How to Fix Advertising

Advertising is broken. There is one group standing in the way of it being fixed.

I think about advertising a fair amount, and I like to think I have a certain amount of objectivity. You see I’m not an advertiser. I’m not an ad agency. But I frequently work closely with both, hundreds of times in fact.

I’m certain that advertising is broken because advertising itself believes it is so. Parties at all levels of the media chain talk about it, worry about it, and don’t seem able to come up with a solution. The advertising media chain looks roughly like this:

Media Network > Ad Exchange > Media planner > Agency > Vendor

That’s me, and my tech company on the end of that chain. We fall into a niche of doing creative as well as technology. Being at the end, we feel the full effect of decisions along that chain.

Ad Agencies are Stuck

The people beside us, at the ad agency, are in a tough spot. In the last four years a number have disappeared and others have been gobbled up by holding companies. They’ve lost a lot of good people, and clients play fast and loose with payments. Those clients move their business around, playing the agencies against each other. This makes the agencies stay in a perpetual state of pitching in addition to their actual job of planning and doing creative work. They also don’t get paid for pitching. The whole situation is destabilized.

How has advertising gotten so broken so quickly? I have a theory that I can state pretty simply.

Advertising doesn’t serve modern business.

The advertising industry was spawned when there were relatively few brands, and those were promoted by even fewer advertisers. Media companies base their value on “impressions”, pseudo-analytics regarding how many people noticed an ad message running in one of their placements. The impression is the figure, regardless if the placement is in interactive media, television, a billboard or radio spot. Does anyone else find that strange?

The media networks favour mass marketing. From billboard spaces to websites, they try to accumulate properties that have a lot of traffic so they can estimate high impressions. Starting with the media networks, this priority travels down the chain to affect each tier.

Ad exchanges try to get the most impressions at least cost. Media planners mix and match the offerings of different exchanges for a better deal. Creative agencies get stuck with the media purchase and try to make a creative concept work across all of it. And the vendors deal with the many varying technical specifications that result.

It is formulated for large advertisers. The system began when there were relatively few brands compared to today and it operates like that is still the case. But it isn’t.

Most business is conducted in small to mid-sized companies now. This shift becomes more notable each year. This is advertising’s problem — there is no way for the small company to participate in a media chain set up for mass marketers.

I started to notice this when I began to consider offering services to smaller local companies. They are vastly under-served by the current advertising system. Most have never used it.

Most small to mid-sized companies can’t afford advertising through media. They don’t have the volumes. Unlike large advertisers they simply can’t take a chance on doing something they can’t equate with a measurable result.

So what do they do? Bricks-and-mortar small businesses often count on foot-traffic and street signage. Sometimes they participate in initiatives of their local business improvement agency like a street festival. Some will occasionally use local newspapers or companies that distribute flyers.

Their digital efforts, if they conduct them, are based on growing their email lists and they do this by co-opting social media tools like Facebook, Twitter, and Youtube. Many don’t buy advertising on those platforms, but they use them to get word out to whomever they can about their products and services.

Social Isn’t Good for Everyone

The problem in that scenario is that these tools were not made for advertising. Pushing a commercial message through them is a lot of work that small business owners often don’t have time for. It is also hard for them to equate the advertising to sales results. In other words they have the same problems large advertisers do, but in their case it can sink them.

There is no straightforward way for small-to-midsize businesses to simply advertise on modern media. Yet collectively they represent an increasing portion of our economy.

That right there is advertising’s problem.

Think I’m over-stating? As of 2013 89.9% of Canadians were employed in small to mid-sized companies.

Narrowing the scope to Toronto, where I operate, is interesting. 37% of Canada’s small businesses are located here. Of those 75% have less than ten employees. Yet those businesses are responsible for 98% of Toronto’s production of goods and services. My observation is that to a large extent these companies don’t participate in the media chain used by a relatively few big advertisers.

This means that current advertisers are very big fish in a shrinking pond and can pretty much do whatever they wish.

If this is the problem, how does it get fixed?

Well…it doesn’t actually. Something new is needed and it can’t come from traditional sources. Where must it come from? Only one group serves small to medium sized business well.

SMB serves SMB

If media doesn’t serve small to mid-size business well, we can ask who does serve the needs of such companies. The answer is obvious — other small businesses.

Successful companies like Basecamp, Freshbooks, and Shopify are perfect examples of organizations that exist to serve the growing ecosystem of small business. They can do so, because despite gaining significant numbers of customers they persist in running like small businesses themselves.

So why haven’t we seen an SMB emerge to serve the advertising needs of small business? Because unlike the groups here mentioned there is no way to just start a company, carve out a niche in advertising, and service it. In advertising, you will still need the involvement of the media networks to place the ads, which are huge corporations. Those networks don’t care about small business.

Change Comes From The Top

There is only one answer. Advertising needs a new kind of media network — one not based on impressions, designed for and by small business. The existing networks simply won’t work.

What would it mean if such a media network existed, one specifically for small business? It would have to find a way of handling a wide variety of small customers rather than large sales to major advertisers. Such systems didn’t exist during the formation of our existing media networks but they sure do now. Distribution technologies have also advanced enormously. The technology is not a barrier.

