Simon Canning is a well-known and highly respected marketing commentator who has worked on both the trade media and agency side for the past 25 years. Here he shares and discusses the changes, but more importantly the key decisions and their impact and implications on the advertising industry today.
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Welcome to Managing Marketing and today I get a chance to sit down with a long-term friend and colleague; someone who is highly respected in trade media as a terrific commentator and a journalist about everything in media, advertising, and marketing and that’s Simon Canning.
Thanks for having me here, Darren.
It’s great to catch up because it would be almost 25 years ago…
Yeah, 22, 24 years ago – something like that.
When I was a copywriter and creative director, president of the Melbourne Advertising and Design Club. What was the journal you were writing for?
At the time I was editing ‘Adbrief’, which was the famous industry gossip sheet that we printed on a Friday afternoon and agencies would have couriers waiting outside the print shop waiting to pick up the first copy and race it off to the MD and the CEO to see what was pitching, what was happening, who’d been fired, and also it had lots of insightful analysis about what was going on and just a little bit of gossip.
I remember within an hour or so there were photocopies with highlighter circulated right through the agency if you were either mentioned or you’d missed something. Because we’re talking the early days of email in a way.
Email was barely a flicker in the eye and the internet didn’t exist to all intents and purposes so the channel we had was a print channel, a newsletter channel.
Couriers would race out and those who would get it mailed out to them would get it Monday morning in the mailbox and they would be ripped open. But if you’d really hit a nerve somewhere then that phone would be ringing straight away.
How the advertising industry has changed since deregulation
It’s amazing how in a relatively short time the industry has changed so much hasn’t it?
Yeah it has. I’m in my third decade now of covering the industry and commentating on it and seeing how it’s changed and I’ve got to say the biggest thing that’s triggered it besides technology the thing that’s really affected the industry was the death of accreditation, the guaranteed income that agencies had through the fact that they were effectively the bagmen for the media companies, Fairfax, the News and the Networks etc.
Those big media companies were never exposed to the threat of non-payment because the agencies had a deal that had effectively been authorized by the ACCC at the time where they’d get in total 17.5% loading on their media buying for the fact that they would have the billings sitting in the bank waiting to be handed over to the media owners.
In terms of agencies it was money for jam. And it was the beginning of that whole accreditation system that had existed from the late 70s and was the reason creative and ideas were never valued.
And that’s something if you look back over the last 20 or 25 odd years it’s still something the industry is struggling to come to terms with: how do you value a great idea?
That real shift in the revenue stream of agencies – I get the feeling the industry is still yet to recover from.
You would have seen WPP’s second quarter results and we’re now seeing the holding companies staring down the barrel of negative growth because what they replaced accreditation with was a financial remuneration system that’s best placed in an accounting firm or a law firm where you’re billing on 10 and 15 minute increments.
The whole idea that as a copywriter my work could be billed out on an hourly basis was just ridiculous because how long does it take to actually come up with an idea?
Well back in the day it took a good bottle of claret, a beer coaster, and a couple of napkins and a good pen and you’d be off.
Many a good lunch led to a great creative breakthrough.
Certainly. This kicks into one of the other big changes that we’ve seen: the rise of such things as procurement into the mix. The impact they’ve had on advertising—trying to commoditise the concept of advertising.
Certainly, there are elements of it you can commoditise. There is media buying that’s been a commodity from day one because it’s a strict airtime transaction or a strict column inch transaction –that sort of thing so commoditisation has been part of it.
One of the other interesting things has been the shift in language – the need for advertising across media and creative to have to find a way to talk in the language of the boardroom and the Chief Operating Officer and the CFO in order to try and find and make sure that it had a place at the table.
The debate is still going on, I think, about has advertising earned a place at the boardroom table?
The impact on marketing and marketers
It’s interesting because going back three decades the CEO of most agencies was in regular conversation with the CEO of most of their clients. There was that CEO to CEO conversation.
Then somehow marketing and the agency slipped away from being part of the big table.
Yeah, they did because it was all about networks. And look networks are still massively powerful. You only have to look at Melbourne as an example of the sheer importance of networks.
