What killed advertising? Initial reports indicate a suicide.

The Cannes Lions Festival wrapped up late week. The ad industry that still attends it to bump elbows with Hollywood was finished long before that. I’ll admit I’m partly jealous of those that go, but even when I was in advertising, I’ve never understood just why the ad community attends.

Hollywood is art, quietly run by business people. Advertising is a business whose sole desire around art and entertainment is all about nothing more than driving commerce.

The entertainment and creativity that Cannes recognizes in advertising are merely a means to an end. It’s like jingle writers attending the Grammy’s. It makes me come to believe that advertising has never really understood what it was.

What is advertising?

At the heart of advertising is a business that seeks to recycle and regurgitate the zeitgeist of society. To capture its current moods, fears, desires for happiness and fulfillment. Then it tries to connect those impulses to accessible and consumer-focused products that society can buy to achieve that happiness.

In order to recycle the public’s mindset in order to feed it back to itself, my old industry was hardcoded not to be visionary or an early adopter of change and opportunity. Instead, we focused on being the peddler of the comfortable. In words, media and imagery, we assured consumers with things they already know, want and are comfortable with.

In time, feeding our clients’ audience a media diet of feel-good platitudes and nostalgia instead of new ideas and technology also made our industry complacent and lazy. As an industry, we failed to think ahead into the future and ask ourselves, “how can we be more? How can we be better? How can we truly give our clients the unexpected?”

Instead, we became a collection of laggards who didn’t want to ruin a good thing. After all, clients paid agencies considerable sums of money to just tell consumers “today is great! Especially if you buy Product X.”

It’s a simplistic attitude that would eventually cost the industry respect, reputation, and leadership.

Don’t get me wrong. Advertising agencies aren’t dead. Yet.

It’s more like they’re ready for retirement and nursing homes. It’s hard not to look at them as if they represent a time gone by. They are still companies that make TV ads, collateral, etc. To talk about them and the services they still provide is like hearing the stereotypical senior citizen talk about the “good old days.”

“Back in my day, we used to spend weeks to print words on a piece a paper and mail them to everybody to get our client noticed. And we liked it!”

That’s a nostalgic success story increasingly told to a generation that can post a picture of their new outfit to billions of people across the world in seconds and have them racing to a website to buy it long before they brush their teeth in the morning.

Agencies used to be gatekeepers and publishers of content.

Now everyone is. Agencies on the once-famous street of Madison Avenue in New York City were known for creating ideas that got people talking in the office (back then, at the water cooler) the next day. Now a YouTube post of the person in Kansas photographing themselves cry overseeing a duck can do that.

If you are a business that wants to reach any modern audience with tactics beyond brand awareness or speak beyond an audience that clings to old media, the traditional advertising agency is no longer the place to go. In the past, it would be the first. Especially as the “wizards of Madison Avenue” touted creative and strategic talent who’s only rival was another ad agency.

Why has advertising lost its place as the consulting lead for helping clients navigate all the technological and marketing changes that are transforming the business of their clients?

Only until too late did ad agencies want to fight for a place at the table.

Then really it was too late. Agencies found that others like the big 4 consulting firms, data and analytic firms and even clients with in-house resources, had taken all the seats around the table.

To champion transformation, you have to embrace change.

For at least a decade and a half, that’s something the advertising industry refused to do. It dragged its feet with almost contempt for the transformation until it was too late.

Like a Shakespearean play, this tragedy can be broken down in acts.

Act One: The Mad Men days.

When traditional media, was the key to mass influence is the period when the advertising wizards of Madison Avenue were king.

TV, radio, and print existed as a content sluce to send messages down and reach the public. Through programs with high audiences and loyal media consumers, your product message would certainly reach the public. That’s why companies who wanted to sell more product did it. Problem was, so were all their competitors.

With so much ad clutter, how would your product or brand stand out?

This is where the consultative power of ad agencies played a role.

