Frenemies | Ken Auletta

Summary of: Frenemies: The Epic Disruption of the Ad Business (and Everything Else)
By: Ken Auletta

Introduction

Welcome to ‘Frenemies’, a fascinating glimpse into the epic disruption of the advertising business and its impact on consumers. Ken Auletta guides you through a world where advertising and marketing are at once ubiquitous and in continuous flux. Discover how the industry has evolved, from the analog age of newspapers and billboards to the digital world of big data and micro-targeting. Understand the roles of traditional powerhouses and millennial influencers, and explore the complex web of relationships that characterizes the modern era of advertising. This summary will provide insights into the changing face of this dynamic industry and its implications for the global economy.

Evolving Advertising Through Ages

Reflecting on the evolution of advertising, it is clear that competition has always driven its development. From ancient Greek and Roman tradesmen announcing services on rock writings and wall paintings, advertising has transformed dramatically. These days, the industry is all-encompassing, managing every aspect of a company’s persona. Marketing strategies include direct mail, in-store promotions, crisis management, corporate rebranding, CEO consultations, and utilizing social media influencers. Advances in technology, especially the smartphone revolution, enable advertisers to reach an unprecedented audience, giving them access to billions of people and allowing real-time user tracking and interactions.

From the Greek and Roman eras with their simple advertisements painted on walls and etched in stone, the world faced a swift transformation into the industrial age of marketing. In today’s world, marketing encompasses an even broader spectrum, dealing in multifaceted aspects of a company’s image. From direct mails to in-store promotions or advising CEOs on corporate positioning, no part of a company’s identity is left untouched.

Not long ago, television, radio, newspapers, and magazines were the predominant modes of communication for advertisers. However, the dawn of the 21st century has rendered these channels almost obsolete, paving the way for the rise of the mighty smartphone. With six billion smartphones in use across the globe, these powerful devices provide advertisers with the potential to tap into vast markets.

Smartphones, with their formidable processing power, have made it possible for advertisers to dynamically track and interact with users in real time. The transformation is perhaps best illustrated in Tencent, the colossal Chinese corporation. Its platform not only enables communication and shopping but also allows advertisers to closely monitor users’ activities and trends. With 800 million users, an impressive 80 percent spend over an hour on the platform while interacting and shopping every day.

The impact of this emerging digital age can now be felt far beyond its conventional online roots, with advertisers wielding influence over marketing strategies like never before. In a nutshell, competitive forces have driven the advertising industry into a new era of marketing complexity and opportunity.

Dismantling Don Draper’s Dynasty

Mad Men’s portrayal of 1960s advertising titan Don Draper captures the era’s extraordinary success, fueled by dual commissions from both publishers and clients. This golden age allowed the industry to reap incredible profits, often compromising agencies’ integrity in the process. However, in the twenty-first century, increased company scrutiny on marketing expenses led to a decline in corporate marketing power and the subsequent dismantling of this opulent commission structure.

Don Draper, the iconic protagonist of Mad Men, epitomizes the 1960s advertising world where remarkable ad men like David Ogilvy, George Lois, and Bill Bernbach reigned supreme. Masters of creative content and client relations, these executives thrived during a time when the advertising industry was flush with effortless revenue.

This prosperity stemmed from advertising agencies receiving generous commissions from both sides of the business: buyers and sellers of advertising space. Media outlets would pay agencies a 15-percent commission every time they placed an ad, and clients rewarded agencies with an additional 17-percent commission for crafting new ads. These commissions, combined with reimbursed ad-production costs, meant substantial income for advertising firms.

However, this advantageous system often came at the cost of the agency’s integrity. Advertising publishers and agencies colluded to maintain high-priced ad spaces, as exemplified in Randall Rothenberg’s Where the Suckers Moon: An Advertising Story. Ad agencies seldom bartered on prices with publishers, knowing that higher client payments for ad space meant larger commissions for themselves.

The twentieth century’s advertising dominance faced a reckoning in the early 2000s, primarily driven by a shift in American corporate culture. As financial scrutiny intensified after the 2008 crisis, CEOs pressured finance directors to pay closer attention to marketing expenses. This increased fiscal awareness eroded the influence of corporate marketing executives who engaged with ad agencies and consequently shrank their budgets.

These financial cutbacks signaled the end of an era for the Don Drapers of the world and dismantled the opulent commission structure once enjoyed by advertising agencies.

Big Data Revolutionizing Advertising

World leaders in advertising are continuously grappling with the question of harnessing big data effectively. Born from the internet age through digital cookies, big data allows marketers to target potential customers with great precision. It exposes user interactions, enabling companies to gauge the success of an advertising campaign. Consequently, media agencies, once responsible for planning and ad spaces, now possess greater power as they inch towards the creative domain. The sheer volume of data necessitates the employment of specialized data scientists and engineers, who can dissect large datasets and segregate audiences, crafting tailor-made campaigns for each segment. This revolutionary shift in targeting capabilities, as showcased by Revlon’s “Love Is On” campaign, threatens the conventional norms of advertising and the reliance on traditional creative advertising agencies.

Big Data’s Impact on Advertising

In the contemporary world of advertising and marketing, big data plays a crucial role. It is obtained from three primary sources: first-party data, second-party data, and third-party data. First-party data, the most valuable type, is collected directly from customers like names and contact information. Second-party data is obtained by anonymizing first-party data and sharing or selling it to other organizations. Third-party data is bought from stores and catalogues which media companies utilize to match their clients with potential customers. However, media agencies face challenges in gathering big data due to internet giants’ reluctance to share valuable first-party data and the complexities of using mobile phones for data collection. Additionally, the demand for data analysts and engineers exceeds the supply, making the competition to secure talent fierce.

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