invest next year’s budget. There are a lot of options in mass media, retail, digital, et cetera. Every year the options multiply.

During a break I ran into a client who was attending the Sales meeting. How’s the discussion? “Great,” he told me. “It’s just that the retail landscape is changing so fast. Keeping up takes real effort.”

What’s he keeping up with? The largest mass retailer is rethinking its store layout and the number of brands it carries. The next-largest mass retailer is riding out recessionary price pressures. One of the big players in the Food class of trade is struggling. Shopper marketing as a discipline grows more sophisticated. Customer loyalty database analytics are being leveraged more strategically. The Dollar stores are evolving. Last but not least, online retailing continues to grow.

Clicks-and-mortar gets a lot of buzz, but bricks-and-mortar retail is no less of a changing landscape. The options are multiplying – and so are the opportunities. Keeping up takes real effort.

(Please use the comments section to suggest your most reliable online resources for news and analysis about retail.)

A newspaper with business acumen -- and a sense of humor

You may have seen this video satire of integrated marketing award entries. It hilariously sends up the type of kitchen-sink, social-media laden program that seems to guarantee a trophy from any ad industry awards show jury.

The perpetrator in this case is a Swedish daily financial paper, Dagens Industri, published by Bonnier AB. After satirizing emerging media frenzy for a couple of minutes, they claim their newspaper is “Still the most effective way to reach your target audience”.

A friend and colleague in Sweden tells me the video is part of a larger print campaign from by Storåkers McCann, which continues the message that Dagens Industri is an effective way to reach business people.

Laughing all the way to the bank

There is a great deal of city-room concern these days about the business side of newspapers. Just this past weekend I met another unemployed editor for a great metropolitan newspaper. A lot of publishers are struggling.

In this case, however, prospects aren’t so dim. The Wikipedia entry for Dagens Industri describes it as “the most profitable daily newspaper in Sweden”. In any case, Bonnier entered the U.S. market three years ago by acquiring several magazine titles from Time Inc. They’re doing well.

Why? They are smart enough marketers to know that advertisers who want to reach their paper’s subscribers may be represented by agencies savvy enough to get the message via social media.

The other reason is very simple: they publish an excellent newspaper. As my colleague told me, “I read Dagens Industri everyday. It’s the best way to follow our business climate in Sweden. They are perceived as very trustworthy and professional.” U.S. publishers of daily fluff, take note.

Your results are worth more than your time

This tweet made me stop and think this morning: "Hourly billing is unethical and dumb. The quicker you can help, the more you're worth." Credit goes to Alan Weiss of Contrarian Consulting.

It's all about business results

Alan voices a principle I've espoused at our agency over the past four years. During that time we negotiated global contracts with large clients, merged with a sister company to create the first channel-neutral, through-the-line agency on a single P&L, and packaged our capabilities in dozens of new business pitches, many of them successful.

The proposition we make to clients and prospects is about results, or Return On Ideas. The number of hours we spend developing a campaign means little if the client's business isn't moving forward.

No -- it's all about timesheets

Yet we and almost every other agency agree to labor-based compensation agreements. To put it more bluntly, we charge by the hour, not by the idea or by the result.

Here's my version of how ad agencies got to this point.

(1) For most of the 20th Century, clients paid agencies a 15% commission on the media they placed. The agency P&L could support a high level of client service.

(2) In the 1980s and 1990s, competing agencies accepted lower commissions -- same model, but at drastically reduced prices. The agency P&L didn't allow the same level of service.

(3) Eventually, clients wanted to know what they were paying for and agencies wanted to ensure they made a profit, so the parties agreed to hourly fees that fixed the agency's staffing levels -- and fixed the agency's profit margin.

Agencies got lazy about two things

Throughout the above history, agencies worked hard and created good ideas, but got lazy about two important things.

One is appreciating the value of our ideas. Many advertisers succeed or fail based on what their agencies provide. A really good idea can lead to global or national prominence, #1 market share and a strong balance sheet. Yet many of us show up for work just hoping to get the ads out on time and on budget.

The other is estimating the value of our ideas. It's probably not hard to appreciate the value of our ideas, but what's that worth to a client? Here is why Alan Weiss' tweet this morning is so important. If you drive the client's business forward, shouldn't you be paid more than a fixed hourly rate?

Your results are worth more than your time

If you are compensated in any way based on the results you bring to your client, congratulations. This is a big step toward providing value rather than just providing advertising. Otherwise you may want to rethink your compensation agreement.

Party like it's 1963

Here's a sobering news item for those of you who wish this business would go back to the Mad Men era: Newspaper advertising revenue is the same today as it was in 1963, almost a half century ago.

Tick Tock

The New York Times media blog recently reported that ad revenue was at 1986 levels. Last week this data point was corrected by the Columbia Journalism Review, which adjusted for inflation, setting the clock back to 1963. The two articles together represent a good summary of the sources of newspaper ad revenue today. It's not a pretty picture. (Hat tip: John McQuaid.)

Rendezvous with Destiny

Despite the bleak outlook, nobody should yearn for the days of Ye Olde Marketing. Consumers, whether they are your readers, target audience, heavy user, shopper, lo que sea, are moving on, yearning for the future.

3 keys to (continued) survival in 2010

At the beginning of 2009, we all knew a tough year lay ahead. We won’t repeat it all here except to say: housing bubble bursts --> credit market freezes --> financial institutions fail --> stock market crashes --> budgets get cut.

