The world of advertising has never been so complicated. An industry built around 30-second television commercials is facing up to the knowledge that these “spots” just don’t do the job anymore. Consumers’ fast-changing media habits have made campaign planning a minefield, and there’s little public tolerance for ads, jingles, flashing banners or anything else that interrupts. All this at a time when, with jobs being shed and consumer spending power on the skids, some CEOs are asking whether a good chunk of the ad budget might be better served elsewhere.

Global advertising spend is expected to drop 0.2% this year, to €344bn — the first drop in worldwide ad spending since a post-dotcom dip in 2001. In the US, the decline will be a deeper 3%, according to media and marketing agency network GroupM. This shift into negative territory is a huge reversal of fortunes for an industry that’s been growing at an average of 6.5% a year for the past five years.


In a sense, the pressure on advertisers and their agencies to move with the times isn’t new. Industry pioneer Leo Burnett once said: “There’s no such thing as a permanent advertising success.” What’s different now is that, as demand for visible ROI strips away some of the mystery shrouding the ad business, fundamental questions are being asked about what advertising ought to do, where agencies fit in, and the relationship between brands and the people who buy them.


Lucian James, founder-president of brand consultancy Agenda, says the economic downturn has simply intensified a bout of soul-searching that was already under way. “The golden age of advertising was in an era when it pointed out distinctions between different products, and sold an image that helped people distinguish between and feel loyal to a specific product,” he says. “Avis tried harder, and Ariel washed whiter. That era is over and has been for a while.” 


Now shoppers consult expert blogs and peer reviews before buying anything from holidays to shampoo. “People aren’t interested in advertising or being sold to by someone,” says Amir Kassaei, chief creative officer in Germany for DDB Group, an ad agency network. “One of the consequences of the banking disaster is people don’t believe anymore. They want to decide for themselves what’s good and bad.”


Advertisers, meanwhile, are losing faith in the very vehicles that have for decades driven them into customers’ hearts — or at least their shopping trolleys. Primetime TV spots no longer reach an entire nation. Establishing where certain kinds of consumers are likely to be at any given time has always been a science; now, it’s an art form. And, even when you find your target audience, often they’re not paying much attention. A study of affluent Europeans by market research company Synovate shows just how distracted we’ve become. About 70% to 80% of the time people spend watching TV is simultaneously spent doing something else — eating, texting or checking emails, for instance — and the same goes for reading magazines. 


Little wonder then that advertising online is booming. The risks are usually lower as ad space — which snatches about 80% of a traditional campaign’s budget — can cost next to nothing. “Clients are getting a bit ahead of their agencies and saying ‘there’s lots of stuff happening in the digital realm, why aren’t we out there?’” says Patrick Gardner, co-founder of Perfect Fools, an international digital creative agency. “It’s a big change from five years ago when they were very sceptical about it. It’s not just about keeping up with the Joneses anymore — not just ‘doing a bit of digital’ because everyone else is.”


GroupM forecasts online ad spending to grow this year by 10% — well down on the 22% growth of last year, but taking online’s share of advertising spend to €44bn, or 13% of the total. GM announced in 2008 it would put half of its €2.2bn a year ad budget into digital and other one-to-one media within three years. Verizon, Chrysler, Nestlé and Burger King are among other big names announcing significant budget shifts into digital.


The viral video ‘Evolution’ by personal care brand Dove is still, two years on, a poster child for online advertising. Nike is another pioneer in this field, and an online campaign for Swedish pension company AMF, which allowed people to see what they’d look like aged 70, had 5% of Sweden trying it out. 


Online social networks have clear appeal, reaching consumers at a time when they are paying attention, and some of the world’s biggest advertisers have been experimenting here. Procter & Gamble has used Facebook to generate “fans” for Crest Whitestrips, a tooth whitener, and Tide washing detergent. But this area remains largely unproven and may even backfire: technology research firm IDC reports that so few internet users would willingly let advertisers use their friends that the idea of social advertising is stillborn.