It’ll be interesting to see as agencies such as the Monkees move into the Melbourne market for the first time. You can look even at their early stage recruitment for that agency and you can see that networks are going to be exceedingly important because of the way they’re run.
Networks were important back then. Relationships were hugely important. You look at how Harold Mitchell’s business was helped to be created by the largesse of Kerry Packer, the support that Kerry Packer gave Mitchell. It was about networks, connections and things like that.
Those networks these days are harder to have because we have much higher turnover both in agency land and also in terms of clients particularly.
One of the other great things that we’ve seen in terms of the changes in the industry over the past 20, certainly the past 10 years has been the quick pace of turnover of Chief Marketing Officers and senior marketers within organizations.
People are in roles for only two or three years and not even necessarily having come into those roles through the company but moving across industry sectors and simply applying what they’ve learnt from an FMCG into a pharmaceutical then lo and behold they’re in an alcohol brand or a Telco.
Or financial services.
But the thing is what we’ve lost is the connection of CMOs to the industry to a large degree but also, I think we’ve lost a connection of marketers to the industries they understood.
You look back in the day and a lot of marketers came up as sales people. They were out in the market. They understood how the buyers, the consumers used their product and it may not necessarily have been the way that the product was manufactured but they understood it and when they came to market those products they really got the differences.
That’s not to say that marketing isn’t improving all the time and that’s where data comes into it.
So the economic change is really important because I had this conversation recently with Dr Lee Styger at Wollongong University. He goes back to the Y2K, the millennial bug that was going to happen and all the money that was spent in the lead up to the year 2000 was something that sucked money out of businesses to solve an IT problem.
He said, it was compounded by the Global Financial Crisis and Recession of 2007 and 2008, which is why we’ve seen this constant downward pressure on pricing. Whether it’s an agency or media there’s this mindset.
But I think it actually started before that because I got into advertising two years before the stock exchange crash of 1987—that’s how old I am—much older than you and you’re much younger than me.
I remember when that happened, what happened in most of the big clients that we were dealing with is that middle management of marketing disappeared. It was either a senior marketer or a whole lot of graduates. As the marketing departments rebuilt they hired graduates.
Marketers no longer came from sales or other areas. They were coming out of universities as these pre-prepared, pre-stamped marketers but what they didn’t have was any practical experience of what marketing meant.
I’d have to agree with that and one of the interesting things you talked about is where do marketers go for their information? How do they learn? We’ve seen the rise of focus groups, research, things like that. Where is the genuine coal-face experience—what consumers are looking for and what consumers want?
One of the interesting things in this transition age to digital and social media is that we’re actually finding a reconnection with a group of consumers (not necessarily all consumers) whose voices are again being heard in the ears of the marketers.
The problem is now instead of having long cycles where you had time to listen, learn, and react to what consumers were wanting or how their behaviours were changing and what you needed to do for your brand, for your product to try and keep in lock step with that and potentially take a lead for it.
We now have so much voice out there that is seen as a consumer voice that we have to react to it every single day. We have to react to it every single minute. A crisis is just a tweet away for a brand. You only have to look in the last 24 hours; a Pizza Hut app-failure, which was charging people multiple times for a transaction they didn’t think, was going through.
That’s all it takes; one or two people to have that happen to. It may be an isolated incident but they put it out in their social media streams. It gets picked up and all of a sudden it becomes a thing; it becomes a meme, it becomes a mainstream media story.
I think if you want to look at another recent example of that in the last couple of days you only have to look at a photo of Malcolm Turnbull holding a beer and a baby at once.
The great fake news discussion and that’s another challenge for the industry across trade: what is real news, what is fake news? But again, this was something that took only a few minutes to turn into a flashpoint.
It’s interesting you raise the idea about social media because in some ways it enables the consumer (and we hear about consumer created content and the desirability of that) but it’s actually impacted the two industries you’ve spent a lot of your life commentating on.
One of them is journalism because this whole thing of citizen journalism has had this impact. We’ve seen recently the Senate inquiry into public interest journalists as well. But this idea that the agency and the creative department is the only place that has the ability to create content has actually been completely disrupted, hasn’t it?
