Part 2: Will Advertising Corruption Scandal Explode?

On March 5, Jon Mandel, former CEO of Mediacom (owned by WPP) told an audience at the Association of National Advertisers Media Leadership Conference about widespread U.S. agency kickbacks.

He presented a document which purported to show how some of the kickbacks work...

"...a media agency agreeing with an unnamed media vendor to an industry-standard 2% commission, but as much as 9% in volume-based incentives." (Ad Age)

Since then, reports of kickbacks have appeared in The Wall Street Journal, and several other venues including a front page story in Ad Age, that reported...

" 'It's really ugly and crooked,' said one ad-tech executive who described receiving such requests."

" 'It's the reason I left,' said a former U.S. media-agency executive."

Ad Age reports,

"U.S.-based marketers are being kept out of the loop about billions of dollars that agencies make back from deals on clients' behalf, according to industry executives, whether in the form of opaque markups, kickbacks or undisclosed rebates."

Mandel said,  

"Have you ever wondered why fees to agencies have gone down and yet the declared profits to these agencies are up?"

According to The Wall Street Journal...

"Marketers say they’re increasingly worried agencies are allocating ad dollars in ways that best suit their own businesses, as opposed to those of their clients."

Brian Wieser, Senior Research Analyst at Pivotal Research Group says...

"...most of the activity involving undisclosed activities is likely concentrated in digital." 

But kickbacks are only the tip of the iceberg of fraud and corruption in the digital ad business.

As we have said on several occasions, ad agencies have become the web's lapdog -- irresponsibly exaggerating the effectiveness of social media marketing; ignoring the abominable results of display advertising; and glossing over the fraud and corruption that has contaminated the web. Why? Follow the money.

Online advertising is a gold mine for agencies. WPP, the world's largest agency holding company, gets 30% of its revenue, over $5 billion, from digital. It is aiming for 45% over the next few years.

Perhaps the most astounding part of this incipient scandal is that the victims seem determined to hush it up.

While Ad Age reports that "hundreds of millions" of dollars are being siphoned from advertisers, a few days after Mandel's talk, the Association of National Advertisers issued this pathetic statement,

"...we regret any impression that agencies in general are engaged in questionable activities and apologize to those who were offended."

Gag me with a volume-based incentive. Mandel never claimed these practices were universal.

Apparently the victims are afraid that a thorough investigation will expose them for the clueless buffoons they are. After all, if their corporations lose a few hundred million here and there, big deal. Just as long as they don't lose their jobs.

The big question is whether this will erupt into a full-fledged scandal or just fade away behind a curtain of double-talk and indecipherable accounting? The answer lies in discovering whose interest would be served by exposing the corruption of the current system:

-The agencies? Hell no.
-The online media industry? Hell no.
-The marketing doofuses who have been asleep at the wheel? Hell no.

None of the principles have much of an incentive to make trouble. The only hope lies with the press.

If the mainstream press gets on it, and governmental agencies take notice, something useful might happen. Otherwise, corruption as usual.

By the end of this decade online advertising will be as big as TV advertising. The advertising and marketing industries are too deeply invested to make much of a fuss about its unsavory, criminal underbelly.

Will the advertising corruption scandal explode? Count me as officially skeptical.

Will Advertising Corruption Scandal Explode? (Part 1)

Two years ago we wrote, "Not only are online advertisers getting screwed by crooks, some of them are also getting screwed by their agencies."

This is suddenly a hot topic.

For over two years, the Crack Investigative Team here at The Ad Contrarian Worldwide Headquarters has been reporting on corruption and fraud in advertising -- particularly in the online ad industry.

In June of 2013, we said,  

"This is the biggest advertising story of the decade, and it's being buried."

(A bibliography of some TAC writing on this story appears below today's post.)

Billions of advertisers' dollars have been stolen, wasted, and misappropriated while everyone who should have been acting responsibly turned a blind eye. There was just too much money at stake.

Meanwhile, pathetically naive and impressionable marketers continue to throw good money after bad down the online advertising toilet.

- They don't know what they're buying
- They don't know who they're buying it from
- They don't know what they're getting
- They don't know how much they're paying

If the victims weren't so fucking dumb, it would be sad. But, honestly, I can't help but be amused.

