Agency Agita Lurks at Advertising Week

By Suzanne Vranica Features Dow Jones Newswires

At this year's Advertising Week gathering in New York, attendees will get a heavy dose of discussion about the future of marketing and how new technologies such as artificial intelligence and voice assistants may transform marketing.

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But beneath the promises of an exciting tomorrow, attendees at the schmoozefest will also be confronting the enormous pressures facing the agencies at the heart of the business of advertising.

The world's biggest advertising companies, such as WPP PLC and Interpublic Group of Cos., are dealing with the slowest revenue growth since the recession and tumbling stock prices. Lackluster growth has brought broader concerns about the health of the agency business into sharp relief, with pressures coming from the pullback in spending from belt-tightening industries such as consumer package goods, the dramatic evolution of technology, and the emergence of new competitors.

As Google and Facebook continue to dominate digital advertising, the technology behemoths aren't escaping criticism themselves, as marketers look for more assurances about the effectiveness and quality of online ads.

On top of that, the very idea of convincing someone to buy a product using advertising is also being called into question, as consumers increasingly block disruptive ads and turn to the plethora of new commercial-free entertainment options.

"As an advertiser, I must tell you ads are dead," read a recent tweet from Lou Paskalis, senior vice president of media and investment for Bank of America. "The future is about things people want, not things they have to endure."

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Mr. Paskalis says that marketing now must be "engineered to be relevant in order to engage an audience."

The festival is expected to tackle many of these thorny issues, as thousands of advertising, marketing, technology and media executives descend on Manhattan for the 14th annual Advertising Week conference, which will include 2 40 seminars, 52 workshops and countless parties.

One panel, entitled " Advertising Needs a Rebrand," is expected to discuss how agencies can shed the perception that they are "big, slow, expensive and only know television." Another will explore the hypothesis that agencies will cease to exist and try to explain what the future of the agency business looks like.

These are likely to be must-attend events for agency executives. Why? Collectively, WPP, Omnicom Group Inc., Interpublic, Publicis Groupe SA and Havas SA had organic global revenue growth of 0.7% in the second quarter, the worst performance since 2009, according to Brian Wieser, a senior research analyst at Pivotal Research Group.

Beside softening financial outlooks, marketers are continuing to push to reduce the fees they pay for agency services and some are pressing the firms for structural changes that can help foster better collaboration between sister agencies within the same sprawling ad empires.

Executives from Facebook and Google will also be in attendance, and the shadow of the "duopoly" will hang heavy over many discussions and strategy sessions. Last year, the two companies sucked up 77 cents of each new dollar spent on U.S. digital marketing thanks to the power of their ad targeting, and their dominance isn't slowing down. Last week, eMarketer raised its forecast for this year, estimating Facebook and Google will account for 63% of total U.S. digital ad spending.

On Monday, Facebook's vice president of global marketing solutions, Carolyn Everson, is expected to talk about how video is changing marketing, while Google's head of advertising and commerce, Sridhar Ramaswamy, will speak on Wednesday about the future of commerce.

On Wednesday, a panel dubbed " Minding the Machines" will discuss solving the tech industry's transparency issues from brand safety and the problems with measurement. The discussion is expected to include executives from ad buyer GroupM, Oath and Verizon Communications.

Although Facebook and Google have taken steps to improve their ad measuring processes and have put more safeguards in place to make sure ads don't appear near controversial content, marketers still have concerns.

A new study of marketing chiefs, expected to be released publicly on Tuesday, found that 72% of CMOs have concerns about safety and controls with their digital ad placements and are facing pressure internally to fix the issue. Roughly half of the 316 marketers who participated in the online survey said they are developing new guidelines to ensure ads are placed on appropriate sites, according to the study, which was commissioned by the CMO Council, a marketing trade group, and Dow Jones, parent of The Wall Street Journal. It was conducted late this summer.

On Tuesday, Mastercard's CMO, Raja Rajamannar will tackle the broader topic of how brands can reach consumers when there are over 600 million devices running ad-blocking software during a panel entitled: "Storytelling Is Dead."

It may be much-needed advice for companies that are struggling to figure out their next move as anti-advertising sentiment spreads. For example, several advertising trade groups united earlier this month to protest Apple's move to block advertisers from collecting certain data that helps them target ads to Apple device users.

Despite the litany of issues facing Madison Avenue, Mr. Wieser says don't write off storied agencies just yet. He believes they will find ways to evolve and reinvent.

"They are more like cockroaches than dinosaurs," he said.

Write to Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

September 25, 2017 05:14 ET (09:14 GMT)