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The Deep Dive

Shoebridge from Cannes: the debate is "no longer healthy"

By Neil Shoebridge and Andrew Knowles - Partners, SKMG

23 June 2019 7min read

Cannes 2019

P&G's global brand boss Marc Pritchard (left) has cut agency and production fees by $1 billion in the past three years with its marketing teams behaving more like entrepenuers. Uber's global marketing head doesn't get why agencies have not morphed. Photo

By Neil Shoebridge and Andrew Knowles - Partners, SKMG

23 June 2019 7min read

One Australian marketer in Cannes last week summed up the tension perfectly between media, creative, data and technology: their tech stack is costing $3 million per year to run and that's come directly from media and advertising budgets. There's more of where that came from below.

"Our tech stack costs us about $3m a year to run. My marketing budget hasn't grown by $3m. That money has come straight out of media advertising. We're focusing less on traditional creative work and spending less on media."

- Australian marketing director in Cannes last week

 

In his first ever skip to the French Riviera, Neil Shoebridge, who for three decades struck fear, trembling (and some loathing) in media and marketing circles as the pre-eminent marketing journalist and editor at BRW and the Australian Financial Review , delivers the smart Australian analysis from Cannes last week in a two-part series with his partner at SKMG, Andrew Knowles. Part Two next week.  


 

Neil Shoebridge

Neil Shoebridge, SKMG

Andrew Knowles

Andrew Knowles Photo : SKMG

 

You need to know this: 

 

  • Uber was scathing about the ad industry’s reluctance to change its business model and dismissive of arguments against in-housing creativity.
  • But Apple is not a fan of in-housing: "We need an outside perspective and we happily pay for that objectivity," says its marketing boss.
  • Research among more than 1,000 marketers by Dentsu Aegis Network says a company that in-houses agency functions will see a 12%-14% ROI improvement in year two. But in year three, “a dangerous riptide” will hit the company, “making those ROI numbers sink like a stone”. 
  • Forrester Research’s Pattisall said agencies have spent more than $US12 billion on tech over the past five years, often on platforms that “don’t support creativity”.
  • Agencies need to shift $US19 billion globally from tech to creative over the next six years, according to Forrester, which claims it will hand a net return of $US66 billion to the industry versus $US56 billion if it doesn't. 
  • Twitter tries to wedge its bigger platform rivals with solid research arguing to get beyond the first impression. It did ok.
  • Dettol's parent company gave one of the week’s best examples about the different - and complimentary - roles of data and creativity. To sell more Dettol in India, RB Health needs to convince consumers to wash their hands more often. Data won’t to do that. Creativity will drive that behaviour and data will deliver that creativity effectively, it says. Good point, even if you're in media or tech. 
  • This is Part One of Mi3's two-part series from Cannes - this week's three themes are:​​​​​​ 
    • Data, media and creative: industry is atomising on a future model
    • In-housing: Apple says no; Uber yes. Dentsu - a problem in year three
    • The Social take: Twitter tries to wedge its bigger rivals

 

 

1. Data, media and creative: industry is atomising on a future model.   

The ongoing debate about data versus creativity took centre stage at Cannes this year, as the advertising industry continues to gnash its teeth over the time and money devoted to tech stacks and the resultant impact on media and creative budgets.

One Australian marketing director who attended the festival put the problem in simple terms. “Our tech stack costs us about $3 million a year to run,” they told Mi3. “My marketing budget hasn’t grown by $3 million. That money has come straight out of media advertising. We’re focusing less on traditional creative work and spending less on media.”

Myriad speakers at Cannes addressed the data versus creativity issue, with Forrester Research principal analyst Jay Pattisall arguing the tension between the two “is no longer healthy”.

“The balance is no longer there. It’s part of a bigger problem. The currency of [the advertising] business is being questioned by tech stacks, new competitors and in-housing,” he said. 

Sir Martin Sorrell summed up the view of many. “Our industry is going through massive disruption, maybe because of the tech platforms, maybe because of the consultancies, maybe because clients are taking back control. 

“What you have to think about is creative disruption and destruction.”

 

“Data, tech, creative and media need to be put together... we can’t have deserts of data and tech siloed in agencies.”