There are several types of fraud being perpetrated on online advertisers, here are a few of the major ones:

1. Phony traffic - Bot-nets generate billions of phony visits to websites daily, which advertisers pay for.

2. Phony clicks - Likewise

3. Phony websites - Sometimes called "spoofing," phony websites pretend they're real websites and sell imaginary ad space to knuckleheads

4. Invisible ads - Euphemistically called "unviewable," these are ads that "technically" appear but are invisible.

5. Agency kickbacks - Suddenly, the most topical corruption issue. 

The wonderful thing about all these scams is that everybody thinks it's the other guy who's the idiot. Everyone assures their clients and their management that it's the other guy being screwed and "we have processes in place to protect ourselves."

Yeah, right.

Meanwhile the crooks and sleazebags are laughing all the way to the bank.

In the past ten days, the trade press has finally come out of its inexplicable torpor and has started to report on the some of the issues, particularly the agency kickback issue. Will this explode into a full-fledged scandal?

Some thoughts on that will appear here on Monday.

Some pieces on this subject -
Online Advertisers Getting Hosed 4/29/13
Time To Clean Out The Stables 5/2/13
Online Ad Criminals 9/16/13
Alarming Online Sleaze Factor 10/16/13
The Scam What Am 11/14/13
Epic Screwing Of Online Advertisers 2/27/14
NYTimes: 57% Of Online Video Ads Unviewable 5/6/14
Ad Industry Is The Web's Lapdog 5/19/14
Woeful Weenies Of Traditional Media 6/2/14
Amazing Tale Of Online Fraud 10/15/14
Digital Clown Act In Big Trouble 10/30/14
What Every CEO Needs To Know 12/8/14
Agencies Cheating Clients, Says Former Mediacom CEO. No Shit,Says Me. 3/9/15
The Difference Between Waste And Fraud 1/14/15

What The Brand Babblers Don't Understand

Imagine for a second that you're the brand manager for BigSave supermarkets.

Your job is to build the BigSave brand so that customers prefer you to SaveMore, and HugeSave.

You know how wonderful BigSave is. You want to spread the word. You want consumers to see inside your brand. You want them to know how responsive you are, and how pleasant you are to engage with, and how willing you are to work with them and help them.

Building the brand is absolutely essential to your career and central to your life. Once you leave the house in the morning, it is the most important thing you do.

Now let's talk about the average consumer. The average consumer couldn't give a flying shit about BigSave.

If BigSave exploded tomorrow, the average consumer wouldn't bother picking up the donuts.

The average consumer has other things on her mind. Like why she gained 2 pounds last week, and why her father is looking pale, and why the fucking computer keeps losing its WiFi signal, and why Timmy's teacher wants to see her next week, and what's that bump she noticed on her arm?

The point is this: our brands are very important to us marketers and very unimportant to most consumers. Please read that again.

Are there some brands each of us are attached to? Sure. Are there brands we buy regularly? Sure. Is our attachment to a handful of brands strong and nonsensical? Sure. The problem is we buy stuff in hundreds of categories and are strongly attached to only a few brands.

The idea that our attachment represents "love" or any of the other woolly nonsense perpetrated by brand hustlers is folly.

The clearest demonstration of the weakness of the cult of brands is the dismal performance of social media marketing. We were promised that social media would be the magic carpet on which our legions of brand advocates would go to spread the word about the marvelousness of our brands, and would free us from the terrible, wasteful expense of advertising. It has done nothing of the sort.

In fact, it is often the exact opposite. Social media is usually where people go to scream about the mistreatment we get at the hands of companies. And where companies go to beg forgiveness.

A recent study reported that among a brand’s fans, only .07% — that’s 7 in ten thousand — ever engage with the brand’s Facebook posts. On Twitter the number is even lower — 3 in ten thousand. And these are not average consumers. These are the brands so-called "fans." (This is a correction from the original post which had the number at .7%)

A study I quoted here recently by Havas claims that “in Europe and the US, people would not care if 92% of brands disappeared.”

Having a successful brand is very important to a marketer. But the idea that it is anything like that to a consumer is folly. Brand babble is just the faulty conflation of marketers' needs and consumers' interests.

