report advertisding

7/31/2019 Report Advertisding

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The Advertising

IndustryPassport to Excellence Research Project

By Akshay Shukla


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Akshay Shukla

Dr. Caryn Voskuil

Passport to Excellence

19th

March 2012

IntroductionThe advertising industry has evolved since the 1980s as most agencies are moving to a common

structure because most of their clientele refused to pay for the marketing services they did not

need. This has resulted in an increase of individual agencies though the ownership of these

companies has become consolidated. This consolidation happened over the course of time as

there were multiple acquisitions and mergers. These international groups that are sitting on top of

the industry pyramid are Omnicom, WPP, Interpublic and the Publicis Groupe. There are other

mid-size holding groups such as Dentsu and Havas who are restricted by either their

functionality or by their geographic presence.(Source: (adbrands.net)

Advertising agencies were traditionally described as companies whose main role was to

create marketing concepts for their clientele. These are the companies that specialize in the

poster creation, television commercials, the radio jingles and the print advertisements. Now due

to the influence of digital media marketing the ad agencies now need to cater to the clientsdemand of online and social media marketing. The advertising agencies can now be bracketed

into three categories. The first are the global networks such as BBDO or Satchi & Satchi that

cater to multinational companies that require advertisements in multiple countries. The second

kinds are what you would call creative content designing companies. These companies have a

presence in a few countries and in cities that act as a regional center for entire continental

markets. These companies are approached by clients to come up with global ad campaigns and

are implemented by the companies own regional offices, instead of the marketing firms. The

third kind of agency is the most popular one which is the stand alone variety. These are at times

independent or owned by one of the major holding groups. They tend to operate in one particular

country only and at times have links to other companys world over. (Source: (adbrands.net)


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Literature Review

1. Creative Advertising by Mario Pricken, - This book gives us the creative detailsregarding some of the most popular ad campaigns in recent times. There are over a

hundred illustrations in the book describing the various campaigns by different

companies for brands like McDonalds, Toyota, Levis, M&M and Adidas. This book

gives the readers a proper structure and framework for anybody who wants to enter the

industry, and also gives details about how to go about designing an ad campaigns. There

are specific techniques described in the book such as the use of humor, the use of a

certain kind of visuals and even some of the ideas which will help one communicate with

potential readers. In the final chapters of the book there are interviews with some industry

experts such as the creative director from BBDO Hong Kong and academicians like a

professor from the University of Applied Art at Vienna. These interviews have given an

insight into how the top advertising agencies function and what practices are used by

them. This book as a whole is the perfect guide to any creative mind who is in the

advertising field, and will help him or her enhance their career opportunities to a great

extent. (Pricken)

2. Ogilvy on Advertising by David Ogilvy- In this book the author writes about all theaspects of advertising from his own perspective and experiences. He inspects how to

produce advertisements which sell products, about jobs in the industry, about then how to

actually run an ad agency and finally about how to attract clients. He defines how to

position a product to a particular market segment, for example Dove soap having its

target as women with dry skin. He talks in the book about B2B advertising and the

various mediums of advertising such as television commercials and direct mail

advertising. The only downside to this book is the fact that it does not mention some of

the mediums of advertising used today. There is no mention of how to use social media

as a tool and the new advancements in technology which have led to newer mediums

being available. Overall this book gives an overall perspective of the industry. (Ogilvy)


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History of Advertising

Advertising has been around officially since the seventeenth century around the same time since

newspapers were started. The first known advertisement was developed in England in 1477 for a

book called The Pyes of Salisbury by William Coxton (adbrands.net)

The need for advertising was created after the industrial revolution, when due to advancements

in technology goods were mass produced and the one on one interaction between producer and

consumer was reduced. Another reason for the rise of advertising was the popularity of

newspapers and the fact that they were ideal to communicate with the consumers on a large

scale. In the latter part of the 19th century advertising really picked up as the first few ad

agencies started coming up. Claude Hopkins was one of the pioneers in copywriting and

developed innovative new techniques in advertising. ((History of Advertising))