“Some people are being too extreme and trying to make everything viral, thinking they’ll put something out and people will come,” adds Perfect Fools’ Gardner. “It’s easy to present digital as something that’s come along to solve all your problems … but it’s still very young and there’s a long way to go when it comes to measuring results.”


For Ann Handley, editor of Marketingprofs.com, a Texas-based marketing company, social networking sites such as Twitter [see All Talk, No Action article in this issue] may help in a recession: “Dwindling budgets suddenly make low-cost social media look like the pretty girl at the ball.”


One potentially far-reaching project intended to create and research new advertising models is The Pool, a collaborative venture spearheaded by Publicis-owned Starcom MediaVest Group. Several media owners, including Hulu, Microsoft Advertising and Yahoo, and clients, including credit card provider Capital One and petfood company Nestlé Purina, are to focus on online video, althought its future plans includes advanced TV, mobile media and social networking. 


Starcom CEO Laura Desmond says: “We already know consumers behave differently when interacting with different media, so we have to move away from old models.” 


Yet alongside new media, old-fashioned, in-store marketing is enjoying a resurgence, assisted by advances in technology. This is where you hit shoppers in the so-called “last mile” of the purchase journey — those last steps before they pull out their credit card. This makes good sense given that nearly 30% of shoppers wait until they’re in a shop to decide which brand to buy. Rafe Ring, global planning director at marketing services agency OgilvyAction, says one in 10 shoppers changes their mind about a brand once they’re in-store, and nearly 20% get to the tills with something that wasn’t on their list. Marketing in-store is no longer limited to free samples and special offers. In-store video can tailor messages to shoppers depending on the aisle they’re in and the time of day. High-tech trolleys can even suggest complementary products to the ones you’re picking up.


As advertisers re-examine the way they connect with harder-to-reach consumers, it’s natural that some also ask whether they can afford to keep advertising at all, given the current pressure on business costs. Ad agencies and media outlets selling ad space say that they can’t afford not to. The argument goes that when shoppers buy more carefully, it’s no time for your brand to vanish from the radar; in fact, if your competition cuts back, then simply by maintaining your level of advertising, you make more noise. You also get more bang for your buck as weaker demand drives down the price of ad space. Observers of past recessions say all this rings true. McGraw-Hill’s analysis of the 1981–82 recession found those brands that maintained or increased their ad spend averaged significantly higher sales and profit growth during and after the recession than those who spent less. The most aggressive spenders were, by 1985, posting sales 256% higher than those who hadn’t kept up their campaigns. 


But not everyone’s convinced. When the Association of National Advertisers in the US recently polled its members — who collectively spend some €75bn on marketing — about the effect of the downturn on budgets, a third still said they’ll cut back this year. Another third said they’ll spend the same amount but in a different way, and 27% plannned to up the money. What they agreed on, however, was that they shouldn’t stick with the status quo; only 7% said they’d be doing pretty much the same as last year. As marketing consultant and author Seth Godin says: “Traditional approaches are obsolete; 100 years of marketing thoughts are gone.”


Shifts in media strategy are being accompanied by a change in the tone used in advertising. LG Electronics is dimming the lights on its ‘Life’s Good’ slogan because, as LG marketing director Andrew Warner has noted, “life isn’t actually that good now”.


Gary Leih, chief executive of ad agency Ogilvy Group UK, expects fewer big-budget spectaculars on TV. “Instead, we’ll see a return to the well-crafted, slightly homely ad — something well-written and well-acted that gets its message over in an amusing or witty way. Nostalgia will probably play a part, as people look for comfort and reassurance.”