Modern marketing is operating under the delusion that consumers want to interact with brands, and have relationships with brands, and brand experiences, and engage with them, and co-create with them.

Sorry, amigo. Not in this lifetime.

Top 6 Reasons Agencies Love The Web

The agency business -- particularly "big advertising" -- has adopted a knee-jerk inclination to disparage traditional advertising and advocate for the web. Here's why:

1. Doing good advertising is hard. Yapping about precision targeting is easy.

2. Doing good advertising is hard. Yapping about collecting data is easy.

3. Doing good advertising is hard. Yapping about social media is easy.

4. Doing good advertising is hard. Yapping about engagement is easy.

5. Doing good advertising is hard. Yapping about technology is easy.

6. Finding people who can do good advertising is hard. Finding people who can yap about precision targeting and collecting data and social media and engagement and technology is easy.

The agency business has become a little too comfortable with easy. And a little too uneasy with hard.

Stranger Than We Imagine

I had the occasion to read a wonderful book about advertising last week. It's called The Anatomy Of Humbug and is written by Paul Feldwick.

The book is fascinating and superbly written. It takes us from the beginning of the modern era of advertising up to the present with charming anecdotes and intelligent analyses of the people and ideas that have made us the struggling, bewildered ad hacks we are today.

It also explores some thought-provoking ideas about the ad person's eternal question: How the fuck does advertising work?

Additionally, it motivated me to publish something of my own.

Back in October, I wrote a 3-part post about "quantum advertising" (I know, pretentious as hell) which (in a much less thorough, entertaining or intelligent way) also deals with the nature of how advertising works. I have now published it as a little booklet (ePamphlet?) at Amazon under that title.

I wanted to make it downloadable for free, but Amazon insists that an author charge at least 99¢. The good news is that I can offer it for free a few days every quarter. So you can download this thing for free for the next 3 days (until 11:59 PM PDT Thursday.)

One thing that Feldwick's book and my booklet have in common is that neither of us is satisfied with the standard model of advertising as simply a function of either logic or emotion. It is probably a lot stranger than that. But don't try to tell that to your client. Marketers prefer clear answers that are wrong to vague answers that are right.

So here's what to do. Buy The Anatomy of Humbug and then, for dessert, download Quantum Advertising.

 
Big thanks to Mark Earls for giving me The Anatomy Of Humbug.

Hi-Tech High School

Having never been to either one, it's hard to decide which I hate more - Cannes or SXSW. Both of these WorldWide Whack-offs have so much to recommend them.

It's like trying to decide which is more important -- Ads That Never Ran or Things That Will Never Happen.

Well, anyway, if you are going to Awestin for SXSW, here's some actual advice from three "experts" that appeared in Adweek last week about having a successful trip:

"Try to go to the "it" parties as often as a random bar—where there's a lot of interaction and cool stuff going on." 

OMG! Totally awesome! Going to the "it" parties and doing "cool stuff." But do you think I should, like, slow dance with Debbie? Do you think she likes me? I mean, like like?

"...as you collect hundreds of business cards, develop a system so you know which ones you want to follow up with. Either by designating a specific pocket to place follow-up cards, or slightly folding a corner, or marking with a pen..."

Dude, what if you just take your precious fucking business cards and fold 'em five ways and stick 'em where the sun don't shine? How does that system sound?

And, of course, my all-time favorite digi-babbler had the winning entry...

"It's not just about creating buzz around an activation, but it's thinking about the event as a platform to begin to shape the industry and do something future-leaning."

Yeah, I'll get right on that.

But seriously, do these people really live on our planet? What kind of lives do they have that this shit is important to them? This is just the tech-world's brand of Kardashian stupidity.

Has Social Media Made Customer Service Worse?

Have you noticed how amazingly great customer service has become? Yeah, neither have I.

I don't get it. It seems like the more we are told "the consumer is in control," the worse things get.

Trying to get someone to pay attention to you - or even answer the phone - at a bank, or an airline, or a telecom company, or an insurance company or a... you get the picture... is an experience in emotional suicide.

And yet, if you're like me, you check on these things. Social media venues make it pretty easy to get info on who's good and who's lousy. But it seems like most companies don't really give a shit.