Absolutely and I would actually take it back quite a few steps to that. Before we saw YouTube come in; user-created content, before we saw Twitter arrive, Instagram, before Facebook was a thing, long before MySpace was going to be a business model by the Murdoch family what we did see was something different in the rise of creativity in media agencies and creative strategy within media agencies.
It was something that Universal McCann probably, in the Australian market, was very much at the forefront of, working on campaigns for Magnum back in the early 2000s and late 90s.
We saw the idea of creativity being taken away from the creative agencies or if not taken away certainly challenged by a group of people who up until that point were being considered glorified box tickers.
A strategy was the Sunday night movie on 9, the NRL early in the evening and the AFL on 7 and thank you very much I’ll collect my pay and head down to the pub in the afternoon.
Or the old Sunday movie roadblock.
Absolutely. That was a strategy. So, I think before we started to see this sort of shift that’s come through digital, then technology and applications and the empowerment of consumers that has so disrupted journalism and the advertising industry we actually saw an initial disruption, which again came from accreditation.
Because media agencies suddenly had to think we’ve got to value ideas, we’ve got to come up with strategy. So that was the beginnings of it. And I think one of the really important things we should always try and think about is history; where things came from, what was the beginning of something, why did it evolve in the way it has evolved?
Because it can give you some really clear pointers as to where you might be at right now and how things might evolve into the future. We forget history at our peril.
Interestingly the agency accreditation was primarily driven by the advertisers and the way they won their case for accreditation was that they were able to prove that it was anti-competitive because it allowed a relatively small group to have some sort of cartel control over it.
Because people forget accreditation was the big media publishers; the News, the Fairfax, the 9 Networks, the ACPs.
If you were not accredited you could not buy media.
But the thing that was never discussed was that to be accredited (and I think you alluded to it before) you needed to have in cash ten months, so one month of billing ten times, sitting in the account so that the media proprietors would know that you were able to pay your bills even if your clients fell over. So that was the benefit for the media publishers.
The benefit for the industry was that you couldn’t be a fly-by-night operation. You couldn’t come and set up an agency unless you had significant cash reserves or assets available to you. Whereas now marketers will often say ‘what new agencies are there?’ And I’ll say, ‘what new agencies aren’t there?’
There are so many because to set up an agency today is the simplest thing: you just hang up your shingle.
If you think of the powerhouse agencies (some of which have fallen by the wayside), some of the big names that were around at the time. They were built on a 17.5% non-rebatable (and we’ve talked about value-banks and we can talk about it later—the rise of value banks).
The value banks existed back in the day in what was a secret rebate back to clients when 5 to 10% of the billings was rebated back. The thing to remember there too was that there was this massive amount of money that was sitting there.
It created the first media independents; Dennis Merchant and Harold Mitchell getting together to set up the first independent media agency.
But it also created the powerhouse agencies that dominated the Australian marketplace; the Clemengers before they became part of BBDO, the George Pattersons, the multinationals, the Y&Rs, the JWTs, the McCann Ericksons all built their businesses not on the back necessarily of brilliant creativity.
They built their businesses on the back of very good revenue because they were buying media as well as creating the campaigns. And again, I come back to when I alluded to giving ideas because you didn’t have to charge for ideas because you were making all of that on the back of the media buy.
The world did change and there had to be some change in the system. I don’t think you’re sitting there saying accreditation would have lasted this long or would even be the right solution now, but I think the big downfall was that there was nothing to replace the model.
I’ve heard different arguments; some people say it was actually proposed by the agencies to move to an hourly rate, a cost recovery model and others say it came from procurement or the marketers.
I think it’s the worst way to buy ideas. In fact, no other creative industry sells their ideas by the hour.
Indeed. I was sitting there in the Federal Court the day the accreditation decision was handed down. I’d been dealing with one of the major proponents of scrapping that system who was Bob Miller the CMO of Toyota in Australia and also the Head of the Australian Association of National Advertisers at the time, who had effectively spearheaded the campaign, as you alluded to earlier, to have this system scrapped.
