Frenemies: The Epic Disruption of the Ad Business (and Everything Else) (25 page)

Pepsi set up a content center and recruited creative talent to produce
content they can sell. A reason Pepsi made this move, Brad Jakeman, president of the Global Beverage Group, told an audience at the 2016 Cannes festival, is because agencies are too rooted in the past: “I've been asking the advertising industry for years to evolve their business and they haven't. We value our agencies. But we also need the ability to produce fast.” Fast may not equal effective. Few brands have been as successful as Red Bull in creating their own media platform that creates events that are covered by news organizations. It is costly, which is one impediment. And it may be delusional. Rishad Tobaccowala of Publicis cautions, “Brands want to talk about their brands, which in most cases is boring as hell and does not make an ongoing content platform.”

Disruption is driven by frustration with agencies and by new business opportunities innovative technologies offer. On a deeper level, disruption is driven by a new reality: citizens are increasingly hostile to interruptive ads, as we've seen repeatedly. So advertisers experiment—with native ads meant to seduce users with narratives or ads that don't seem like ads; with new mobile ad formats, including six-second videos (instead of thirty-second ads) created by upstart companies like Kargo; with discounts and buy buttons. A popular and socially useful app aimed at reducing drunk driving fatalities was introduced by the Mindshare agency on behalf of Campari America, which makes Skyy Vodka, Wild Turkey, and Campari. They created in-app messages, sent Friday evenings to sports bars, containing a five-dollar discount coupon with the ride-sharing Lyft. Campari enjoyed a huge jump in its brand awareness, and probably saved lives.

Among the more effective marketing ploys to reach younger consumers has been influencer marketing. Young influencers have their own channels or platforms on YouTube, Instagram, Facebook, Snapchat, as well as their own Web sites. The route Samantha Fishbein, Aleen Kuperman, and Jordana Abraham took was unusual. They are
not glamorous, wear little makeup, pin their hair up quickly, and enjoy the easy rapport of three girls who grew up around the corner from each other in Roslyn, Long Island, attended the same public schools and the same college. As bored seniors at Cornell, they started blogging and tweeting anonymously as the Betches. “We made fun of the ridiculous culture around us, without being a hater,” Samantha says. After graduating in 2011, and getting jobs and returning to their parents' nests, they decided to try and popularize the Betches. As the Betches, they anonymously published a paperback book in 2013,
Nice Is Just a Place in France: How to Win at Basically Everything.
It became a national best seller. Success invited attention, and they promoted themselves in a
New York Times
interview, followed by others. Their Web site made fun of the lifestyle they enjoyed, including incessant partying; they posted pictures on Instagram with captions like, “The Best Emoji for Flirting & to Get You Laid.” Their upper-middle-class audience of eighteen- to thirty-year-old females “doesn't take themselves too seriously and likes to have a good time,” Samantha says. “No one would go and protest for something they believed in. It's very much about yourself, the ME generation.” Not feeling comfortable that they could perform as well in a video format like YouTube, their preferred platform was Instagram. Impressed with their young female audience, advertisers sold ads on their Betches platforms, providing funds for them to rent an office on East Twenty-eighth Street in Manhattan.

There was rarely an agency between the Betches and the advertiser when they were hired as influencers. By late 2015, they were doing twenty influencer ads per month for such clients as Smirnoff, the Bumble dating app, and Captain Morgan rum. They assembled fifteen contract writers and an overall staff of thirty-five. They asked clients to send them the message they wanted conveyed. “Usually, we put it in our own words,” Samantha says. “We said that the least promotional
way to sell is the best.” She continued, “When we started we didn't want people to think we are bought by advertisers.” They quickly got over their qualms. “You can't sell out anymore. Everyone is doing it.”

The key, says Jordana, “is doing it in a way that seems organic and natural. They don't want to know you're paid. Even if they do know, they don't want it in their face.”

Asked if he believed the survival of advertising agencies was threatened just as newspapers and magazines and music companies have been, David Pemsel, the CEO of the Guardian Media Group in London, said, “I do. These agency guys are smart. However, they probably are surprised by how quickly change comes and the agility” of the digital world. “With the pace of change, it puts all of us under threat all the time.”

“We're weeks away from Armageddon.”