- Jay Pattisall, Forrester Research

On the sidelines of Cannes, Sir Martin told an event hosted by The Drum that the slow growth is in traditional advertising; digital, on the other hand, is seeing fast growth and presents an opportunity to agencies that improve their use of technology and operate with greater efficiency and speed. 

“[Advertising] is essential, but…the traditional agency model is not fit for purpose; it has to change,” he said. That means embracing data and not viewing it as the enemy of creativity. 

When Laurent Faracci, executive vice president of global category development at RB Health and owner of Dettol, told his session that the marketing business has entered “the golden age of creativity” you could feel the scepticism in the room. 

“It’s a golden age of a different creativity, creativity of iteration and data allowing us to create better,” he explained. “We need to embrace the utility that digital brings and add creativity to that. Digital adds value – that’s why it’s dominating the beach [at Cannes] right now. We need to take advantage of that. Yes, it puts a crunch on budgets, but it also forces us to reinvent the model.”

Faracci gave one of the week’s best examples about the different – and complimentary – roles of data and creativity. 

To sell more Dettol in India, RB Health needs to convince consumers to wash their hands more often. “Data won’t to do that,” he said. “Creativity will drive that behaviour and data will deliver that creativity effectively.”

Forrester Research’s Pattisall said agencies have spent more than $US12 billion on tech over the past five years, often on platforms that “don’t support creativity”. 

Data, tech, creative and media need to be put together,” he said. “The creative department needs to fully embrace data and tech-driven creativity, and we can’t have deserts of data and tech siloed in agencies.”

Forrester used Cannes to reveal the results of a new report, “The Cost of Losing Creativity”. The research firm’s premise was simple. Companies are not investing in creativity. Customer experiences are stagnant, digital sameness has taken hold, tech spend is skyrocketing, and cost reductions have cut to the quick. 

Forrester’s research concluded that agencies need to shift $US19 billion from tech to creative over the next six years. It claims that investment will give a net return of $US66 billion versus a net return of $US56 billion for the industry if it does make that investment in creativity. 

“Achieving an additional $US10 billion dollars the next six years is the value of agency creativity,” Pattisall said.

“Consumer experience then becomes creative experience, allowing agencies to be the partners that marketers are demanding. We’re talking about a new type of agency who aligns the channels, message and audience.

Forrester was, of course, playing to its audience. Its presentation did not explain precisely how that $US19 billion would be spent; clearly it would buy many truckloads of copywriters and art directors, but that’s probably not what Forrester meant. The research firm also did not give any concrete suggestions for how data, tech, creative and media should be put together.

But Forrester’s research did, at least, put the spotlight on the problems being created by the imbalance between data and creativity right now. Time will tell if agencies are brave and bold enough to rein in their spending on data and tech and funnel money back into creativity. Time will also tell if their clients allow them to do it.

 

“The ad industry is obsessed with disruption and yet we’re not doing it in our own industry”

- Paulie Dery, Uber

2. In-housing and creativity: Apple says no, Uber says yes. Dentsu says it's a problem in year three. 

 

For a topic that contains many shades of grey, the Cannes Lion debate that posed the question “Will In-Housing Creativity Fail?” was disappointingly black and white. 

The problem was the question: it forced the four panel members to deliver a “yes” or “no” response that reflected their vested interests. A better and more illuminating question would have been “Will in-housing creativity increase and why?”. That could have generated a forward-looking conversation and – ideally – insights that marketers and agencies could build into their strategies. 

Not surprisingly, Publicis Emil CEO, Justin Billingsley, and Grey London chief creative officer, Vicki Maguire, argued that in-housing creativity will fail. Uber executive creative director, Paulie Dery, and Teresa Herd, the former global creative director at Intel, disagreed. (Interesting, an audience poll showed that attendees agreed with Dery and Herd.)

Both sides seemed to agree – albeit from different perspectives – that if either approach is done right, failure is unlikely. Both also agreed in-house creative departments still need to collaborate with agencies. But beyond that, there was little agreement and quite a few head-in-the-sand arguments during the debate.  

“Not only will [the in-housing of creativity] fail, but it is currently failing and will continue to fail,” Billingsley said. 

