The Net's precision accountability will kill not only traditional advertising, but its parasite, Big Media. Sniff.
It was as luminous as LA gets at eight in the morning. Studio chiefs. Production company heads. Bernard Weinraub, entertainment reporter for The New York Times. Peter Bart, editor of Variety. Burt Manning, chair of the J. Walter Thompson advertising agency, had flown his bearded self in from La Côte Droite. The only person missing, it seemed, was Merv Griffin. But his picture was everywhere. He owned the hotel where these hundreds of mediarati were juicing and schmoozing.
They'd come this May morning in 1995 to bear witness as the most formidable of their number - Michael Ovitz of Creative Artists Agency; former CBS head Howard Stringer; and Ray Smith, Ivan Seidenberg, and Phil Quigley - of Bell Atlantic, Nynex, and Pacific Telesis, respectively - announced the formation of a US$300 million joint venture in interactive television, which they dubbed Tele-TV.
The air was thick with anticipation. Eighteen months earlier, Nynex had sunk $1 billion-plus into Viacom. The result: nothing. Time's prediction of a "brave new world" of interactive multimedia was already a year old. But Stringer - beloved for his hard-times stewardship of the greatest of broadcast networks, and the highest-profile deserter to new media - was exultant. Media, marketing, and interactivity were about to unite. "You are no longer restrained by the constraints of time!" he rejoiced, his accent a refreshing mix of Wales, Oxford, and New York. "Time as you know it is gone."
Today, Stringer is gone - as are most of his partners. Having succeeded in their various real goals (a large finder's fee, a desperately needed new job, scaring competitors away), they've found better things to do: for Ovitz, the brief presidency of (and $100 million buyout from) the Walt Disney Company, a conventional media conglomerate; for Stringer, the presidency of Sony, a conventional entertainment company; and for Smith, Seidenberg, and Quigley, a merger focused on conventional telephony.
One doesn't have to be a genius to detect the self-interest that has lurked beneath the development of new media. And from the day Absolut put a URL on a NoHo billboard to signal its hipness to New York's downtowners, advertisers and their agencies have been feeding the hype and then exploiting the buzz of the Web.
Were it not for the fact that the media world knows no shame, the shamelessness of it all would be astonishing. Last year, I heard Jupiter Communications head Gene DeRose guess that Web advertising would hit $4 billion to $6 billion by 2000 - a mere 400 to 600 percent jump in four years. Not to be outdone, Mark Kvamme of the CKS Group, the most successful of the interactive-advertising start-ups, estimated that it could reach $100 billion. "That's madness," a Wall Street analyst sitting next to me whispered.
Madness with a mission. Soon after CKS completed its auspicious initial public offering, it acquired an established agency that specializes in - guess what? - old-fashioned print and broadcast advertising. A marketing executive at a large broadcasting company once told me that his Web site's profitability was based entirely on using the promise of front-page banner placement to lure advertisers into buying more commercials on his network.
Marketing in the information age is, in short, a form of gamesmanship. Playing on advertisers' valid fear that conventional print and electronic media have exhausted their ability to attract consumers, ad agencies, research firms, trade publications, and the digital dominion have been willing new media into existence, building it upon a foundation of swagger and fabrication.
But here's the beauty of it: they are stitching together a Frankenstein that will, that must, inevitably destroy them all.
To understand the coming disintegration of Big Media - the Los Angeles Times and The New York Times, 60 Minutes and 20/20, Howard and Rush, Glamour and Slate - you've got to grasp the Knowability Paradox.
It was not a foregone conclusion that advertising would become the dominant force in the development of American media. In Europe, royal support, state sponsorship, and political-party assistance helped guarantee the primacy of specific manufacturers and certain media institutions well up to the present.
But in the US, starting in the early 19th century, something curious happened: the media abandoned the Old World models and wrapped itself - contextually as well as financially - around advertising. The move was driven partly by mass manufacturers' need to brand commodity goods, partly by the vastness of our continental marketplace, and partly by a presumption of class mobility that made us want to sell, earn, acquire, and display.
A newfound "objectivity" in news reporting arose from publishers' desire to draw the largest audience with the least offense. What historian Daniel Boorstin has labeled pseudo-events - news conferences, press releases, and stunts that "someone has planned, planted, or incited" - were concocted to fill the print space and broadcast time that increased year by year as advertisers sought to satiate a growing middle class. For the three decades between commercial radio's first appearance in Pittsburgh and the TV quiz show scandals of the '50s, advertising agencies produced not only the ads, but also the programs themselves.
But this massive edifice has always been undergirded by a contradiction: no one understands how, or even if, advertising works. Because the system of production, distribution, sales, and communications is so large and complex, attempting to isolate the effectiveness of a single element - advertising content - is all but impossible.