—Michael Kassan

At the start of each year the entire marketing community—buyers and sellers, agencies, clients, publishers and platforms, Hollywood studios, digital and software and hardware companies—flock to CES in Las Vegas. Once, attendees came to tour the electronic exhibits, hoping to catch a glimpse of the future, and to meet and greet. Michael Kassan would come to CES with his friend Irwin Gotlieb to walk the floors of the various hotels that house the exhibitions. Then CES expanded its reach, and Michael Kassan assumed an outsized role. In 2010, to broaden their support in the tech community, CES called on Kassan to help lure Steve Ballmer, then CEO of Microsoft, a MediaLink client, to attend MediaLink's cocktail party. Ballmer become a regular at this event.

Kassan started stumping for more advertisers to attend CES. Gary Shapiro, the president and CEO of the Consumer Technology
Association, which produces CES, liked the idea, and Kassan offered a deal Shapiro welcomed. He would lobby brand advertisers and agencies to attend, and in return CES would give MediaLink VIP status to create a reserved space in an established hotel where Kassan and brands and clients could conduct closed-door meetings, as well as a separate venue where MediaLink could host and invite speakers and moderate panels. CES would also cosponsor with MediaLink the opening night kickoff cocktail party and would encourage a MediaLink dinner that became a must-be-invited-to meal for 350. Little wonder that after Peter Kafka of the online publication
Recode
followed Kassan around at CES in 2014, he lightheartedly described him as “the Godfather.”

Kassan became the schmoozer-in-chief. His visits to CES coincided with the upheaval in the entertainment and marketing world. Members of the film and television communities started coming to CES in the late 1990s and early in this century when new technologies like HDTV were seen as disrupters and a debate raged as to whether the living room would be controlled by the TV or by computers. Advertisers followed not just because Michael Kassan invited them, but because they had the same curiosity about the companies and technologies that could disrupt their business. “Michael has put himself in the center of what's taking place,” says Karen Chupka, CES senior vice president for corporate business strategy. By working together as partners, she adds, “I never walk away feeling, ‘Oh, I gave something to Michael.' I always feel like we got something better together.”

January 2016 was CES's forty-ninth anniversary, and 176,000 attendees filled 150,000 Las Vegas hotel rooms and walked the length of 50 football fields worth of exhibits. Stepping out of any hotel, neon signs beckoned visitors to come see the past perform—Donnie and Marie, Olivia Newton John, Wayne Newton. Or one could visit the
future at just about any nearby hotel to see the 20,000 products on exhibit. Keith Weed of Unilever, who Kassan says was the first client to ask him to arrange a tour of the exhibition floors, explains why he comes to CES annually: “If you're going to get to the future, first you better have an idea of the future. . . . If I can stay ahead, it gives me an advantage.” Plus, he adds, “Everyone is here.” Like other clients, Weed told MediaLink what he was most interested in doing at CES. This year he wanted a curated exhibition tour to explore three subjects: artificial intelligence, virtual reality, and the Internet of things.

In addition to Unilever, MediaLink had a total of 100 clients attending and would curate 582 floor tours and meetings with advertisers, agencies, and digital companies. A staff of forty was in attendance, each person responsible for accompanying a group of clients—JPMorgan Chase, GE, McDonald's, NBC, Hearst, Gawker, the
New York Times
—as well as organizing public session panels for agency clients like Digitas, Publicis's digital media agency. “We're like the official sherpas for our clients,” Wenda Millard says. Sporting his Christmas tan from Turks and Caicos, Kassan, casually attired in grey khakis and a wheat-colored crewneck thrown over a white shirt, met Tuesday afternoon with the MediaLink team to discuss their agenda for the rest of the week. They reviewed last minute additions to the 4,000 people invited to a party that evening billed as a MediaLink event, even though the names in small print at the bottom of the prominent posters were those who paid for the party—GroupM, Havas, Omnicom, IPG, Digitas,
Variety
, among others. They reviewed the 350 invites to their more exclusive Wednesday Executive Dinner.