Companies needed the creative geniuses at ad agencies to make messages and ads that would stand out among others. Ideas that would capture attention, seduce, and influence.

From the 50s to the late 90s, the “Don Drapers” of advertising were sought and worshipped for creating advertising differentiators for products and brands. By the same token, creative reputation became a key differentiator among ad agencies to potential clients.

It became a symbol of the creative firepower a client could wield on behalf of their product to carve out a niche in the marketplace.

While the creative sold clients on agencies, agencies were really sold on the 15% margin kickback-rebate it made on media buys for clients to place their ads.

$150,000 in revenue just for placing a million-dollars in ads is a formula that makes for some handsome agency salaries.

Because of that, it and not good creative truly defined the ad agency model. For larger, non-boutique firms, billings, and fees around creative were either enough to just cover creative department costs or be a loss leader to win more lucrative media buys.

This didn’t change in the 90s and 00s as the once large universe of agencies merged to consolidate into 5-6 holding companies. While agencies within those conglomerates may be differentiated by creative brands, lucrative media purchases are still at the core of the revenue model. The addiction to this source of revenue would be the platform for the industries undoing.

Act Two: Advertising at peak performance? Or on a cliff?

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In the mid-90s, the Internet, once the private joy of nerds who could afford an expensive computer and modem, became mainstream.

Along with it, new types of businesses arose to leverage it. With dot.com firms flush with money from investors to spend on awareness advertising, agencies prostrated themselves before them to take their money and promote them.

While advocates for these Internet companies, most were never really true believers, except for the belief that these companies were spending a lot of money in stunts and media buys. This vendor-centric, media-buy-for wild-kegger-party mindset that agencies helped enable began to erode the traditional agencies’ role as prudent and forward-thinking partners and consultants.

But in the meantime, life was good.

As the money flowed, many agencies failed to grasp the idea of the Internet as a new and transformative medium. Especially for themselves. Besides giving employees email and sending print files for a print run or to a magazine, no one stopped in forward-looking realization of what the Internet as a platform meant for agencies.

There was no movie-scientist-that-realizes-the-world-is-screwed-and-dramatically-pulls-off-his-glasses saying “if we don’t get a handle on this, our business could be doomed!”

Like global warming today, ad agencies surely saw the signs of the Internet’s disruption power as it started appearing in other industries.

The music industry faced Napster and music that could be shared digitally and pirated without paying. Email started sapping people’s effort to write letters or create direct mail to send through the post office, eventually shrinking USPS’s revenue and creating a fiscal crisis.

The signs were all around. If the advertising industry was listening it would have realized that the Internet wasn’t a product, it was the new medium.

One that could disrupt them. Even destroy them. But hey, that Pets.com ad. Hilarious, right? Paid the director 2 million dollars to make it.

Act Three: Economic and technological changes face advertising.

But just before the advertising industry’s disruption was clearly imminent, another disruption came first. March 2001 came. Stock prices started to go south with the collapse of the dot.com bubble.

Along with it, all those well-banked Internet companies wanting to advertise. The sudden dry up of money hit agencies hard. Agencies had to wean themselves off the sugar high of a reckless spending euphoria.

It hurt for a while. But that hit turned out to be just a jab. The bigger blow would happen with the housing bubble burst and the great recession.

As all the money dried up, the bullshit went away, too.

Financially stressed companies simply didn’t have the money to spend without a good reason anymore. Frugal, they demanded efficiency. The wanted measurability. They viciously sought ways to optimize costs. Not only within their organization but with their vendors and partners.

That put the existing agency model in the crosshairs. A model where making money just for placing media buys and pocketing 15% seemed like a no-brainer cost-cut target.

Over the years agencies were pressured to concede some of their lucrative fees in order to keep existing clients or win new ones.