“Creativity thrives when three things exist. The first is real talent. Talent are not attracted to networks or holding companies but to other talent. The second is diversity – in terms of the work you do and the people you work with – and for that you need scale. The third and most important thing is the tension between the people creating the ideas and the people buying them.

“You don’t get those three things when you in-house.”

Maguire admitted the in-housing trend is a wake-up call for the ad industry. “It says we are not giving some clients the work they want to justify our margin,” she said. “That’s on us as an industry.

“But as a creative person, I need to be fed and stretched. I need the breadth of work and ideas. You can’t get that with an in-housed creative department.”

True, but why then is the in-housing of marketing functions – including creative – gathering pace. Cost cutting is the biggest reason and, according to the critics of in-housing, the most flawed reason. 

“In-housing [is] certainly tempting. On the surface, it can seem like an easy way of driving down costs. And in the short term, substantial cost savings can be achieved,” Fabrice Otano, Global Chief Intelligence Officer at the media agency Carat, wrote in an article for WARC in early June.

“However, what many clients miss while attempting to deliver [the perceived benefits of in-housing] is that in-house operations can become sub-optimal over time, driven by pressures on resources, lack of innovation and an inability to maintain best practice.”

Drawing on research done with more than 1,000 marketers by Carat’s parent, Dentsu Aegis Network, Otano said it takes a company at least a year to set up an effective and efficient in-house marketing operation. The company will see a payback in year two, in the form of a 12% to 14% improvement in ROI. But in year three, “a dangerous riptide” will hit the company, “making those ROI numbers sink like a stone”. 

“Firstly, it will become impossible to leverage any more savings on the technical costs,” he wrote.

“Secondly, without an agency pushing the creative agenda, there will be an inevitable lack of innovation with media partners and publishers – vital to staying ahead of the ROI curve.

“Agencies are always trying to find the best solution – even the best people in a client’s company are too far removed from this sort of business. Without increasing investment in innovation, it is inevitable that momentum will be lost and there will be decreased profitability.

“Finally, there will be a talent retention issue. In the hectic first year it is imperative to hire a host of new talent to deliver the project. However, because it is a project, after two years there is no career development. Your people will be looking to advance their careers while taking on multiple experiences, not working on the same campaigns with the same tools.”

Back in Cannes, Uber’s Paulie Dery was scathing about the ad industry’s reluctance to change its business model and dismissive of Billingsley’s argument against in-housing creativity. 

“The ad industry is obsessed with disruption and yet we’re not doing it in our own industry,” Dery said.

“At the moment, brands are a bit stuck and they’re not sure what to do. In-housing is one of those options for them. At Uber, we can get great [creative] talent and that talent can make a real impact on the business. We’re not waiting around for the next brief from the client. We are thinking all the time about how to change our business.”

Dery’s zeal for in-housing was in sharp contrast to comments made the next day by Apple’s vice president of marketing communications, Tor Myhren

“And we have had the same [creative] agency for over 20 years. To make great creative, the most important thing is trust. This allows us to partner very, very tightly and really let them inside our business. 

 “We need an outside perspective and we happily pay for that objectivity. We call it radical candour. We say exactly what we think and we make our decisions together at the table so everyone understands why an idea dies or lives,” he said. 

Herd took a slightly more moderate line than Dery. “In-housing is a fad to some degree and some people are rushing to do it to save money. 

“The pendulum will swing again but not all the way back because there is so much discontent out there about agencies,” she said. 

Herd didn’t explain the cause of that discontent, but both she and Herd were happy to dismiss the arguments against in-housing creativity, including the claim it limits companies’ access to the best talent and fails to create an environment in which creative and strategic thinking can thrive. 

Herd argued that in-house creatives have better access to a company’s information and innovation that external creatives. “As a creative, in-housing allows you to get to the source of information fast,” she said. 

What Herd didn’t say is that for all the talk about partnerships and relationships, many companies are still reluctant to share of all their data with their marketing services partners, an issue Starcom Melbourne managing director Stuart Jaffray discussed with Mi3 last month.

Jaffray, a former BMW general manager for marketing, said shared business KPIs are where marketers must step up with their agencies. 

