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International: Ad agencies should take their own advice: Al Ries

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International: Ad agencies should take their own advice: Al Ries

The only industry in America that doesn’t believe in advertising is the advertising industry itself. Because they don’t do any. Well, hardly any. And certainly nothing like the volume of advertising they convince their clients to spend.

Advertising is the communications backbone of America. Virtually every large company spends anywhere from 2 per cent to 16 per cent of its sales on advertising. That is, every large company except Omnicom, WPP, Interpublic and Publicis.

Look at the 100 leading national advertisers as reported in ‘Advertising Age’. All together, these 100 companies spent $93.3 billion on advertising last year.

Ad money goes to the Big Four

The bulk of this money flowed through the four advertising conglomerates. (Ad Age reports that the Big Four account for 57 per cent of the US advertising volume and this percentage is bound to be higher for the large companies on the top 100 list.)

As you might suspect, the percentage of sales spent on advertising by the top 100 companies varies widely depending on product category.

Automotive: 3.1 per cent

Beer, wine and liquor: 8.6 per cent

Computers and software: 2.8 per cent

Cosmetics and personal care: 16 per cent

Drugs: 8.9 per cent

Fast-food restaurants: 5.8 per cent

Food: 5 per cent

Retail: 2.1 per cent

Soft drinks: 7.2 per cent

Telecom: 3.7 per cent

Why don’t advertising agencies advertise? Maybe they can’t afford to. Years ago, when even the largest agencies were relatively small, perhaps that was true. But today we have the giant conglomerates, who are as big as many of their clients. Here are 2004 revenues of the Big Four.

Omnicom: $9.7 billion

WPP: $8.2 billion

Interpublic: $5.9 billion

Publicis: $5.2 billion

(That’s revenue, not billings. If the conglomerates reported billings, the traditional way it was done, the numbers would be much higher.)

With revenues of $9.7 billion, Omnicom is No 230 on Fortune’s list of 500 largest US companies. In terms of sales, Omnicom is larger than Kellogg, HJ Heinz, Apple Computer, Campbell Soup, Southwest Airlines and many other companies that do spend a lot of money on advertising.

What do they believe in?

If advertising agencies don’t believe in advertising, what do they believe in? What the advertising industry believes in is public relations. They bombard Advertising Age, Adweek, The New York Times, The Wall Street Journal, USA Today and other publications with press releases about their latest campaigns.

And why the intense interest in winning advertising awards? Awards generate publicity and publicity generates clients.

We looked through five consecutive issues of Advertising Age, and except for a few classified “help wanted” ads, there wasn’t a single advertisement from an advertising agency.

“Do as I say, not as I do” seems to be the motto of the agency establishment. They sell advertising to others, but they don’t buy advertising for themselves.

Other professional service firms

Maybe professional service firms like advertising agencies don’t need to advertise. Maybe their reputations suffice to bring them all the business they need. This might be true, but ad agencies have no trouble recommending big advertising budgets for professional service firms like PricewaterhouseCoopers, KPMG, Deloitte & Touche and Ernst & Young.

And some advertising agency convinced Accenture to spend $100 million to launch its new brand.

What about Omnicom, another manufactured name that presumably could benefit from a little advertising. “The quickest way to make a brand famous,” according to a DDB brochure, “is to make its advertising famous.” That apparently doesn’t apply to Omnicom, DDB’s parent.

Agencies used to advertise

Agencies used to advertise. Some quite heavily. In 1930, Young & Rubicam was a charter advertiser in Fortune magazine and continued to advertise in every issue until the late 1960s. On the business-to-business side, Marsteller was a consistent advertiser its entire life, from its founding in 1951 to its sale to Y&R in 1979.

When we started Ries Cappiello Colwell (later Trout & Ries), we launched the agency with a full-page advertisement in, what else, Advertising Age.

Over the years, we ran quite a few advertisements, including a number of full-page ads in The Wall Street Journal and The New York Times. For example, we ranted and raved about the dangers of line extensions with a full-page ad in The New York Times headlined “There’s no such thing as a free launch.”

Hey, Omnicom, there’s no such thing as a free launch when it comes to advertising agencies, either.



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