How Long Before Ad Agencies Give Up On Traditional Media?

Philip Stone July 2, 2009 Follow on Twitter

The headline is intentionally provocative and probably premature, but the goings on last week at the annual Cannes Lions International Advertising Festival really should have traditional media wanting to know more, for there were Internet giants such as Google and Microsoft cozying up to the world’s big ad agencies encouraging them to switch more of their spend to digital and the body motion from the advertising community showed it was only too happy to welcome digital into their fold.

Indeed Microsoft’s Steve Ballmer was actually given their media person of the year award – that’s getting really cozy. Microsoft has always had heavy attendance at this event and the organizers this year  must have been really pleased with  that since so many traditional media representatives stayed away to save on costs. Brings to mind that old saying, “When the cat is away the mice do play!”

Ballmer seized the opportunity to tell everyone who would listen that as far as he was concerned print media was dead; it was just a matter of how long it was going to take, but print was finished.

“All content consumed will be digital, we can only debate if that may be in one, two, five or 10 years. There won’t be only traditional newspapers, magazines, and TV programs. There won’t be only personal, social communications offline and separate. In 10 years it will all be online. Static content won’t cut it in the future.”

Also showing up in Cannes was Eric Schmidt, Google’s chief executive. The buzz was that Google is not happy with the downward price pressure on its keyword auctions that set the price for much of its search engine advertising; it has given up in the last year on its projects to sell newspaper and radio advertising, and it even has trouble generating the revenues it wants from its video-sharing YouTube, and it is seeking more and more help from the likes of Publicis to develop, for instance, new advertising formats for YouTube.

And Google has to keep an eye on Microsoft’s new Bing search engine which is very slowly nibbling away at Google’s search engine supremacy. Obviously Microsoft launched Bing to get more advertising spend flowing through its coffers and it needs the agencies to make sure that happens to a significant degree.

Publicis is also doing good business with Microsoft developing new kinds of digital advertising so the bottom line seems to be that the once frosty relationship between ad agencies and digital have now warmed up significantly. There were no statements from the ad agencies about traditional media – their bread and butter – being dead as Ballmer claimed, but you get the distinct feeling that the ad agencies are no longer putting all of their eggs in one basket.

And the fear is that if it is the agencies developing the new digital ad formats then those very same agencies will then be encouraging their clients to make use of those new digital advertising formats. And there is plenty of room to expand that digital spend – Group M, owned by WPP, says it believes that by next year the digital spend could equal around  15% of the global advertising market compared with just 10% in 2007. In other words, around a 50% increase in three years.

Of course it’s nothing new for digital executives to bad-mouth the future of traditional media –back in the late 1990s newspapers were given less than 10 years in print and yet they are still around although admittedly not near as financially healthy as they were back then. Ballmer, however, is now taking this to a new level by saying  he does not believe that traditional media is battling a recession – that implies things will get better eventually as the economy turns more positive – but rather there is a “reset” and things will never go back to where they were. 

“I don’t think we are in a recession. I think we have a reset. A recession implies recovery and for planning purposes I don’t think we will. We have reset and won’t rebound and re-grow,” he said.

He says that for traditional media to survive it must provide different digital products. Trying to replicate a newspaper on the Internet, for instance, is not the way forward, he warned.

But he admits the big question out there is whether the digital platform is conducive to advertising. Obviously the public has flocked to digital as an information platform, but do people pay attention to the advertising? The answer to that question “is somewhat in the balance as we move forward,” he said.

According to ZenithOptimedia, also owned by Publicis, digital advertising is the one bright advertising platform still out there. It predicts digital advertising will increase by 8.6% this year while the overall global ad market is predicted to decline by 6.9% this year.

And less anyone wonders where Yahoo fits into all this, don’t forget that in May it and the WPP Group announced that WPP’s 24/7 Real Media ad targeting unit and Yahoo’s auction-based ad placement system will share information enhancing ad targeting for WPP clients on Yahoo.

So the once cold relationship between the ad agencies and the big digital players is on the thaw. While traditional media is still by far the biggest advertising spend the fact that the agencies and the big digital players are now getting into bed together does traditional media no good. If it was new and additional money going to digital then it wouldn’t matter so much, but in most cases the spends are going to remain the same and it is the allocation that changes. And that obviously means now that digital is lining up the big ad agencies to help them get more of that pie.