September 25, 2018

How Ad Industry Destroys Brand Value

The advertising industry prides itself on being brand builders. Building successful brands is supposed to be the essence of what we do. But in recent years the ad industry has been guilty of cheapening some of the most important brands it controls -- its own.

I am going to be picking on WPP because it is the biggest offender. But to some degree the same can probably be said about each of the major holding companies.

WPP is the owner of some of the most famous and worthy brands in the history of the ad business: JWT, Ogilvy, Y&R and Grey. It has been systematically dismantling the value in these brands. Today they are splinters of what they were.

The holding companies have undermined their agencies from the top down and from the bottom up.

What a holding company usually does is buy successful brands and manage them at arms length to, presumably, add value to shareholders. Examples of successful holding companies are Berkshire Hathaway and Procter & Gamble. Nobody buys a Berkshire Hathaway or a Procter & Gamble. The buy GEICO insurance or Tide detergent. The value is in the brand, not the bookkeepers who support it.

But WPP and the other agency holding companies, saw things differently. They chose to become brands themselves. They became super-brands. From the top down, they subsumed the brands they owned. So over time, it was no longer Y&R pitching against McCann for an account. It became WPP vs IPG. The holding companies became the stars. The agencies became the bit players.

Then the holding companies started to devalue their brands from the bottom up. They created custom-made agencies for clients. Drawing talent from this agency and that agency. The unspoken message to marketers was clear: we don't have the right talent in any one agency. We need to draw from several agencies to get you what you need. Examples of this are WPP's Team Blue (who seem to be on the way to losing the global Ford account) and Omnicom's We Are United, the agency custom-built to do mediocre work for McDonald's.

Agencies have always had difficulty practicing what they preach, i.e., differentiating themselves. But with the advent of holding company super-brands, differentiation among their constituent agencies has become almost impossible.

Now the holding companies are saying the creative agencies are insufficient contributors to revenues. We have reached the stage of blaming the victims.

I will not be surprised to see WPP's new ceo make further moves to disembowel the agencies. I will not be surprised to see mash-ups among JWT, Ogilvy, Y&R, and Grey that make the brands even weaker and less distinct.

There is not an industry in the world who should understand the importance of protecting the value in a successful brand better than the ad industry. And yet we have done a remarkably good job of vacuuming the value out of some of our best.