) After the First World War and during the Great Depression there was a sudden increase in the

popularity of the radio. To take advantage of this phenomenon Procter and Gamble funded radio

dramas and hence the term Soap opera was coined. In the 1950s after the Second World War

along with the popularity of television sets led to a boom in advertising. The market was full of

goods and services and now there was an even more popular medium to advertise it through. (

(History of Advertising)

This is around the time David Ogilvy, till date considered the foremost pioneer in advertising

started his own agency. Ogilvy took risks and focused on attention gathering advertising. Now

with the turn of the century there has been a rise in the internet as a source of advertising. Digital

marketing and advertising is allocated a significant portion of marketing budgets in todays day

and age. The future of advertising definitely lies in the online forte as social networks such as

Facebook and Twitter are gaining popularity. More about the future trends will be discussed later

in the report. (History of Advertising)

Source Article: Advertising History According to the textbooks by Vincent P Norris,

Journal of Advertising, Vol9 No. 3, 1980. (Norris)

In this article the author raises a very valid point that most texts of the modern era say that

advertising is as old as mankind, but they never mention the fact that not any medium except for

word of mouth advertising existed two million years ago. The author states that all along the

textbooks have been missing the most obvious points like advertising is supposed to increase

profits. This article criticizes the introductory advertising textbooks because of the economic


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history given in them is very little and even what is provided is inaccurate. According to Norris

most of the textbooks argue that advertising is used for the creation of jobs and boosting the

economy but forget the basic fundamental that it increases the revenue of the advertiser.

Throughout the article the basic message provided is that the advertising textbooks keep beating

around the bush, and do not focus on the basic fundamentals of advertising which is to increase

revenue.

Current Leaders

Source:https://reader009.{domain}/reader009/html5/0430/5ae6b3ad96cb6/5ae6b3b18176f.j

(wpp.com)

Fi ure 1
http://gaia.adage.com/images/bin/image/25-2010-us-revenue-042511.jpghttp://gaia.adage.com/images/bin/image/25-2010-us-revenue-042511.jpghttp://gaia.adage.com/images/bin/image/25-2010-us-revenue-042511.jpghttp://gaia.adage.com/images/bin/image/25-2010-us-revenue-042511.jpg


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From the above graph we can infer that the top 3 global networks in ad agencies are the

following:

1. The WPP group: The WPP group consists of 310 companies worldwide which are inadvertising, Media Investment Management, Branding and Identity, Promotion and

Relationship marketing and Public Relations. It has offices in over 100 countries and

employees over 150,000 people. (wpp.com) It market capitalization as of March 2012 is

$16.9 Billion. (Source: (Yahoo.com)

2. Omnicom Group: Omnicom is a strategic holding company which has presence all overthe world and manages the portfolio of some of the leading global brands in the world.

The company has three of the biggest global advertising agencies under it: BBDO, DDB

and TBWA. Besides these three companies it has about a 175 companies under it into

various marketing disciplines (Omnicomgroup.com). As of March 16th 2012 the group

had a market capitalization of US $13.64 billion ( (finance)

3. The third biggest network in terms of revenue is the Publicis Groupe. It has a market capas of March 2012 of US $10.5 Billion. The company has presence across 5 continents

and employs about 49,000 worldwide. The company has 1214 agencies under their

umbrella across the 5 continents (publicisgroupe.com). The company has grown over the

past 15 years with acquisitions of some of the leading agencies in the world like Satchi and

Satchi and the Leo Burnett group. The group also formed a strategic alliance with Dentsu as a

result of which it got its presence in the Asian and American markets. (Source: (adbrands.net)).