I think to a degree a lot of the industry and the Advertising Association of Australia genuinely did not really believe (because the authorisation had carried through for so many years) the Federal Court was going to strike this down as cartel behaviour.
When it happened there really was no plan B. And we’ve been seeing the results of no plan B for creative agencies and those agencies that were reliant on billings and that revenue ever since.
We’ve seen all sorts of interesting ideas come up; agencies—let’s own a piece of the product, a bit of the IP, let’s own this bit, let’s own that bit but still coming back to billing on head hours.
When you walk into an agency and see an executive creative director being billed on an hourly rate of a thousand bucks to look over a brief for a client—is that a business model? I think we’re at a point now where the industry as a whole can probably do across the board a lot better.
Absolutely. Accreditation finished in 95.
The creation and role of the Advertising Standard Bureau
95, early 96 but I just want to point out another thing (because you talked about the flow-on effect of how agencies were remunerated). Well the other effect of the scrapping of the accreditation system was that the accreditation system allowed the authorisation for the advertising standards code.
They were guaranteed. If you had an ad rejected by the Advertising Standards Council the media owners were in lock-step; they would refuse to run something. That was TV, print, outdoor, you name it, they would not run an ad. There was just a guarantee it was not run.
We had a couple of year’s period where there was actually no regulatory body for the advertising industry and then finally the AANA set up the Advertising Standards Bureau, which they had been hankering for because there was a lot of pressure from government to get some sort of system in place.
We’d seen some campaigns particularly brands like Windsor Smith, which had put some fairly offensive stuff out there (not compared to Wicked Campers these days) but certainly stuff in outdoor in particular that had upset people.
So, the industry said, ‘what do we do about this?’ The government said, ‘if you don’t get a regulation system in place we’re going to regulate’. The AANA was obviously deeply concerned about freedom of commercial speech and so set up the Advertising Standards Board, which was a challenge to launch at the time.
It wasn’t particularly good at the time when it first launched. I give them credit: over the years they’ve finally come to a model that’s actually worked very well.
Fiona Jolly who celebrated not too long ago 10 years running the ASB. It took them a long time to get the model right. They’re still tweaking it and it’s still growing as it should. It should always be a living breathing thing.
That’s right. When you went through the list of media before there were like five different channels. And now when you add digital in there and we saw recently there were alcoholic beverages on Instagram clearly targeting teens with their ready-to-drink brands.
The ASB is sitting there going well what do we do because it’s not actually paid advertising? It’s branded content so how do we enforce this?
There are going to be challenges for any regulatory system be it industry-based or government legislative because the industry’s evolving so quickly.
The other thing that had to evolve was the speed with which the ASB could sit in place and it would take them sometimes two or three months.
In fact looking back to the glory days of the Campaign Palace. The Palace was very successful with its advertising campaigns for Cleo Magazine and the strategy was pure and simple: create an ad that would cause controversy. It would get complaints made to the Advertising Standards Council.
By the time the Advertising Standards Council had sat in judgement of the ad the campaign was over because the magazine was off the shelf.
One of the things that I believe happened with the loss of accreditation was that suddenly agencies and their clients spent a lot more time talking about money. You just have to watch Mad Men or have lived through it and there was very little discussion about money because commission was just part and parcel of what happened.
Suddenly you’re having to talk about retainers and having to quote every piece of work, money becomes centre to it and I think it’s actually had a disruptive effect on the relationship. Marketers and their agencies often form very close personal bonds.
Suddenly when you’re throwing in a conversation about money it changes or constantly reminds you that this is a commercial relationship, which makes it in many ways more transactional. Do you think that’s part of the whole problem with the trust issue which we are seeing today?
I think so. The analogy I would make is at the time when money was easy for agencies, money was oxygen. Yes, it was life-giving but it was also everywhere. You were rarely deprived of it and you didn’t suddenly find yourself in a place where there was no oxygen.
However, food, you need it. You have to seek out water, food, sustenance. Those were the clients, those were the briefs you were hunting. Once you got them the oxygen, the money was there. The shift changed when suddenly you actually had to go out and buy oxygen tanks.
