Red Frog, Inc.

by Brian Steinberg and Suzanne Vranica
The Wall Street Journal, January 5, 2004

One of the worst eras in advertising is drawing to a close, but 2004 will present a host of new challenges.

U.S. ad spending is expected to grow 6.9% to $266.4 billion in 2004, with world-wide ad spending set to rise 5.8% to $498.3 billion, according to Robert J. Coen, director of forecasting at Interpublic Group of Cos.' Universal McCann. Still, marketers are operating lean and mean and demanding more creativity and strategic thinking from their ad shops.

Five key issues have the potential to alter the marketing landscape. Each could serve as a catalyst for other shifts in this volatile industry:

TV's annual bazaar: Last year's "upfront" market -- where the major television networks line up sponsors for their prime-time programming -- brought in a record $9.3 billion, with marketers begrudgingly paying double-digit price increases. But soon after the prime-time season started, few marketers were pleased. Ratings for many top shows were disappointing, and young men -- a valuable demographic -- appear to have wandered elsewhere.

Will big-name advertisers rebel in 2004, either by refusing to pay another increase or by taking their ads elsewhere? TV prices are expected to stay high because broadcast-TV remains the most cost-efficient means to reach a mass audience. But some marketers may think -- and act -- differently. And the question remains whether TV executives can come up with the kind of programming that brings back the audiences advertisers want.

'Advertainment': Frustrated with the limitations of the traditional 30-second TV commercial, and fearful of gadgets that let viewers skip ads altogether, marketers have begun to find new ways to drive their messages home. Walt Disney Co.'s ABC is teaming up with WPP Group PLC's MindShare, a media-services firm, to create programs that can incorporate product placement and other sorts of brand alliances.

Once relegated to the screens of reality programming, in-show product plugs have made the leap into comedies and dramas. Ford Motor Co. vehicles, for example, are turning up in the drama "24" on News Corp.'s Fox network. Will consumers respond favorably? Or will they throw in with groups like Commercial Alert, a nonprofit organization co-founded by Ralph Nader, that has asked government regulators to investigate and possibly regulate such practices?

In-your-face antics: With commercial clutter skyrocketing and media audiences fragmenting, some marketers are taking their messages to the streets, hoping to integrate them into the fabric of our lives. Last year, for example, Coca-Cola Co. opened lounges for teens at malls. Campbell Soup Co. has unveiled "Soup Sanctuaries," which offer weary shoppers a chance to relax while enjoying free soup. AT&T Wireless staged buskers at transportation centers, singing spoof versions of famous songs that included amusing lyrics about cellphone courtesy. Are such approaches informative or annoying? The debate will continue in coming months as marketers turn up the heat on this hard-to-miss form of advertising.

The Return of the Web: As broadband penetration increases, marketers will have more opportunities to show off their creativity with ads that have TV-commercial quality, plus all the bells and whistles that Web-based advertising already uses. Some advertisers are on board now. German car maker Bayerische Motoren Werke continued to make strides in 2003, for example, with short Web-based films about its BMWs by major movie directors. And presidential candidates Howard Dean, Wesley Clark and others are the envy of many marketers with Internet-based efforts that include a Weblog that anyone can join and techniques that urge people to hold their own house parties and communicate among themselves.

Universal McCann's Mr. Coen sees national advertising via the Internet rising 10% over 2003 to about $6.2 billion in 2004. Already, one media-services firm, Publicis Groupe SA's Starcom MediaVest Worldwide, has put forth the notion that the broadband platform ought to have its own "upfront," which could theoretically let marketers lock up advertising time in advance on the most desirable video programming shown online by Internet service providers such as the AOL unit of Time Warner Inc.

Will marketers take advantage of the new capabilities and come up with Web advertising that will actually work without ticking off surfers with ever more pop-up ads? The Internet has proved difficult to master in the past, but as more households embrace broadband, the potential is too great to ignore.

Pay Pressure: Times are getting better, but the nation's top marketers are still keeping a tight grip on the agencies they hire and the ad dollars they spend. Clients are increasingly calling in executives from their purchasing departments to help choose which agency would provide the best work at the most attractive price. Those decisions were once determined over a handshake and a martini, and frequently were based on longstanding relationships between an agency honcho and the client. Now much of that intimacy is gone.

Last year, for example, chemicals titan DuPont Co. put ad agencies through a multistep process that included an online auction in which five rivals had to compete on pricing. Other marketers are examining numbers of agency employees on accounts and even going overseas to examine foreign offices. How will agencies, unaccustomed to such intense scrutiny, deal with even more of it this year? Few on Madison Avenue are eager to find out.

Posted on aef.com: January 8, 2004