There is one more effect, actually. “Marketers seek results.” After budget cuts, every dollar must show a result. We’ve written about this here, here and here.

Ad Majorem is all about embracing the changes and challenges of modern marketing. The “modern” part is often the trickiest.

No one has all the answers, however, so don’t expect this of yourself.

Instead, here is some advice extracted from what Arthur Ashe, the great U.S. tennis pro once said: “Start where you are. Use what you have. Do what you can.”

1. Start where you are

It’s human nature to reflect upon a year gone by. We knew 2009 would be tough, and it was. Where does it leave me? What have I learned? These are simple questions, but not easy ones. The hard part is taking the time and having the courage to assess these questions, look ourselves in the mirror and honestly understand our individual situations.

For example, you may have a client who is more attentive to cost savings than ever before. You may have a customer who wants to remove your products from the shelf. A new product launch may not be going well. Writing these things down on a list often helps me face them more honestly. “The truth will set you free” – if you’re willing to face it.

Catalogue the good stuff, too. We won a new account (let’s ensure their first 90 days are so good they never look back). We hired an outstanding SEO expert (let’s put her to work on that new client).

2. Use what you have

There are two thoughts here that complement one another.

The first is to play your position. What are you charged with doing and delivering? Make sure you nail those objectives and let nothing distract you. For example, you may make TV commercials for a living and hear pundits deride these as Ye Olde Media. Consider that many consumers watch TV commercials on broadcast, cable, digital or mobile media. More than that, if a client is paying you to make a TV commercial, make sure it is the best dang TV commercial you can possibly deliver.

The second thought is to deliver added value beyond what’s expected. Chances are that you have smart, capable co-workers who can be part of a team that produces something of added value. To extend the above example of an agency that makes TV commercials for a client, the team can deliver a retail extension or a partnership with one of the broadcasters to feature the product more prominently. Other avenues may be a new product idea, a new claim or demo or an emerging media application. If you know your consumer and your client’s business well enough, you’ll generate good ideas.

3. Do what you can

Look around your organization. What other resources does it provide to you as an employee, manager or leader? What does it offer to clients or prospects? Many of us take a quick glance and complain that the company hasn’t made this or that investment, or that “no one” wants to push the envelope. Is “no one” really stopping you?

When Draft and FCB merged three years ago we suddenly had a long list of capabilities. The list was so long that nobody wrote it down. I walked around the newly combined hallways of Draftfcb, interviewed colleagues old and new, took notes, and eventually compiled that list. It was impressive (and we have filled it out a little more in the past three years).

The point here is not to have a long list of resources, but to fully assess the possibilities. Dream a little bit. Where can we take this business?

At minimum this kind of exercise develops your peripheral vision. In a time of change it is critical to understand what goes on around us. If we don’t know what’s possible, we’ll never make it a reality.

Start where you are: Honestly assess your situation going into 2010. Use what you have: Play your position – and add value. Do what you can: Push the envelope – stay abreast of the new possibilities that constantly arise in today’s changing and challenging marketing environment.

Merry Christmas, Happy Hannukah, Happy Kwanzaa, and Feliz Navidad -- and have a happy, prosperous, change-embracing New Year in 2010.

The world is spinning out of control...

This blog embraces the changes and challenges of modern marketing, which are legion. Here are two quick ones from the past 24 hours of marketing news.

DVR time-shifting. This article on AdAge.com reports a new study on which shows are the most "time-shifted", thanks to DVRs ("TiVo" to some of us). The study from Horizon Media counted eleven shows that are regularly watched up to seven days after they air.

Radio ratings. This morning's NYTimes.com reports that Nielsen's new Portable People Meters bring new accuracy to radio ratings. The author seems very interested in the findings that adult men listen to Celine Dion and that classical radio fans are a bit hypocritical.

These aren't just changes in technology, they are changes in how we measure the effectiveness of what we do.

The golden age of wireless

Radio will always be special to me because I was a local reporter and announcer before entering corporate life.

Over the years radio itself went corporate as thousands of stations were bought by the likes of Clear Channel and Infinity. At the same time many have predicted the medium will die at the hands of the iPod, satellite or Internet radio.

This just in: Radio lives.

According to an article yesterday in MediaPost, a recent study of media usage confirms that radio is actually thriving in several ways. The study, funded by Nielsen and conducted jointly by the Ball State Center for Media Design and the Council of Research Excellence, measures a wide range of media usage by American consumers. Radio is second only to television in terms of reach, even in the 18-34 age demographic. To be sure, this demo uses their iPods a lot, but radio doesn't seem to suffer. You can click here for a roundup of their findings.

The only caveat I'd offer is that our own agency's research consistently finds that younger adults consume several media simultaneously. Not sure if this new study accounts for that effect, but on balance it seems as if we are still in the golden age of wireless.

If you can't stand the heat...

McDonald's pulls out of Iceland, closing their three restaurants in the economically beleaguered country, according to this report from Financial Times. The collapsed economy is only part of the story -- the other part is that most ingredients must be imported from Germany, driving up the retail prices to unaffordable levels. This is not consistent with the "V" in McDonald's strategy of QSCV. On that point alone maybe this was an overdue decision.

UPDATED 28 OCTOBER 2009: The McDonald's pullout from Iceland inspired this WSJ editorial about the dangers of currency devaluation.