[Sigia-l] Free lunch...and drinks too

[Listera]

Dave Heller:

> It is talking about ad agencies and never once said anything about
> project based work...

OK, I'll get into this not to debate the semantics here (online project = ad
campaign, essentially), but because there's a fundamental issue of industry
shaping, which can conceivably impact ours.

(I worked in the ad biz for about a decade and sold my startup to a European
ad agency.)

In the ad industry, the advertiser puts out a carrot (the campaign contract)
and for the ad agency the cover charge to the proverbial restaurant is a
stick (the obligatory free-pitch). No stick, no carrot.

To pay the cover price, an ad agency can do one of two things:

#1 Spend the amount of resources equivalent to what they would have done if
they actually had the account and then offer it to the advertiser for free,
in hopes of getting the contract.

#2 Spend some small fraction of the efforts that they would have had they
had the account and offer it free.

With #1, the expenditures are significant enough (more in talent+time than
money) that no agency can afford to sustain such a business model for long,
especially if their ROI is low (an agency makes many more pitches than it
wins, obviously).

With #2, the agency is at a disadvantage.  With small budgets, one doesn't
have the wherewithal to understand deeply a campaign's
issues/challenges/opportunities. So you skimp and put yourself at a
disadvantaged position wrt other agencies that do #1.  Yes, an agency can be
creative, do more with less, etc., but over the long run, in a competitive
industry like advertising, it'll catch up.

Now, what's given for free here is not some supplemental or peripheral
doodad, it's the primary product of what an ad agency does. You are being
conditioned to hand over your most valuable asset (an agency's ability  to
understand and solve an advertiser's problem) for free. This has certain
adverse affects:

It dampens creativity/innovation/risk taking because of resource constraints
(hence my mediocrity remark). Agencies routinely take shortcuts in
preparation/research/thinking as one can only do so much in so little a time
with its own money at total risk.

It increases opaqueness both in accounting and services, as agencies try to
recoup free-pitch costs through indirect means such as service markups,
media placement and other forms of inflation, which amount to a covert tax
on the industry as a whole.

It emboldens non-creative stakeholders (both inside advertisers and
agencies) to shape campaigns because transactional, administrative and risk
avoidance aspects of the process have been artificially inflated. Since
creative is thus seen as loss leader, markups and media commissions are
where the agency makes money and thus become the focus of their collective
attention, at the expense of the quality of the campaigns.

It recreates an unethical culture whereby advertisers are in a position to
and in fact do steal ideas.

There are many other reasons but most importantly, it devalues over time ad
agency's core competency. What's given for free is not the few posters on a
board, but the fundamental effort behind it: critical thinking.

It wouldn't take a genius to figure that I'd object to that.

----
Ziya

"Innovate as a last resort."