Advertising agencies exploited this confusion by urging clients to buy more pages, more spots, more billboards. The agencies became more profitable, which in turn led to the creation of more media. But to forestall uncomfortable scrutiny by a business culture addicted to scientism and certitude, agencies were always on the lookout for new services. Copywriting, market research, psychological research, sales promotion, public relations, even the procurement of prostitutes for clients - all were gimmicks designed to draw attention away from advertising's inscrutability and toward the unverifiable but desperate need for more.
Hence the Knowability Paradox: The less we have known about how advertising and the media work, the more advertising and media there have been. Conversely, the more advertising and media there have been, the more they have shaped the culture they saturate. Sitcoms, docudramas, advertorials, celebrity covers, radio, shock jocks, drive time - the forms and conventions that are as familiar and invisible as the air we breathe owe their existence to the fact that we don't know what works to attract consumers, or why. Hence the continual hammer of innovation against the hard shell of tradition.
So too in the agency business proper. Advertising's creative revolution in the '60s sprang from the unprovable belief of Bill Bernbach - guru of the groundbreaking Doyle Dane Bernbach agency - that "advertising is fundamentally persuasion and persuasion happens to be not a science, but an art." Led by Doyle Dane, an entertainment impulse engulfed the ad industry, providing consumers with Borscht Belt blackouts (Alka-Seltzer's "I can't believe I ate the whole thing" campaign) and cinematic sentimentality (Coca-Cola's "I'd like to teach the world to sing"), culminating with what some believe to be the greatest TV commercial ever produced, Chiat/Day's stirring, neoconstructivist "1984" spot for Apple's introduction of the Macintosh.
The postmodern wave that's swept over advertising during the 1990s - self-referential, mediacentric, and coy - is also impelled by the Knowability Paradox. Its hallmark is the self-conscious admission: hey, we're only doing an ad here; we know that you can see right through us. While the roots of this are planted firmly in the '50s - in Mad magazine's scathing indictment of advertising ballyhoo - the cynicism, pastiches, and layered meanings of postmodernism have blossomed into the core currency of the media culture. They are evident in Oliviero Toscani's political tracts for Benetton; in ABC's current TV-rots-your-brain promotional campaign; and, most famously, in virtually everything produced by Portland's Wieden & Kennedy, whether it's Spike Lee proclaiming the transubstantiating power of Michael Jordan's shoes or Robert Goulet warbling the virtues of ESPN. Using sly social commentary as a vehicle for marketing - or is it the other way around? - is only the latest of the innovations bequeathed to us by a media-spindustrial complex that simply doesn't know its own strengths.
If it has any. For evidence abounds that people just aren't paying attention. The phenomenal growth of a few megabrands like Nike can't disguise the fact that, despite a 70 percent increase in US advertising spending between 1986 and 1996 - from $102 billion to $175 billion - more people than ever believe that most products in most categories are exactly alike. A contemporary television blockbuster like Seinfeld draws only one-third the audience, as a percentage of the total, that saw 1960s network hits like The Beverly Hillbillies. Unsurprising, because Nielsen's People Meters (a more accurate viewer sampling technology than the Audimeters it replaced) have shown far fewer people watching television in toto than TV executives previously believed.
By the dawn of the 1990s, it was clear that new gimmicks were needed, equal in their subversive power to marketing's earlier gimmicks. So advertisers and their media supplicants have tried ever-more ham-handed ways of blurring the line between advertising and content. BMW tied the launch of a new car to its paid placement in a James Bond flick. The Los Angeles Times last year reorganized its news division around Procter & Gamble's brand-management model, putting marketing executives on an equal footing with editors. Media giants set up or acquired new narrowcast cable networks, the better to reach consumers with pre-identified interests, all primed for the targeted sell - Chop TV for martial-arts enthusiasts, The Recovery Network for 12-step aficionados, et cetera.
Great ideas, but all subject to external tension. Newspaper readership continues to drop, by 10 percent in the past four years. Sports sponsorships by tobacco companies invite government scrutiny. Even heavily promoted new networks like MSNBC and Fox News top out with an average daily viewership of between 20,000 and 100,000 households, probably not much more than the circulation of your local weekly newspaper. By the time the recession began to lift in 1992, a much better gimmick was needed if advertising-as-we-know-it (witty copy, brilliant graphics, extravagant productions, superstar pitchmen, long lunches, houses in the Hamptons) was to survive.
The Internet happened at exactly the right time.