At this CES, unlike many industry confabs, Jon Mandel did not seem to excite a fever of discussion. In between hugs and high fives, Michael Kassan mostly spent the day gliding from MediaLink's CES space in the Aria hotel, where it hosted panels; its private Aria Sky Suites, where he met with clients and visitors; and at another hotel
where he was to interview NBCUniversal CEO Steve Burke on a main stage, just as he interviewed Les Moonves the year before and Twitter CEO Dick Costolo the year before that. Kassan constantly peppered staffers with questions. When he learned that PepsiCo CEO Indra Nooyi would attend their dinner, he asked, “Is this a Pepsi or a Coke hotel?” The answer did not matter. He wanted Pepsi served. He fielded a flood of e-mail requests, including one from Martin Sorrell asking if he could bring two guests to Wednesday's dinner, and one from a CMO asking to meet tomorrow for what Kassan guessed was personal advice on seeking a new job. Anxious that his Executive Dinner be flawless, accompanied by his daughter, Brett Kassan Smith, who was coordinating it, they visited the Foxtail at the SLS hotel, a combination indoor and outdoor space that she said could accommodate no more than 350. Aware that he had said yes to Sorrell and others, she addressed her father by his first name and warned, “Michael, you have to understand, we can't squeeze more than 350 in here.” People pushed too far outside would not be able to see Lady Gaga perform. And she knew rain was in the forecast, which would close off most of the outdoor space.

He bobbed and weaved, never once agreeing. With Universal Music donating Lady Gaga, and with Condé Nast sharing half the $400,000 evening's cost with MediaLink but not half the branding credit, and with sports celebrities like Alex Rodriquez attending, he was the host of the hottest event of CES. He knew—his daughter knew—his guest list had already climbed north of four hundred.

Kassan's nights were devoted to drop-bys at a blur of agency, advertiser, and media parties. After leaving the Omnicom, Havas, and then MediaVest parties Tuesday evening, he raced by foot to the XS Nightclub in the Encore hotel for MediaLink's cocktail party. Coming toward him was an elderly man and a younger blonde, holding hands and wearing matching black sneakers. It was Rupert Murdoch, who
Kassan says is his biggest client, and Jerry Hall, soon to be his wife. After a warm exchange of hellos, Kassan quickened his pace and soon was escorted past long lines into the XS Nightclub, for what was billed as the MediaLink party.

Like Kassan, Carolyn Everson of Facebook had a packed schedule at CES. While being ferried in a black SUV to one of her many appointments in Las Vegas, she said of CES, “People moan and groan that it's the first thing they have to do when they come back from holiday. We all do it. And yet every top marketer and agency and media and technology company is here.” Her Facebook team scheduled 122 meetings this week, 30 of which she would attend. They reviewed with brands what they did together in 2015, and what the new challenges for 2016 were.

Her task, as she saw it, was to help galvanize the marketing world to address disruption. Her pitch in meetings here, she says, goes like this: “The real challenge in the industry today is that consumer behavior has shifted already. More time is spent on mobile apps than on television. However, mobile is still an afterthought for most marketing campaigns. Companies are struggling with how to rejigger their teams, their skills, their work flow, their board structure, so they can be more relevant to consumers in a mobile environment. The real question is: How fast can they do that? Companies that have been around for a hundred-plus years? Really hard to change behavior and culture. New companies? They go right to mobile. Do you think Uber is worried about anything other than the experience on the mobile device?”

By selling mobile, she knows she is selling Facebook. But here, as elsewhere, she is both a self-serving and a supportive missionary. She knows companies will not shift to mobile unless they first transform their culture. “How can we help them learn from what Facebook is doing to hire people that are focused on impact, that are willing to
move quickly, that are willing to have failures?” To prod them: “I start off by showing the photo of Facebook's headquarters in Menlo Park, which has the big Like sign.” Facebook's sprawling headquarters was once home to Sun Microsystems, a seemingly impregnable tech company that fizzled and was sold to Oracle in 2009. She tells them what they don't see on the face of the Like sign: “If you peek behind the sign you will see the old Sun Microsystems sign. They say, ‘Why?' Because every time a Facebook employee leaves campus we want them to remember that at any moment you could become irrelevant. Sun was an amazing company, and now they're no longer here.”