“It requires clients to be more transparent with the business data they’re sharing with partners,” he said. “Agencies can only steer to a business outcome if they have a clear line-of-site on that data. In a strong business relationship, you can have that and optimise media to a business goal. It that data isn’t available or not being shared, you default to vanity marketing metrics.”

Maguire zeroed in on a key problem with in-housing: the absence of perspective and distance that a company gets by working with external experts.

“In my role, I can and do tell clients that they are making mistakes,” she said. “That doesn’t happen with in-house creative departments. They don’t have distance. They don’t have breadth and diversity of thinking. They don’t have someone telling them they are wrong.”

 

 

"Instagram’s product marketing director spectacularly glossed over the platform’s paid advertising model and encouraged brands to use all of the tools made available by Instagram to “create meaningful conversations with the next generation."

 
Want more? Read on for the final theme and a reality check  
 
 
3. The Social take: Twitter tries to wedge its bigger rivals

 

The social platforms were out in force at Cannes Lions with Facebook, Twitter, YouTube and more holding down beaches along the Croisette and taking the stage in the Palais. But, what did they actually have to say to the industry during a time of growing scepticism over false reporting, brand safety and of course privacy concerns? Some absolutely smashed it out of the park while others… let’s just say they underwhelmed.

Sheryl Sandberg’s Wednesday keynote saw Facebook’s COO take a notably humble demeanour as she tackled everything from Facebook’s self-proclaimed unwarranted position of global power, to its reshaped focus on how to approach targeted advertising.

Sandberg certainly knew the right things to say to pander to an audience peppered with marketers ready for blood. She readily admitted that companies like Facebook should not be in the position to be making the decisions they currently are; apparently they want to address that.

On exactly how the social giant plans to address it, she was a little more vague but added: “It’s hard. It should be hard. Mark and I and the other Facebook leaders have a really big responsibility… I wish we picked up on Russia… We’ve made mistakes. The fact that this is hard is important.”

Of course various industry players have pointed out one clear way to address this power: break the companies up. 

Sandberg didn’t shy away from the point, but certainly took a curious line of argument that bordered on fear-mongering. Without disclosing whether she herself subscribes to the theory, Sandberg made mention of “others” who are concerned over the potential for Chinese social platforms like WeChat filling the void left by a dismantled Google and Facebook. She noted the Chinese competitors rival the size and power of Facebook, but are pushed forward by their government rather than restricted.

While China’s government is allegedly fuelling the fire of a global social takeover, Facebook “knows that [they] can come together with governments and other companies to do better.” Sandberg went to great length to point out that “in Europe, GDPR is the biggest privacy legislation that’s ever been passed. Now, it wasn’t passed anywhere else in the world but we took those same controls and put them out everywhere, because we know people care about privacy.” She also touted their ongoing work with A.I. to tackle fraudulent online behaviour like the proliferation of deepfakes as well as their work with ethics counsellors and scientists to make sure there tech doesn’t have biases audiences don’t want to see – a fairly shallow nod to achieving greater brand safety on the platform.

Unsurprisingly, things got really juicy when the conversation turned to Facebook’s ad revenue platforms. 

Targeted advertising is under attack” claims Sandberg, something she plans to fight because of its importance to small business. With reference to the concerns for privacy she said: “We’re working on it. If it’s targeted to you and it’s a good experience and feels like no one’s reading your messages - and let’s be clear no one’s reading your messages - then it is a good experience. But if it’s targeted to you and you’re worried about how that happened, that’s bad and we need to start making our case in a much, much clearer way.”

To make that case, Sandberg says Facebook’s new focus is using “minimal data in ways that people can really understand and control to create those experiences”. 

But is that enough? We deserve more detail, more transparency as to what the actual plans are. Targeted ads should be under attack, Facebook (and Google) created the problem in the first place in the way they track and extract user data. The industry over-reached and is now fixed to something that will probably be restrained by the regulators - on the home front Rod Sims will hand over the ACCC’s digital platforms report to the federal Treasurer next week which will likely follow the lead of Germany and the UK in their moves to regulate the platform.

