What if the advent of digital media is all due to the failures of advertising?

August 19, 2011

Could John Wanamaker have been wrong when he lamented that 50 percent of all advertising works, the problem being that advertisers don’t know which half?

But what if in reality, instead of just 50 percent of advertising not working, 100 percent of advertising dollars spent on TV, newspaper, and magazine advertising in the past failed to work in any meaningful way?

If so, that could explain why traditional media have eroded so quickly, being replaced by the direct-response mechanisms inherent in all things digital.

The point crossed my mind recently, after reading “Primetime Propaganda,” by Ben Shapiro. In it, Shapiro made an interesting argument when he dissected the network TV wars of the 1950s and 1960s. At the time, CBS dominated ratings by producing family-oriented shows that audiences loved. To counter CBS’s success, ABC commissioned a study by Dr. Paul Lazarsfeld of Columbia University, who argued that the size of an audience was less important than demographics and the younger the demographic, the better.

The paid research played well at a time when baby boomers were inheriting the earth. ABC went on to win new advertisers with programming such as “The Smothers Brothers” and eventually “Charlie’s Angels,” and “Three’s Company.”

But Shapiro believes that the “younger is better” bias was flawed from the beginning, and that young people do not have more disposable income than their parents. He also argues against the common advertising assumption that advertisers must penetrate young people early to win their brand loyalty. Shapiro thinks young people are less brand loyal over time for any number of reasons.

If this is the case, how could such a flawed model of advertising become so ingrained? Shapiro contends it’s due to the unique relationships large advertising agencies had with their clients in the “Mad Men” era of 1950s and 1960s advertising.

Back then, and still to some extent today, large agencies made big dollars on the 18 percent commissions they received from media for the ads that they placed. Shapiro calls the payment arrangements kickbacks. While you can agree or disagree, getting paid from both clients and vendors seems to pose an ethical quandary, if not conflict of interest.

In the 1950s and 1960s, the conflict forced agencies to do everything in their power to convince their clients to spend millions of dollars on TV, magazines, and newspapers advertising, whether or not it worked or was in their clients’ best interests.

The theory might be far afield. After all, with media limited to three networks and a handful of national newspapers and magazines, the way to reach audiences was through mass media, so it’s logical that agencies pushed their clients in those directions.

Still, I know from my experience that advertisers have long been suspicious of whether the money being spent actually had the desired intent. I can verify this to some extent, borrowing from a long career working in real estate PR.

For years, real estate marketers openly questioned whether full page brand awareness ads in magazines and newspapers had any effect on leasing or sales. Their concerns were soothed by agency talk about the importance of branding and the lack of alternatives in gaining visibility.

Which bring us back to the original thesis. If advertising as we once knew it simply didn’t work for all these generations, then it makes sense why digital media have been able to quickly overtake publishing and network TV, what with digital’s easily quantifiable results and emphasis on impacting buying behavior rather than brand awareness.

It also bodes well for traditional media points, such as The New York Times, which today serves as the seminal point of origination for thoughts and opinions delivered digitally to American consumers every hour of every day of our digital lives. The Times and others enjoy the best of both worlds — world-class content to attract readers as well as digital accountability for advertisers.

Still, the CBS case study, if correct, is an eye opener, and in retrospect, might shed light on the cataclysm media is facing in today’s new digital world order and why change has come so quickly to our industry.

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