To compound this situation, tech entrepreneurs, some arising from the ashes of the dot.om boom, began to roll out technologies and nascent marketing and sales platforms that were able to offer greater scale, productivity, efficiency and measurability than their advertising and marketing brethren.

There was this book company called Amazon. You might have heard of it. A place where you find and choose books, books that weren’t in your local bookstore and have them shipped to your home.

There was this picture service for college students called Facebook. Where students could share pictures of themselves and rate them. And they were looking to expand this service to everyone.

There were search engines companies that made it easier to research information and find things. Including things you might want to buy at a store.

As we all know. If advertising agencies were Skynet, this would be like finding John Connor as a child.

A potential threat but at this stage, the threat could be eliminated easily. Agencies were flush with money as big holding companies. They were buying other ad firms, but they could have easily purchased the next or future Facebook.

As we know, this did not happen.

Instead, agencies did was most industries did when disruptors entered their ecosystem. Downplay it or ignore it.

At his point, I had already been involved on the tech side, developing web applications. Understanding the power and capabilities of technology, the idea of agencies adopting this mindset and offering these capabilities for clients seem natural, if not critical to ad agencies’ future. I would bring it up to friends at ad agencies.

I remember doing interviews and talking about the possibilities of the new technologies and how they could push the agency forward. And almost without out fail I could see this look on people’s face as if to say “yeah, sure.” or “what’s this got to do with us?”

One of the reasons for the foot-dragging by agencies, and let’s just admit it, people in the ad business were artistic and creative minded. Not technicians.

Mad Men. Not Math Men (pardon this sexism, but it rhymes).

The talent at that time simply didn’t have the ability to see what these growing technologies meant. Either to create their own or buying them early to control them and shape them for the industry.

So for years, the agencies kept their heads down.

Fought harder and worked longer hours for more dwindling traditional media scraps. Got a tech request? Rather than learn it and adopt it as an agency practice or discipline, many simply outsourced it to people who could do it and take a revenue cut.

Despite some executive dabbles, the most part, there no in-agency talent who could really drive agency transformation to match the transformation happening all around them.

And the change just got faster and faster…

Act Four: We’re on the wrong side of change.

As the young platforms transformed into the powerhouse we see today, agencies were blindsided by what was really in plain sight.

What made them blind was that they didn’t see platforms like Google, Facebook and Netflix as competition, they saw them as merely (and frustratingly less profitable ) outlets for their creative and marketing efforts. Just another place to place creative.

What they really didn’t see until it was too late, is that most of these companies were at their heart, data companies.

Building larger and larger data sets and linking more user and customer information. Now, these platforms became companies and places that knew the customer – and better than agencies did. A depth of knowledge that turns the platform into the marketing consultant, not just a channel to put content into.

And the modern agencies have no control over this platform and technology outside deciding how they want to set up delivery of their creative. Recently we’ve seen a desperate scramble as holding agencies like Publicis buy data and analytics firms like Epsilon for billions in order to pivot to a new form of business.

Better late than never for ad agencies. But so late, the end could be near…

It reminds me of Amazon and shipping.

At first, the behemoth online seller worked with companies like Fed Ex and UPS and USPS. Now it’s working less and less with them as it’s taking on more and more product shipping. It’s pivoting from the big shippers and using lots of contractors who are the “last mile” to drop off product from Amazon’s distribution center to the customer home.

Amazon does everything else, except that last mile. And someday it may decide it wants to do that last mile as well. So soon other companies will be shut out as Amazon becomes its own shipping company delivering to customers on its own controlled platform.

Because agencies missed their opportunity to be the platform, they are, if not already, the last mile carrier to a platform they don’t control. And one day, they, too, could be replaced.

Very soon Amazon could easily say to an ad agencies clients…

“we have the data on the customer you want to reach from finding patterns in our sales data. Using our proprietary information we can develop the precise marketing and creative that will help you market and sell your product to our worldwide audience.

So what do you need that ad agency for? Hopefully agencies will find an answer to that question.