Whereas social media ought to have made businesses very aware of how important it is to treat customers well, all it seems to have done is taught them how to game the system with "war rooms" full of bullshit artists spewing out apologetic tweets and dumbass Facebook updates.

I'm starting to think that despite its promise, social media has actually made most customer service worse. Social media may work to improve service at the local restaurant level, where service has always tended to be pretty good, but at the level of the large entities that we are more and more slaves to, service just continues to get worse.

Companies now apparently believe that they don't really have to treat customers well as long as they have a basement full of interns answering complaints and digi-groveling for forgiveness.

Or maybe there's another answer.

Maybe it's consumers who are full of shit. Maybe consumers really are in control and they've made it clear that they won't pay for good service. Maybe they just go to whomever has the lowest price, regardless of how dismally they're treated.

One thing's for sure -- something's wrong somewhere.

The Future Of Advertising

Dumb agencies will continue to overspend on technology. Smart agencies will continue to overspend on talent.

Agencies Cheating Clients, Says Former Mediacom CEO. No Shit, Says Me.

Almost a year ago I wrote a piece called The Ad Industry Is The Web's Lapdog. In it I said...

"One of the important responsibilities of the advertising industry is to be an 'honest broker' between our clients and the media. We have failed miserably...The ad industry has become the web's lapdog...becoming a de facto sales arm for the online ad industry. Self-interest has come into conflict with responsibility. Guess what's winning?"

A few weeks before that I wrote...

"They (the agencies) buy online ad space at one price and then sell it to their clients at another price...As far as I can tell, this is clearly a conflict of interest. But somehow the agencies have convinced some dumbass clients that this is perfectly okay."

Well, in a huge surprise to absolutely no one with a functioning brain, The Wall Street Journal reported last week that agency media buying practices are corrupt...

"Ad agencies are facing growing scrutiny regarding the transparency of their practices and their compensation. Marketers say they’re increasingly worried agencies are allocating ad dollars in ways that best suit their own businesses, as opposed to those of their clients."

Golly gee. I am just gobsmacked.

The Journal article pays particular attention to rebates and other forms of kickbacks -- oops, sorry, I mean "arrangements" -- but former Mediacom (part of WPP) CEO Jon Mandel says...

“There are many different facets of this...it’s not every agency, but each agency that does it does it differently.”

While I believe there's hanky-panky going on across the media industry, I suspect it's worst in digital. The bullshit machine that is the online ad industry and their cozy pals in the global agency business -- enabled by astoundingly clueless CMOs -- have been having a big ol' fiesta at the expense of dumbshit marketers who have no idea what they're buying or what they're paying.

As I wrote almost 2 years ago...

"The display ad industry is crooked. Agencies are greedy. Clients are clueless. Watching these clowns is the best show in town."

Just for the record, here is some stuff I've written about this suddenly hot topic in the past few years. The same information was available to anyone who cared enough to seek it out.

December 8, 2014

"I spent over forty years in the advertising business, and in that time I never saw anything like the corruption and double-dealing that is currently being perpetrated..."

January 14, 2015

"This type and level of corruption has never existed before in the ad business."

October 15, 2014

"This will never change as long as brain-dead advertisers keep feeding the fraud machine."

April 29, 2013

"When you take a gullible industry that has acted in an irresponsible and foolhardy manner to sell snake oil to its clients, add to that some very sophisticated crooks who are way ahead of the naive buyers and sellers of ads, and top it off with indecipherable metrics that are intentionally designed to confuse and mislead, you have yourself a very toxic blend."

September 23, 2013

"There is clearly a substantial amount of criminal and deceitful activity going on."

September 16, 2013

"When corporate management finally figures out how their money is being pissed away, CMO heads will roll and agencies will be fired."

May 6, 2014

"...they are so dumb and so mesmerized by the bullshit of their agencies and the online advertising crowd that they don't understand how deeply and vigorously they're being screwed."

November 14, 2013

"It's a rotten, dirty game and ignorant advertisers are getting skinned alive....The amazing thing is that no one's been arrested or fired."

June 7, 2103

" ...agency holding companies...'trading desks' are buying online media at one price, marking it up, and selling it to their clients at a higher price. The justification? They're 'adding value.' How's that for a laugh?... Soon enough someone big, smart and influential is going to realize what's going on and all hell will break loose."

