Publicis’ CEO Warns The Advertising Industry that The Playing Field Has Changed – Consumers Are Now In Charge Of When and How They Receive The Message -- And The Only Three Ways For Agencies To Survive In This New Media World Are “Change, Change, and Change”

Levy gave the closing speech at the American Advertising Federation’s (AAF) annual convention in San Francisco where attendees heard a mixed message. Levy told them, “I have no idea what the future will be, but I can guarantee you that three key ingredients will be needed: change, change and change.” And yet the AAF released a report saying that online video had yet to have a major effect on the television advertising spend, but on the other hand advertising budgets for online will continue to grow.

Levy, head of the world's second largest media buying group, warned that new technologies are making it harder and harder to reach consumers via a mass approach. He said the future will include having “to plan more and more individual highly targeted campaigns.”

He is still a fan of the television medium, but wonders whether the paid print business model can continue. “Television, defined as high-quality video and audio content delivered to a screen, is not on the way out. It will remain a unique source of information, of entertainment, and, I hope, of education that will continue to attract family audiences for several hours each day.”

ftm background

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But paid print may be a different matter. “We all know traditional media are all losing ground in one way or another. But it would be just as ill advised to completely dismiss traditional media – waving them aside as obsolescent – as it would be to ignore the fact communications will never be the same as they were. Having to pay to get access to information will be increasingly seen as an imposition, as it already is in the eyes of many young people.”

But according to a survey compiled by Atlantic Media Company while there is little doubt that digital market are the buzzwords for the future a full 63% of American industry leaders believe that the Fortune 500 companies are “generally behind the curve when it comes to online ad strategy.”

It’s not that they don’t recognize the effectiveness of digital marketing – 91% saying they recognized online as “empowering to advertisers allowing the ad industry to shape its own development” -- but they were afraid of risks such as the lack of editorial control on blog sites. But an overwhelming majority thought advertisers “should exploit the viral marketing opportunities.”

So far online video and the sharp uptake in broadband has had little effect on television network advertising although some industries – particularly auto – have cut back, redirecting spend to the Internet. A recent study by the Online Publishers Association said that 24% of Internet users access video at least once a week while 46% watches video once a month, but most of the video watched is hard news.

In 2005 the average US spending on online advertising, as a percentage of the total media budget, was 15% and that is forecast to grow to 20% this year, and reach 32% by 2010, according to the AAF report.

Paid search, which was 9% last year is expected to be 11% this year and double by 2010. Display advertising growth may be peaking with the spend expected to be 28% this year, but down to 13% in 2010.

As good an example of an industry seriously dissecting its advertising spend is automotive, and Jan Thomson, VP-marketing for Nissan North America, told an Automotive News marketing seminar just two weeks before the AAF convention that things simply cannot continue as they are.

She said that automakers account for 25% -- $17 billion – of the US total advertising spend – a figure she calls “shocking”

Even more shocking to her is that in the past 20 years auto advertising has increased 1,378% while new vehicle sales have increased 17%. In two decades what used to be an industry-wide advertising cost of $50 per new car sold is now $1,000.

She is convinced, as are her colleagues at other automakers, that there are far more cost-effective ways at getting the message across – there has to be with all marketing costs, including incentives, now reaching up to $4,000 per new car sold. Automakers still prefer TV – it still is the easiest way to get out the mass message to a mass market – but, they are cutting back seriously on print, and they are investing more than ever on digital online strategies.

Nissan, as an example, has struck deals with MSN, Yahoo, and Google. Thomson said a recent Google paid-search promotion strategy was responsible for driving 40% of Nissan USA’s web traffic, and research showed that 31% of vehicle sales made during the special promotion were tracked to search marketing.

According to Q1 advertising numbers from TNS Media Intelligence local US newspapers saw a 6.1% drop in ad spending caused by declines in three major categories - retail, telecommunication, and automotive. Because of print weakness TNS has now revised down its full year 2006 US advertising growth from 5.4% to 4.9%.

Getting back to Levy’s “change, change, change”, that message seems to be particularly getting through with print media itself in the UK. The Times has started printing in the US as a marketing ploy to gets its name known to promote its online site. Now the Guardian, with a print circulation of some 374,000 but an online audience of 12.9 million unique users – some 5.1 million from the US -- says it wants to do the same.

Any wonder when Group M, the holding company for media-buying agencies owned by WPP accounting for about 30% of global media buying, says that UK Internet advertising will exceed the advertising expenditure in UK national newspapers sometime this year, accounting for 13.3% of the total spend – some £1.62 billion -- compared to 13.2% for the nationals. It’s a combination of the Internet spend going up and the nationals, particularly the red-top tabloids, seeing their advertising spend go down as circulation declines.

That will make the Internet the third biggest UK advertising medium, behind regional newspapers (which it might overtake next year) and television, but the UK percentages are still well under the US where about 20% of the advertising spend is expected to go the Internet this year.

Even so, not bad when one considers that six years ago the Internet in the UK accounted for just 1% of the advertising spend.

And it’s not just the Internet. Group M is forecasting huge growth for mobile phone advertising, too.

As Levy said, it is the consumer who now determines the medium and when to take in the message. Agencies and advertisers have to adapt to that fundamental change in the business model. Levy’s advice is spot-on: “change, change, change.”

Levy Doesn’t Like Free Newspapers. Calls Them “Dangerous” - June 29, 2006

Continuing his theme that the newspaper business is in trouble Maurice Levy took the issue further during an appearance at the Cannes Lions advertising festival.

Although free newspapers rely entirely on advertising for their income, Levy believes readers value the investment that they have to make in a newspaper in order to get the quality product they want. “The reason information has value is the investment made in the quality of the reporters, the journalism, the advertising. If information is free to read, this destroys the value of the information,” he told Dow Jones.

“The brand has a huge value which is being undervalued by the print media. It’s very bad news for the press that it doesn’t understand this – it’s very bad for democracy. The lag between readers and media owners is huge and they have not noticed,” he said.