The End of the Ad World as We Knew It

By Ken Auletta, excerpted in Nieman Reports:

While covering the media business for The New Yorker for more than 25 years, Ken Auletta has profiled many of the most important leaders of the Information Age and reported on the disruption roiling the industry. Among his books are “Three Blind Mice: How the TV Networks Lost Their Way” and “Googled: The End of the World As We Know It.”

In the introduction to his twelfth book, “Frenemies: The Epic Disruption of the Ad Business (and Everything Else),” published by Penguin Press on June 5, he notes that the flight of advertisers from old to new media which started in the late 1990s has accelerated in the current century. “In the public imagination, we were still in the age of Don Draper, but I began to see more and more clearly how this industry that had been intrinsic to the disruption of old media was itself facing fundamental challenges to its existence.” He writes, “The once comfortable agency business is now assailed by frenemies, companies that both compete and cooperate with them.” For the advertising and marketing sector, worth up to $2 trillion, these are anxious times.

An edited excerpt:

Whatever form advertising and marketing takes in coming years, a certainty is that data-fed targeting will be a pillar. Irwin Gotlieb, chairman of GroupM, a subsidiary of W.P.P., believes that in the future, agencies will have to guarantee results to clients, and better results will boost agency compensation.

We can also be certain that privacy will remain a third rail to marketers, always worried that governments will grow alarmed and impose regulations. The European Union, for example, passed legislation restricting the ability of companies to collect personal information without the user’s consent.

Some, like Andrew Robertson of BBDO, believe that the blizzard of different platforms and better targeting will place a premium on creative advertising that captures people’s attention and will invite advertisers to spend more to lure those identified as potential customers, as advertising spending becomes more cost effective. Others, like MediaLink CEO Michael Kassan, offer a bleaker view. “My biggest fear is that the inextricable link that existed historically between serving up content financed by commercial messages, that link is broken because consumers can get their content without commercials now. Think what it would have cost you to get Life magazine if there were no ads in it. It was subsidized by advertising.” But today too many people “just won’t watch commercials.”

So what replaces the commercials?

“We will live in a subscription world,” he boldly, and I believe wrongly, answers.

Tim Wu is among the most prominent advocates for replacing ads with subscriptions. Harking back to 1833 and the first ad-subsidized newspaper, the New York Sun, he calls this “the original sin.” In his provocative book “The Attention Merchants,” Wu argues that in advertiser-supported media the reader or viewer is not the customer; the advertiser is. Thus, letting advertisers into the tent inevitably means a diminution of quality, because advertisers pressure the platform to deliver a bigger audience. More news about Kim Kardashian magnetizes an audience. The way to improve media is to pay for it, he says, preferably with subscriptions and micropayments. Wu is not alone. In February 2017, Twitter cofounder Evan Williams, who had raised $134 million to improve journalism by forming Medium, an ad-supported blogging and publishing site, announced that he was laying off one third of his staff and ending its reliance on ads. Echoing Wu, he told Business Insider that ad-driven media was “broken” because corporations fund it “in order to advance their goals. … We believe people who write and share ideas should be rewarded on their ability to enlighten and inform, not simply their ability to attract a few seconds of attention.” When Jim VandeHei left as CEO of Politico in 2016 to start a provocative online publication, Axios, he assailed the “crap trap” of “trashy clickbait” designed to attract more page views and thus to satisfy advertisers. The “trap” was set by a reliance on ads. For Axios to produce quality journalism, he said, “readers will have to pay up and if they need and love the product, they will, and gladly so.”

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