It was almost like they’d moved into space and you had to bring your oxygen with you and you had to make sure you had enough and you had to ration it properly and all the rest of it.
It has corrupted the relationship to a degree because, again, it’s forced the ideas onto the back foot. There are agencies out there who are brilliant at getting great ideas across the line. But for a lot of agencies the challenge is how do you sell time getting ideas across and the other thing is getting ideas across to clients?
Clients are so aware of the money they’re spending and now with so many channels where their budgets are going. You’ve got digital, which is almost offering a new subsection, a new channel every month or two where you’ve got to consider it, you’ve got to put it into the mix.
So, budgets are under pressure. Think about TV production. You’d produce an ad for two, three, four hundred thousand dollars then your media schedule would be a million, two million behind that to run it on Sunday nights and that was good.
The creatives and directors could pour love into a project because they could afford to because the money was there because it was one 30-second ad or five pieces of a campaign that you were making that would be cut and re-cut or re-purposed for the same medium. Maybe a big one for the cinema; the rest would simply run on TV and five different purposes.
Now, you’ve got less budget but that same budget which is 200,000 without the media budget behind it is being asked to create 70 pieces of content re-purposed across Instagram, YouTube, potentially Twitter, Facebook. Do you do a live stream? How do you control that?
Clients are having to sit back and think about all of that. And agencies are having to think about which of these do we hand to our clients? What is really going to work for our clients? It’s so complex.
Then at the top of it all we’ve got the wonderful world of data where everything is measurable and measurability was the great unknown. And yet even if you subscribe to people like Mark Ritson or Bob Hoffman’s view, even now that we have the ultimate truth of data that’s even impossible to pin down.
The rise of procurement in marketing and advertising
It’s interesting because a lot of people blame procurement and yet from my experience (we started the company in 2000) it wasn’t until 2005, 2006 that I ran into my first procurement people. It was almost like they were sent along because what people had seen was that marketers were looking for ways of expanding their budget.
We saw the rise of digital in the early 2000s and confusion around how to invest it. A lot of people, especially the agencies have said to me, ‘oh, it’s the procurement people that have driven down costs.
But in actual fact procurement was used by many marketers to drive down costs so they could actually afford more of these channels. The other thing that’s happened was the rise of the specialist agencies. Because when we look back at the days of accreditation there was one Clemenger. There was one George Patts.
Fast forward from 1995 to 2005 and Ogilvy, Ogilvy One, Ogilvy Digital—suddenly these agencies have turned into all these little specialist groupings because they were competing with lots and lots of other people that had set up specialist agencies.
Absolutely, then you look at it from the holding companies’ perspective, the IPGs, the WPPs, the Omnicoms etc. and the fact was that those holding companies were seeing revenue potentially drifting off into different areas: public relations, we’ve seen the rise of experiential (as you said, digital agencies), a whole range of design, and of course media and media strategy and media planning and things like that.
So, there was a need to sort of have an offer in that space.
A specialist offer. It was almost like you had to put a flag out that said we’re an experiential agency and over here this is our digital agency and here’s our search agency.
I think one of the interesting things about procurement—what the industry is coming to terms with now and we’ve seen it over the eight or nine years is understanding the language. You know data and better reporting have helped us do this.
Agencies and marketers needed to learn how to speak the language of the CFO and a lot of the information that is now available to agencies and marketers allows them to do that. It allows them to speak on similar terms.
The reality is we’ve kind of shifted into this world where you’ve got a really good idea of what most of your advertising is doing and one of the really interesting things that has happened with procurement is that in the early days procurement came from a position of buying supplies, purchasing logistics. They had a line function.
A lot of companies were asking procurement to play in a role in something they really didn’t understand and couldn’t really measure so they applied old existing standards to what they were doing.
On the basis of that it was really hard for agencies to justify what they were doing because it was not measurable. What we’ve seen happen particularly over the last decade is that the data and the analytics that go behind a lot of agency work now allows a line to be drawn on what the expenditure is, on what the outcome is.