One of the oddities of CES is that most marketers don't actually visit the exhibits. “No one wants to go to the floor,” Andrew Markowitz, GE's director of global digital strategy said during a MediaLink panel on brand reinvention. “They want to be here for face-to-face meetings. There's a ton of meetings going on.” And when people visit the exhibits, strange things can happen. The six thousand journalists who attend CES are asked to share their e-mail addresses, prompting a deluge of invitations to visit some pretty flaky-sounding exhibits. Like the invite from PetChatz, which was described as “the first-ever technology that lets dogs and cats ‘call' their owners for a video chat and treat,” and lets owners “call their pets while away.” The e-mail invite said PetChatz was located in CES Booth 82646, which was in Hall G of the Sands. But a trip to the floor found Booth 82646 empty.

One objective of CES is to manufacture buzz. In 2016, virtual reality was the much-hyped new new thing, which would be supplanted at CES 2017 by artificial intelligence, and AI-centric products like self-driving cars and Amazon's Alexa. In previous years, drones, Google Glass, and 4K TVs had their moment. Writing about CES 2016, Farhad Manjoo of the
New York Times
observed, “If news from CES feels especially desultory this year, it might not be the show that's at fault. Instead, blame the tech cycle. We're at a weird moment in the
industry: The best new stuff is not all that cool, and the coolest stuff”—AI, virtual reality, the Internet of things, drones—“isn't quite ready.”

If CES had been
a warm bath of relationship building, the American Association of Advertising Agencies conference at the Loews Miami Beach Hotel two months later centered more on conflict. The much-anticipated ANA report on agency kickbacks sparked by Jon Mandel's speech a year earlier hovered over anxious agency executives. Michael Kassan spoke of the K2/Ebiquity investigation for the ANA and evoked a common fear: “We're weeks away from Armageddon.” The information he had picked up was that the report would be damning, and though it would not cite agencies by name he guessed that clients would then launch more audits of their agencies and maybe even ask: “Do I really need an agency?” One source who was said to be familiar with the report's conclusions even went so far as to tell
Business Insider
that some agency executives might face “jail time.” Irwin Gotlieb was alert to the report, but less alarmist. He said he had heard “various versions” of what the report would say and expected it would be harsh. “It's being driven by Ebiquity,” he said. “They want more business. They have a great deal to gain by fomenting distrust between clients and agencies. They want to get clients to hire them to monitor agencies.”

On the eve of the 4A's annual March conference, war had broken out between the organization representing agencies and the organization representing advertisers. The joint task force the two organizations established after Mandel's speech, with the aim of agreeing to “transparency” principles, had ended in bitterness and recrimination. ANA board member Jack Haber says, “The 4A's said, ‘We're not going to cooperate with you unless you do it our way.'” He says the 4A's would agree to transparency principles for agencies, but not for the worldwide
holding companies. “We said, ‘No go.' Then they issued it themselves.” Haber says he hoped both sides could “take it down from an emotional pitched battle,” but for him and the ANA the core question was simple, “Are you my agent or not?” Nancy Hill, the president and CEO of the 4A's, saw it differently. After working together for nine months to draft transparency guidelines, she said the task force splintered just before Christmas because the ANA suddenly “wanted to make a rash of changes” to the document. They wanted to “dictate contract language to an entire industry,” while the 4A's believed contracts should be negotiated between individual clients and agencies. By toughening the language in the draft, agency reps believed, ANA members were behaving like cowardly politicians afraid to look weak to their foremost constituency, their CEO and chief procurement officer. As a counter, the 4A's rushed to release its own “transparency” principles.

On the surface, the 4A's Miami conference seemed like business as usual. The agenda was billed as Transformation 2016. MediaLink cohosted an opening night after-party at a nearby hotel. A familiar array of speakers—Maurice Levy, Martin Sorrell, Wendy Clark, Bill Koenigsberg, Jeff Goodby, Carolyn Everson, Rishad Tobaccowala, and Rob Norman—appeared. There would be panels on how to drive business results with engaging digital content, how agencies can attract top talent, the future of the industry, the future of news, and the state of programmatic advertising. And, of course, there would be awards. As at most industry conferences, Michael Kassan would be spotted one moment in a choice seat at the chairman's table in front of the stage checking e-mails, the next moment walking about exchanging hugs with old friends, or slipping outside the ballroom to speak on his mobile, or surrounded by people enjoying his jokes.