If the only defence for Facebook’s current targeted ads platform is its use for small business, Facebook’s comms department needs to be doing better. Next year Facebook is expected to haul US$67 billion from advertisers - and small businesses aren’t making up the majority of that. 

A refreshing point of difference came from Twitter, whose presentation was riddled with a beautiful layer of subtext that positioned the social platform quite differently to its embattled competitors. 

While Facebook defended the need for a data-driven, revenue-based ad platform to drive sales for small business, Twitter rooted itself firmly in the other side of the purchase funnel by illustrating the power of (unsolicited) culture-shaping conversations through its platform and provided clear measure of how that drives effectiveness for brands. 

Marketing consultant Katrina Stirton Dodd and her co-presenter, Twitter’s head of global brand strategy, Alex Josephson, forced marketers to face a harsh reality: 77% of brands could simply disappear and no one would care.

The solution? Create meaningful conversations with consumers and your brand awareness will thrive.

Using the example of the International House Of Pancakes famous bluff, convincing consumers it was changing its name from IHOP to IHOB, or International House Of Burgers, the pair clearly demonstrated how, when timed right, even a single letter is enough to start a conversation that reaches as far as the New York Stock Exchange. That conversation generated 42 billion impressions in earned media and continued for three months after the initial post. But what does it mean at the bottom line? IHOP’s burger sales increased four times and awareness of its burgers trebled - all without paid or targeted ads.

The underlying point was clear: Twitter does things different to its competitors and different works… or at a bare minimum it will help you sleep at night knowing you’re not leading a campaign by funding platforms weaponising data to use Tim Cook’s phrase.

Still sceptical? Amongst the key pillars of their case, Twitter advised marketers to “get beyond the first impression” with direct reference to campaigns led by targeting. He said just because it’s easy to count doesn’t mean it’s worth counting”, directly questioning the value of investing in platforms that rely heavily on targeted data on the pure basis of those platforms having the best metrics. 

The pair backed up their statement with Karen Nelson Field’s update of Binet and Field’s popular The Long And Short Of Itasserting brands actually need to focus 60 per cent of their marketing on brand building and 40 per cent into short-term activations. The former, Josephson assured us, is not possible by relying on first impression data.

Josephson then supported the capability of Twitter in contributing to this 75 per cent figure, by noting that conversation is a fantastic brand building tool. He quoted Binet and Field to indicate brand effects are enhanced by social amplification and heard behaviour, boosting effectiveness by 26 per cent.

By listening to the consumer and engaging with them on their terms, brands can seemingly work magic - all without relying on data tracking. 

Crystal Rix, chief strategy officer at BBDO, put it best: "The holy grail is the intersection of where culture is going and what your brand stands for. You want to look for Judo where you can flip your brand story. Understand where the curve of a conversation is and what people need from brands at that point in the curve.” 

While Facebook was ready to admit to mistakes and Twitter delivered clear and compelling insights to challenge the typical approach to digital campaigns, Facebook’s other platform, Instagram, really didn’t have a lot to say at all.

In a session shared with Samsung, looking to Gen Z and the next 50 years of creativity, Instagram’s product marketing director, Susan Buckner Rose, spectacularly glossed over the platform’s paid advertising model and encouraged brands to use all of the tools made available by Instagram to “create meaningful conversations with the next generation”. Problem is, she didn’t particularly care to use examples, explain how, or more importantly, anchor her argument around the same effectiveness data Twitter had armed themselves with.

The most recent example of product innovation Buckner Rose had to discuss was Instagram Stories, which, although it has seen a great deal of optimisation since, was launched in 2016. While we heard that two thirds of people visiting brand profiles do not follow the brand, we were not told how to convert those two thirds to followers. The best insight we were offered was simply “brands doing the best on Instagram are the ones using all the tools we provide”. 

Overall, the presentation felt like a missed opportunity for Instagram to discuss its glaring issues surrounding mental health and body image and how brands could do better to combat this on the platform with their creative - the presentation was after all, about speaking to Gen Z. The added unwillingness to discuss its revenue-based platform and the bigger digital marketing issues at large gave the overall impression of a fairly sizeable elephant in the Lumiere Theatre. 

It seems fairly clear who won the week in terms of the social game. 

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