They become the basis of Effie awards apart from anything else and now that they can actually speak that language procurement is beginning to get it.
Agencies themselves and the holding companies are coming up with the models that will allow a clear translation of an advertising brief to a production of a piece of communication and a reportable outcome that actually can finish up in an annual report as part of what the companies are doing. I think we’re seeing that evolution of language happen.
Procurement, over time, will be less of a dirty word, less of a practice that isn’t understood because procurement has been forced to learn what this industry does.
Well historically procurement has had huge impacts on a whole range of industries, the aerospace, aeronautical category. Procurement actually lifted the quality and reliability of aircraft in the 70s.
The application of the procurement process—it’s not about cost reduction it’s about improving productivity and quality of outcomes. I think the big problem was that (as you say) when they started talking to marketing the measurements that marketers were using and the measurements agencies were using were not conducive to quality.
It wasn’t about quality. It was about cost. By 2005 agencies were selling resources at a cost with an overhead and profit margin. It wasn’t a conversation around what value are we creating. It was around how many resources I need to do it and what was the cost of those resources, which, for a procurement person, if it’s a cost I’m going to look for ways of reducing it.
If it’s about creating value and you can actually give me a value parameter against cost then I’ll start looking for ways of improving value and minimising cost.
Absolutely. And I think now we’re seeing that transition. Creative awards have their place within the industry serving the industry really well. But I’ve always been a great fan of effectiveness and effectiveness awards because ultimately, it’s about outcomes.
I think that’s one of the things we’re seeing a lot more now within agencies. The work, the work, the work –I know it’s a bit of a cliché.
It’s the BBDO position– the work, the work, the work.
But the work is what it’s about if the work is actually serving a purpose and delivering an outcome. And I think that the outcome the work often delivered in the past, particularly for the famous agencies, was that the work was hugely entertaining but may not necessarily have delivered a business outcome.
It certainly might have raised brand profile, had talk ability but did it sell stuff? I think that what’s happening now is that the work has to sell stuff first and foremost. Sales is what it’s about.
David Ogilvy said, ‘if we’re not selling what are we doing?’
But there’s nothing new under the sun is there really? It’s all basics and again this is why I’m a great fan of history. This is why when I was at Mumbrella I sat down at the knee of Michael Ball before he passed away.
Michael Ball, for those who didn’t know him, was the most successful advertising suit in Australian history. He was David Ogilvy’s right-hand man. He was going to be David Ogilvy’s replacement but then circumstances intervened.
Having set up Ogilvy as a worldwide network, Michael then set up his own agency, which was Euro RSCG, having bought a piece of the Ogilvy network to set it up on and became one of Australia’s richest men, certainly the richest advertising man in the country and hugely successful.
I sat down with him for several hours before he passed away and we talked about so many things in the industry that remain relevant today because there are some really basic ideals. Whether it’s a Michael Ball, a David Ogilvy, a Bill Bernbach there are these people in the industry that it doesn’t hurt to go back and research what they were talking about.
While the environment, the pressures might have been different, while the lunches certainly might have been different the reality was that these people actually got consumers in their day and age, and the very heart of what they were preaching was about selling stuff on behalf of brands.
The thought that I like is that while the principles about humanity remain the same our applications change depending on our circumstances and that’s the thing. If you study human beings the fact is that in 100,000 years we really haven’t changed that much but what changes is the way we behave as human beings in our environment.
I think that’s one of the great things I enjoy about marketing with my science background, I’ve been trained to study. But it’s absolutely fascinating when you apply it to something like marketing.
Simon, there is so much I could talk to you about, it’s absolutely fascinating except we’ve run out of time and I’m like only through half the things so I’d love to do this again. If you’re up for it we’ll pick a time when you’ve got half an hour or so, we’ll sit down and have a chat.
That’d be fantastic. We’ve talked a lot about the past and about where the industry’s gotten up until today and I think there’s a lot more to talk about the potential directions it goes into the future.
Absolutely but there is one question I have before we finish. Out of all the agencies you’ve ever had to report on which one is your favourite?
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