Demographics, Financials and Current Trends

According a report by the Nielsen group, the global advertising industry grew by 10.6% from

2009 to 2010. This means a revenue increase to US$ 503 billion according to the rate cards

provided by the Global AdView Pulse. This was due to a major increase in growth markets such

as the Asia Pacific region and Latin America. This is illustrated in the graph below:


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Source: (nielsen.com)

Sectors

Two of the sectors which were hit by recession very heavily the automotive and the financial

sectors spent about 20% more than the last year. According to industry experts the maximum

growth expected in advertising is going to be in the FMCG sector and in the Emerging markets.

The graph below gives a detail analysis of the increase in spending in each of the sectors

Figure 2


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Media

There was an overall increase in spending on all the traditional advertising media sources, the

highest growth being in television which now accounts for almost 60% of the total spending. The

graph below gives details of increase in spending on televisions, radio, magazines and

newspapers

Figure 3


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The primary reason mentioned for an increase in advertising was the 2010 Soccer World Cup. There is a

huge fan following of soccer globally so this attracted many companies and as a result there was

increase in the spending. The spending peaked during the second quarter and even in some of the

recession hit countries of Europe. The London Olympics in 2012 are expected to generate and create a

similar trend in the spending pattern on advertising by the companies. Regionally the biggest

advertising market the United States had a slower growth rate of 5.6% as compared to the global

average. China which is the third largest advertising market in the world gained about 51.4%.

The current spending by countries on advertising is listed in the graph below along with the expected

expenditure in 2014. As one can see from the graph below that the USA is still expected to dominate the

markets with a spending of US$173 billion. The biggest increase is expected in the growing markets of

China, Brazil and Russia. (nielsen.com)

Figure 4


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Source: (searchenginewatch.com)

The Rise of the Internet as a source of advertising:

The media which is expected to increase now is the internet. Google has created a revolution in

online marketing with its concept of Adsense. Out of the total spending on internet

Table 1


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advertisements around 65-70% is spent on search engines.

Source: (searchenginewatch.com)

There has been a reduction in the share of internet portals since 2007 due to the rise of the social media

websites such as Facebook and Twitter. Facebooks share of the market has grown from 0.6% in 2006 to

3.1% in 2010. (Source: (searchenginewatch.com)

The amount spent on online advertising in 2011 in various regions is listed in the graph below. From this

graph we can easily see that North America and Western Europe which contains most of the developed

countries is where maximum is being spent on online advertising. This is due to the accessibility of

internet in these regions.

Table 2


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(Yahoo.com)

Source: (emarketer.com)

The future of the industry is definitely in the digital and social media advertising. Some of the

predictions for the future are: Firstly, one expects that with the rise of the location based software

such as foursquare and Facebook places here will be a rise in the localization of marketing.

Another expected change is the use of celebrities as brand ambassadors via social media. The

more a celebrity tweets about your brand the popular it will be because of the fan following of

the celebrities. Another trend expected to arise is the importance of Facebook likes. This is

because now companies will be able to do press releases from their Facebook pages and the way

you communicate with your fans is going to be important. (Source: (ithinkmedia.co.uk)

Potential Pitfalls in the advertising industry: The potential pitfalls will have to be divided into

the pitfalls possible in the various forms of advertising. Firstly lets look at the online advertising

aspect of the industry. One of the potential problems is the lack of brand advertiser value and

there is too much attention paid on generating a direct response. This is due to the importance

given to paid searches and the Google AdSense model, as generating a response and getting a

click has become more important. Another problem is the lack of creativity in the online ads. The

North

America,

41.7

Western

Europe,

28.8

Asia

Pacific,

24.1

Eastern

Europe, 2.7

Latin

America,

2.2

Middle

East

and

Africa,

0.5

Percentage Share of Online Advertisment

Expenditure

North America

Western Europe

Asia Pacific

Eastern Europe

Latin America

Middle East and Africa

Figure 5


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issue is that due to the size of the ads an advertiser rarely gets the opportunity to create

something which will truly be able to generate an emotional experience for the end consumer. A

new problem that is rarely looked into by online publishers and media agencies is the issue of

sales and operational inefficiencies. The media agencies are responsible for updating the online

ads and ifthey dont do that on regular intervals the entire point of advertising online is

redundant. Finally the high cost of advertising online will be a barrier. (Source: (Picard)