The Agency Role

Could creative agencies handle much wider client rosters at lower rates? It’s hard to say, but I know a number who would certainly be willing to try to get off the current client merry-go-round. At the very least they would have an alternative.

Would we see more small agencies? Would we see more resistance to being acquired?

Despite the glowing press releases, I do not believe most creative agencies want to be acquired. They do it to try to give some level of security to their people in an increasingly turbulent and abusive environment. When they get acquired they do what marketers do best — they spin it. There is always the line that the acquisition will allow them to “utilize a global network” and “extend their reach”. That’s corporate-speak, not creative.

Most creative agencies are started by people who carve out a place with blood, sweat, and tears over years. They do so with the goal of doing top-notch creative and getting famous for it. I don’t believe someone like that turns over their achievement without a serious fight. But today it is viewed as the only option.

In other words, many creative agencies are much like the other small businesses. But they get no chance to work with those kind of clients because the budgets aren’t there. Why aren’t the budgets there? The media is expensive, and kept that way because it is intended for large advertisers. Chicken, meet egg, meet chicken…

Advertising (not media) needs small business. And small business needs advertising, but not as it is currently.

Despite handling literally thousands of advertising and marketing campaigns over eight years in the business I’ve never bought an ad for my company. Not once. No facebook ads, no ad-words, nada. Yet at times my company has entered into the top 3% of small business employers in Canada by size and revenue. I would sorely like to do advertising if I thought it would work, but I’m not convinced it does for companies like mine.

Most of my revenue is generated through recommendations of people in the community. Those recommendations are reinforced by my company’s efforts in that same community through schools, local groups, and our own programs. Advertising for us bears no resemblance to what advertisers do. When I think about what advertising would need to be to service companies like mine the list isn’t being met. It would need to be:

  • Very local, focused in my area
  • Personable and genuine
  • Above all community based, not just me acting on my own
  • Not advertising

Effective advertising for many small businesses is a matter of being identified with, and recommended by, a group. That group is usually other small businesses and individuals. For the most part advertising, even modern digital advertising, falls down in this respect.

We get served a commercial message from a single sponsor, often in a completely inappropriate social context. We get interrupted. We get tricked. We get manipulated. But there are exceptions.

People don’t hate superbowl ads because they are straightforward advertising. No tricks. They are expected. Even anticipated. The advertising isn’t trying to look like a friend on Facebook or inserting itself into our video watching. It isn’t 90% hash-tags inserted for SEO purposes. It isn’t stalking us by our browser cookies. Yet these are the tricks small businesses are forced to resort to, the same ones used by large advertisers. Many just don’t do it after a time. We expect these kind of things from big advertisers because we’re aware it is mass-advertising. We don’t expect it from small business.

Authenticity is the life-blood of small business.

There needs to be a way for small business to advertise that is straightforward, honest, modern and affordable. And no, it doesn’t need to be social. It needs to be advertising.

When that exists, when the distribution is in place, small businesses might spend on creative services. Step by step agency people might get back some options lost in the congealing under holding companies servicing mammoth advertisers. An ad-exchange for such a network would be more comparable to a neighbourhood market than a stock exchange.

The technology to deploy such a media network would need to be sophisticated in design, but simple in implementation. It would employ geo-location information, and probably a recommendation engine. It would match small businesses together with the goal of collaboration rather than competition. Currently advertising doesn’t do that, it seeks ways of overcoming competitors rather than building communities. Read any advertising journal and count how many times you see variations of “cutting through noise” or “standing out from the competition”. These efforts isolate a group from community rather than encouraging it. The way to do this is by “disrupting” people by any means, perhaps disrupting entire industries.

That doesn’t really sit all that well with small business.

A key insight is that most small to medium sized businesses don’t want to compete. Not really. They simply can’t afford to get into a brawl with other businesses. So for the most part they will work together if another party makes the arrangements. Advertising has the opportunity to be that partner, but it isn’t. It is too focussed on disrupting the very ecosystem small business relies on being relatively stable.

Advertising is lead by a group of clients who see the success of other companies as a threat to their existence. It’s a very different agenda from the small business. For the most part small businesses aren’t required to answer for their profitability. They have room to place some emphasis on things like satisfaction, community leadership, and experimentation for the joy of it without fear of reprisals.

Advertising pushes standing out, when it should stress fitting in.

No small business gives a damn about winning an award for their advertising.

This is why advertising is broken. The largest segment of business today is completely foreign to it. Advertising doesn’t understand SMB, has no significant means to work with it, and is at the mercy of major clients.

I’m aware this isn’t a step-by-step guide on how to fix advertising. It’s a framework for further thought. So I have an unusual request to make of you, the reader:

Please do not comment.

At least not until you have a little time to consider these ideas. Let it percolate in the dome for a while — then I invite you to return and share a thought, not before. I can make this request because I run a small business and a meaningful dialog with a few is more important to me than gobs of shallow interactions. I don’t need a high view-count or an engagement-rating.

Who advertises for me?