British supermarket Sainsbury’s, for instance, until recently had celebrity chef Jamie Oliver urging shoppers to try something new, often with pricey ingredients. Now, its adverts advise on creating a family meal from leftover sausages. “We’re seeing brands trying to empathise more with what consumers are going through and that’s creating seismic shifts in the way they communicate,” says Graham Hales, group chief communications officer with Interbrand. However, he cautions, for brands to remain credible, they mustn’t stray too far from their original message. Sainsbury’s, he says, may have gone a step too far. “Just a few minutes ago you were a source of aspirational food and now you’re about ‘make do and mend’, potentially a bit patronising,” he says. “It’s a good idea to empathise and sympathise but it’s terribly difficult to pull off.”


But, even cynical and hard-up consumers can still fall in love with brands — and that love can overwhelm concerns about price. Just ask a Mac user if they’ll be trading down this year. A great brand delivers a great user experience — that is, it’s a good product first and then it projects a personality that resonates with its target audience. This “personality” is not just marketing speak, it makes financial sense, according to Millward Brown, the market researchers who create the annual BrandZ ranking of most valuable brands, currently topped by Google, GE, Microsoft, Coca-Cola and China Mobile. 


Millward Brown global account director Peter Walshe says if you’d invested in the S&P 500, a good proxy for the brands covered by BrandZ, in the three years to mid-2008, you’d have made 3%; a portfolio of BrandZ strong brands would have made 23%. “Brands which deliver a great product experience, have a clear brand image and are dynamic… command a premium, generate repeat purchasing and recommendation,” he says.


Strong personality or not, in times like this it’s logical for companies to start discounting to shift stock, something that works in the short term but is potentially damaging longer term. Value can be part of what a strong brand stands for (McDonald’s is in the BrandZ top 10), but if cheap is all a brand is, every branding consultant will readily tell you, it’s not long for this world.


In addition to adjusting their ads, advertisers are also getting to grips with what’s called branded entertainment. On the face of it, it’s not new, but it takes product placement into a new dimension, and Agenda Inc’s James says it’s the way forward in an increasingly ad-hostile consumer world. Rather than interrupt a programme or delay the start of a movie, why not get inside it and add to the action. Done well and with a great idea at its heart, this can provide not just brand exposure but real entertainment for consumers, enhancing a story and giving a sense of realism. A great example is Heineken’s presence in the acclaimed TV series Mad Men, set in 1960s ad agencies. The beer is a vital element of a scene in which a senior exec hosts a dinner party for agency partners. Without the brand, the scene would not have made sense.


What does all this mean for agencies? They still need to come up with scintillating ads, and campaigns that work in new media. But most accept they must do more for their money. 


“We have to change radically. We can no longer just provide advertising ideas,” says DDB’s Kassaei. “Clients have real problems which we can’t solve with advertising and communication anymore.” Agencies, he says, need to examine the bigger picture and become a kind of creative consultancy. In future, advertising may be part of what an agency recommends, but not necessarily the start and finish of it.


Some agencies are looking at more radical shifts in emphasis. Anomaly, an agency in New York with plans to expand into Europe, works not only with clients’ products but creates its own. Projects include a premium skincare range developed with biochemist Tammy Ha, and i/denti/tee, a business which enables music fans to have T-shirts printed with their favourite lyrics. This is run jointly with Edun Live, iTunes and Hard Rock.


Similarly, The Brooklyn Brothers, an agency in London and New York, has launched its own chocolate, called Fat Pig, along with soft drinks and toys. And Bartle Bogle Hegarty’s new brand invention division, Zag, makes personal alarms that scream rather than beep, and vegetarian meals, such as “Shepherd’s Pie (without the sheep)”, which it anticipates being a €11m retail business within a year.


Some in the industry are sceptical: “I don’t think agencies creating their own brands is anything more than a bit of a fad,” says Leih. “We’re here to nurture our clients’ brands, not to go into competition with them.” Whether or not this turns out to be the case, advertising is clearly undergoing a revolution. As Godin says: “Alternative approaches aren’t a novelty; they are all we’ve got left.”


Jason DeLand, founding partner of Anomaly, says the current climate will have a Darwinian effect. “It’s going to make good companies better and companies that are struggling go away. A bit of natural selection isn’t going to hurt … it’s healthy.”