). It costs about $75 for the online paid search in the US, as compared to approximately $10 for a

broadcast TV in terms of CPM. This means that for a thousand people to see an online ad I

would cost $75 as compared to $10 for a TV ad. These are the potential problems in the future in

online world.(Source:eMarketer, "How Much Ads Cost," April 23, 2009)Now we discuss what potential problems that have occurred due to the excessive

influence of advertising in the mass media. The first and foremost problem is that, due to the

funding of the free TV channels by advertisements the program content has been changed to suit

the corporates rather than focus on social and economic issues. Another problem is that for

media conglomerates such as the New York Times the audiences are the products to potential

customers such as the companies buyingadvertising space. The other issues are with the

manipulation of images of people in advertising. To increase the potential impact of a product,

the images of models and people in advertisements are changed. This is not only unethical it also

creates false hope in the mind of the end consumer an basically coerces them into buying theproduct. These are some of the problems and practices which are frowned upon by consumers all

over the world. If the politicians and policy makers are outside the influence of the big

corporates, after a few years the advertising industry could face problems and major losses in

revenue due to new government policies.

Source: Shah, Anup. Media and Advertising.Global Issues. 04 Mar. 2012. Web. 18 Mar.

2012.

Conclusion

To conclude what I would like to say is that the advertising industry probably is still going to

prosper, even though there has been in recession. The amount being spent by different companies

globally, across different sectors is on the rise. Whenever we talk about the future of advertising

it is impossible to ignore the social media. The future in advertising is definitely through online
http://www.globalissues.org/article/160/media-and-advertisinghttp://www.globalissues.org/article/160/media-and-advertising


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and mobile marketing as they are interconnected. The popularity of smartphones has led to

people accessing internet on the go, and being online practically 24/7. This is where ad agencies

and media houses need to capitalize. The creative geniuses of the world will probably still be

delivering one brilliant campaign after another and will continue to mesmerize consumers world

over. The only downside is that the small local ad agencies will be unable to compete with the

global media houses and might not be able to stay in the market. The rise of online marketing

and advertisement though has helped individuals showcase their talent and make the ads and

banners for websites. I believe that in there next few years AdSense will not be as popular and

Facebook and Twitter will dominate. The Television and Print Advertising will always remain in

the picture as it is the one that induces a complete sensory experience. So TV, Facebook and

Google are the mediums through which advertising will continue to take place in the future.


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Bibliography

adbrands.net. adbrands.net/publicisgrp. n.d. 17 March 2012

.

. Advertising Industry Structure. 27th July 2010. 28th February 2012

.

emarketer.com. emarketer.com/press release. n.d. 5th March 2012

.

History of Advertising. 2012. 12tb March 2012

.

ithinkmedia.co.uk. ithinkmedia.co.uk-digital advertising. n.d.

.

nielsen.com. nielsen.com/press release. n.d. 18 March 2012

.

Norris, Vincent P. "Advertising History According to the textbooks." Journal of Advertising Vol 9, No.3

(1980): 12.

Ogilvy, David. Ogilvy on Advertising. Multimedia Books, 1983.

Omnicomgroup.com. Omnicomgroup.com Home. n.d. 16 March 2012 .

Picard, Eric. imediaconnection.com. n.d. 18 March 2012

.

Pricken, Mario. Creative Advertsing. Thames & Hudson, 2008.

publicisgroupe.com. Publisicis groupe.com/en. n.d. March 10th 2012 .

searchenginewatch.com. Searchenginewatch.com/google rise. n.d. 18 March 2012 .

wpp.com. Wpp.com/ About us. n.d. 17th March 2012

.


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Shah, Anup. Media and Advertising.Global Issues. 04 Mar. 2012. Web. 18 Mar. 2012.

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