The Net, though, is different. Different from the 30-second spot, the classified ad, and the four-color double-truck. Different from product placement, Nascar logos, and rock-tour sponsorship. Different from Leo Burnett's Middle American corn, David Ogilvy's sophisticated imagery, and Phil Dusenberry's boffo productions.
The Net is accountable. It is knowable. It is the highway leading marketers to their Holy Grail: single-sourcing technology that can definitively tie the information consumers perceive to the purchases they make. No less an institution than Procter & Gamble, perhaps the most influential force in advertising this century, recognized this when it announced a little over a year ago that P&G would compensate its online media outlets on the basis of clickthroughs - by the number of people who push the button and choose to read an ad.
Some, notably Yahoo!, complied. But it's telling that the old guard of advertising and media reacted to the proposal with a mixture of indignation and fear. After all, if Procter's recommendation were to be adopted industrywide, it would destroy the very basis of advertising and the media it supports: imperfect research (like broadcasting's Nielsen and publishing's Simmons, which project total audiences from small and often flawed samples); pass-along readership, out-of-home viewers, and similar numbers-game chimeras; and ad-agency creative "geniuses" and their fulminations about unique selling propositions, power copy, and like hokum. With accountability, they all must wither and die.
Accountability, of course, has existed for generations. It's called direct marketing, and responses to it can be tabulated and, to a great degree, controlled. As far back as 1923, Claude C. Hopkins, the president of the Lord & Thomas agency, was writing that, because of direct marketing, "the time has come when advertising in some hands has reached the status of a science. We know what is most effective, and we act on basic laws."
Marketers have certainly been tantalized. During the past quarter century or so, direct marketing - which encompasses such disciplines as junk mail and infomercials - and other "below the line" marketing functions have grown to constitute some two-thirds of all marketing-communications spending, with conventional advertising accounting for the rest. That's a reversal of the historic ratio and a clear sign of trouble for Madison Avenue.
But direct marketing was always hobbled by a few facts and a lot of fancy. The facts: it's enormously expensive to send missives through the mail, the lag time between call and response is too long, and it's still too damned inefficient, a 2 percent response being akin to nirvana. The fancy: you can never build a brand through direct marketing; there'll always be a difference between image advertising and (ughh!) retail advertising.
The new media technologies, by drastically reducing production and distribution costs and making possible almost continual and instantaneous refinements in message, promise to increase the efficiency of accountable advertising so that its widespread adoption, not as an ancillary medium but as the primary communications choice, becomes inescapable. That powerful brands will be built by such means is as certain a fact as primitive junk mail created L. L. Bean and the antediluvian infomercials spawned the Psychic Friends Network. The spurious distinction between image advertising and retail advertising will erode, then disappear, as each advertisement, every product placement, all editorial can be tied to transactions.
This is no futuristic fantasy. Consider one upcoming innovation: a combination barcode-scanner/smartcard-reader that can be hidden in a TV remote control. When viewers see a commercial they like, they can point the zapper at the screen, read an offer embedded in the ad, and download a coupon into a smartcard, which can be used the next time they go shopping. The response will then be registered for review by the manufacturer and retailer.
In other words, just as the billion-channel universe descends upon us, knowability will wipe away marketing and media as we know them. Communications conglomerates - Rupert Murdoch's News Corporation, Sumner Redstone's Viacom, the fractious Time Warner, and John Malone's TCI - will lose their oligopolistic control of a limited media shelf space. The conventional media forms they produce and dominate will diminish in influence as audiences are drawn to thousands of new variations whose ability to entertain, inform, and induce transactions will be knowable and known. Marketers will marshal their resources, spending only as much on a given venue as their returns can justify. If quality information and entertainment are to survive, the consumer will have to make up the difference.
Once advertising's Knowability Paradox is solved, the era of Big Media and the coddled audience will be over.
In early 1995, having returned from 18 months abroad to a city, a country, a culture ablaze with Internet fever, I called an old acquaintance with a plaintive request for help. He was one of Silicon Alley's rising stars, an expert on the fortunes and presumptions of this fresh medium, and I just couldn't understand all the zine start-ups, the friends transferring from "old" to "new" media jobs, and the gallant affirmations of an advertising inflow that would surely topple the structure of New York's Communications Corridor. As we hunched over beers and cheeseburgers at one of Greenwich Village's more venerable literary pubs, I asked him where all the rosy projections were coming from.
"We make them up," he said. "Everyone does."
I had dinner again this fall with the same friend. We talked about Net hoopla, the shakeout in the zine market, and the failure of some recent interactive media IPOs. I couldn't help but wag a self-righteous finger at him. "The reason all these things went down," I said, with inquisitorial satisfaction, "is because you and your pals inflated the figures."
"Oh, we don't do that any more," he responded. "Now we know this thing can't be stopped."