And wouldn't that be fun to watch?

More on this here, and here.

Mr. Meatball Is At It Again

Just when I was ready to let the healing begin, up pops our favorite "Global CEO" again with some grade-A, artisanally curated bullshit that just can't be ignored.

If you remember, a few days ago we skewered this guy for his self-aggrandizing claim that Steve Jobs was successful because Steve applied the same principles that Mr. Meatball advocates. As we showed, nothing could be further from the truth.

Yesterday, he was back in the news, this time in The Guardian, claiming that "Marketing is dead. Strategy is dead. Management is dead."

Of course, the " ________ Is Dead" gag is the oldest trick in the self-promotion book. Nitwit reporters just can't resist it. And if you're a whore for cheap ink, there's no better way to get yourself some than to claim that something is dead.

Unfortunately for Mr. Meatball his "this-is-dead, that-is-dead" bullshit is years past its sell-by. We've all heard this crap so many times before that this pathetic attempt to be controversial sounds like something borrowed from a rookie planner's 2009 powerpoint.

As you might expect, the reason all this stuff is dead is related to the insufferable "people love brands" nonsense. You see, as The Guardian reported it....

Business is now all about creating a “movement” of people with shared values, he enthuses from his suite at London’s luxurious Bulgari hotel, without even a hint of a smirk.

“You do that by figuring out how you add mystery, sensuality and intimacy to a brand ... Sensuality: we feel the world in five senses. Whether you like this room or not, [the architect] Antonio Citterio designed it and all five senses are at work in here. I mean, people want to lick this table.”

Yeah, lick this.

But, you know, maybe this guy is right.

Maybe people with shared values want to start a movement behind  their socks and their chairs. And their pickles, and their half-and-half, and their mayonnaise, and their cookies, and their tires, and their chewing gum, and their toothbrush, and their umbrella, and their dishwasher, and their napkins, and their toaster, and their gasoline, and their dental floss, and their paper towels, and their golf balls, and their shoes, and their pillows, and their pencils, and their deodorant, and their books, and their nail clippers, and their furniture polish, and their frozen chicken strips, and their lamps, and their potting soil, and their bathing suits, and their glasses, and their clocks, and their fungicide, and their dishes, and their cat food, and their sun block and their cookie dough, and their motor oil, and their light bulbs, and their burglar alarm, and their ironing board, and their fire insurance, and their coffee filters, and their pillow cases, and their allergy pills, and their mouthwash, and their vacuum cleaner bags...

Yeah. Maybe they don't have to worry about their jobs, or their children, or that thing growing on their neck, or how they're going to pay the rent.

Maybe they don't need to wash the bath tub, or have mammograms, or go to work, or apply for loans, or bail their kids out of juvie, or fold the laundry, or take their parents to the doctor, or vacuum, or make dinner.

Maybe they have unlimited time to develop movements with other people in suites at the Bulgari who share their values about all the companies they buy shit from.

It's an amazing fucking world this meatball lives in. Someday I'd like to visit it.
 

Third Stage Social Media

One thing about social media maniacs, they're very inventive.

Just as their nutty ideas are about to hit a brick wall, they seem always able to come up with new reasons for pissing away boatloads of time and money on social media marketing.

Before we get to the latest chapter, let's quickly review the first two stages of social media marketing delusion.

The first stage was the engagement stage. When the miracle of social media first started to enchant the titans of marketing, the rationale was that consumers (that means people) wanted to engage with brands and marketers. You see, we are all so in love with brands that we want to have relationships with them, and co-create, and...well, you've heard all this bullshit a thousand times.

Sadly, it turns out that there are very few people who are so devoid of a life that they want to spend time engaging with brands or marketers. In fact, a recent study showed that even among a brands fans only .7% - that's 7 in a thousand - ever engage with its posts on Facebook. The number is less than half that on Twitter. Which begs the philosophical question, what's half of nothing?

The second stage was the conversation stage. When it turned out that people becoming a fan of a brand had nothing to do with "engagement" and everything to do with hoping to get something for free, a new philosophical rationale for social media had to be created quick. Enter "the conversation." "The conversation" posited that consumers (that's right, people) were so enamored of their favorite brands that they would use social media to extol the brands virtues to others who would do likewise and this would create a tsunami of conversations and sales results that would make advertising obsolete and irrelevant.

