Summary of Frenemies

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9

Qualities

  • Comprehensive
  • Analytical
  • Insider's Take

Recommendation

Traditionally, ad agencies collected a commission on their clients’ ad buys, plus a percentage of ad production costs. In addition, they secretly got kickbacks from media companies. This profitable business model is eroding as ad agencies face competitive threats from internet platforms. Media analyst Ken Auletta reports that many companies now create and place their own ads,and that technology might further supplant agencies in the future by automating their work. His inside report will appeal to those in the marketing industry, and general readers will appreciate Auletta’s emphasis on advertising’s societal impact.

About the Author

Ken Auletta has written the “Annals of Communications” profiles for The New Yorker since 1992. His bestsellers include: Three Blind Mice, Greed and Glory on Wall Street, World War 3.0, The Highwaymen and Googled

 

Summary

Advertising agencies struggle as newspapers and other older forms of media compete with popular online platforms for ad sales.

The current antipathy toward traditional advertising may become permanent, and consumers may become “frenemies” of the agencies that rely on them. Television, radio, magazines and newspapers are struggling as advertising sales revenue declines. Meanwhile, growing advertising revenue growth is strengthening Google and Facebook. Today’s economic hardships for traditional media are linked to the shaky business models of advertising agencies as they experience competitive threats from the companies they cooperate with and those they compete against. These trends ultimately will affect “where – and whether – citizens get their news.”

In March 2015, Jon Mandel, former CEO of MediaCom, a leading media agency, said in a speech at a conference of the Association of National Advertisers (ANA) that ad agencies commonly collect kickbacks or “rebates” from media companies when they buy ad space on behalf of their clients.Mandel claimed ad agencies command kickbacks equal to ...


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