Sadly, it also turned out that no one wanted to have a fucking conversation about brands. Don't believe me? Take a stroll over to your Facebook page. You'll find plenty of traditional paid ads, but "conversations about brands" turn out to be rather thin on the ground.

A few months ago, The New York Times put it nicely,

“A few years ago, (Facebook) was telling brands to increase the number of people following their pages. Now it says fans are largely irrelevant."

Which leads us to what may turn out to be the newest era in social media fantasyland. I am calling it the catalyst stage. It goes something like this:

Social media isn't for consumers to engage with a brand, or to have conversations with or about a brand, instead it's for consumers to interact with and support each other through the brand. I'm afraid I'm not doing justice to this lunatic idea, so let's hear an expert describe it:


This video has a nasty habit of disappearing from the post. If it's not here, you can find it here.

Sometimes I wonder if I'm actually living on the same planet as these meatballs (ya know, people.)


Thanks to Sean O'Donnell for this video

Daring Greatly And Failing Miserably

My favorite car campaigns of all time were Doyle Dane's Volkswagen, Ammirati's BMW, and Scali's Volvo.

These 3 campaigns had one thing in common: They didn't try to tell me who I was, they told me who they were. They told me why their product was great, and in so doing, created great brands.

They understood that the best way to build most brands is with product-focused advertising.

Which leads us to Cadillac's new campaign. You can read all about it here. As you probably know, Cadillac changes campaigns more enthusiastically than Bruce Jenner changes sexes.

Supposedly, this new campaign is not a campaign, it's a re-branding. Well, technically, according Cadillac's CMO, it's not a re-branding either. It's a "re-invention."

What is a "re-invention," you ask? As far as I can tell, it's exactly like a re-branding, only way more expensive.

First, Cadillac is moving its headquarters to New York City's Soho area. How cool is that?

I guess some people from Detroit think of this as the height of hipness. To a lot of New Yorkers, Soho is where you go to admire Korean tourists. On the other hand, if I was the CMO of Cadillac, I wouldn't mind having breakfast every morning at Balthazar either.

Next, Cadillac is "tapping into the Millennial mindset." Of course, you can't do anything in marketing these days without invoking the M word. Just one little problem. Last I looked, Millennials were buying about 12% of new cars and about 0% of Cadillacs.

But maybe it's just their "mindset" he's targeting. This could be problematic because mindsets often have trouble getting car loans.

I don't really care much for the campaign. It's called "Dare Greatly." It feels like an ad school version of "Think Different."

One problem with the campaign is the problem with so much advertising these days. It's full of lofty thoughts and is devoid of persuasion.

Another problem is in the imagery. The CMO seems to be so enchanted with Soho that in addition to moving there, he also shot the spots there. When Chrysler shot in Detroit, they "dared greatly." But leaning on the imagery of Soho seems to me like daring tentatively.

A third problem is that the execution doesn't match the strategy. "Dare greatly" is a quote from Teddy Roosevelt. Roosevelt and and his boys were called the "Rough Riders." They were famous for a brave charge up San Juan Hill during the Spanish-American War. 

But this campaign is very fey and artsy. It features some people we're supposed to admire for following Roosevelt's dictum. I have serious doubts that the Rough Riders would consider fashion design "daring greatly." Their idea of daring greatly was getting up on a horse and shooting something.

One of the people featured in the campaign is Apple co-founder Steve Wozniak, who I actually do admire. Only problem is he looks more like he swallowed a Cadillac than drives one.

Which leads me to a little poem..

Some ads are merely regrettable
And some are completely incredible
I can't see Steve Wozniak
Buying a Cadillac
Unless the damn thing was edible

“Luxury brands don’t sell products, they sell dreams,” says Cadillac's CMO. Yeah, maybe. But car dealers sell products. And when they don't, CMOs have very bad dreams.

The Cadillac re-invention needs to arrive very quickly at advertising that persuasively extols the exceptional qualities of the product -- not the purported mindset of Millennials.

Otherwise they may find they have dared greatly and failed miserably.