Frenemies: The Epic Disruption of the Ad Business (and Everything Else)

ALSO BY KEN AULETTA

Googled: The End of the World as We Know It

World War 3.0: Microsoft and Its Enemies

The Highwaymen: Warriors of the Information Superhighway

Three Blind Mice: How the TV Networks Lost Their Way

Greed and Glory on Wall Street: The Fall of the House of Lehman

Media Man: Ted Turner's Improbable Empire

Backstory: Inside the Business of News

The Art of Corporate Success: The Story of Schlumberger

The Underclass

Hard Feelings: Reporting on the Pols, the Press, the People and the City

The Streets Were Paved with Gold: The Decline of New York, an American
Tragedy

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Copyright © 2018 by Ken Auletta

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LIBRARY OF CONGRESS CATALOGING-I
N-PUBLICATION DATA

Names: Auletta, Ken, author.

Title: Frenemies : the epic disruption of the ad business (and everything else) / Ken Auletta.

Description: New York : Penguin Press, [2018] | Includes bibliographical references and index.

Identifiers: LCCN 2018006195 (print) | LCCN 2018007151 (ebook) | ISBN 9780735220874 (ebook) | ISBN 9780735220867 (hardcover)

Subjects: LCSH: Advertising agencies—History. | Advertising—History. | Marketing—History.

Classification: LCC HF6178 (ebook) | LCC HF6178 .A895 2018 (print) | DDC 659.10973—dc23

LC record available at
https://lccn.loc.gov/2018006195

Version_1

For Matt and
Sam

INTRODUCTION

In a 1970 TV commercial, a group of child actors portraying Louis Armstrong, Fiorello La Guardia, and Barney Pressman as kids are sitting on a New York City stoop and asking each other what they hope to be one day. Armstrong says he wants to be a musician. La Guardia says he wants to be mayor of New York. The bespectacled Barney Pressman is quiet, so they prod him: “Whaddaya gonna be when you grow up, Barney?” Pausing to adjust his glasses, the future founder of Barneys clothing store says, “I don't know. But you'll all need clothing.”

For more than three decades, in books and in my Annals of Communications pieces and profiles for
The New Yorker,
I have reported on the digital hurricane that has swept across the media industry. I have tried to “follow the money,” to understand the source of the economic harm that has struck newspapers, magazines, television, and radio, all reeling from shrinking advertising revenue—revenue now fueling Google, Facebook, and a myriad of other new digital enterprises. You
can almost hear the young Barney Pressman trilling the world, “You'll all need advertising and marketing.”

Worldwide, advertising and marketing is variously said to be a $1 trillion to $2 trillion industry. Of that astronomical sum, roughly three quarters is categorized as marketing dollars. Often, rather than joining together the words
advertising
and
marketing
, we employ the shorthand, advertising. We do so because advertising is a more familiar term, and to utter both terms together is a mouthful. In fact, advertising and marketing are interchangeable. They take different forms, but each involves a sales pitch. A thirty-second TV ad or a full-page ad in a newspaper seeks to sell something, which is also a marketing pitch. A direct mail or newly designed brand name or email solicitation or giveaway coupon is listed as a marketing expenditure, but it's also an advertising sales pitch. So the two categories are really one.

Yet advertising and marketing, like the media industry it has long subsidized, is convulsed by change, struggling itself to figure out how to sell products on mobile devices without harassing consumers, how to reach a younger generation accustomed to dodging ads, how to capture consumer attention in an age where choices proliferate and a mass audience is rare.

In the course of my work as a journalist, I have tended to shift back and forth between the disrupters and the disrupted. My first book,
The Streets Were Paved with Gold
, published in 1978, chronicled how New York City had been hit by a Category 5 economic and social storm that shattered its manufacturing base and spurred the flight of its middle class. My focus on the people on the wrong end of change continued in 1981, in a three-part series in
The New Yorker
that grew into a book,
The Underclass
. A reporting sojourn to Wall Street in the mid-1980s resulted in
Greed and Glory on Wall Street
, a battlefield account of the corrosive greed that brought low Lehman Brothers, the oldest partnership on Wall Street, and signaled the Wall Street
gluttony that produced insider trading scandals and would bear such disastrous fruit in 2008.

It's fair to say that at this point I was a naïf about the advertising industry's true economic power. That began to change in 1985, when I embarked on a nearly six-year odyssey through the world of network television while reporting my book
Three Blind Mice
, a report on how the three dominant television networks—CBS, NBC, and ABC—were being disrupted by a new technology, cable. Advertising was central to that story, for unlike cable, the networks were 100 percent reliant on advertising. And so when the estimable Tina Brown, the new editor of
The New Yorker
, offered a regular platform in the magazine, which she called the Annals of Entertainment, I demurred. I told her that in reporting
Three Blind Mice
I glimpsed how the world of media was being transformed, and so we needed a broader rubric—the Annals of Communications—because studios and publishers and television and digital companies were increasingly invading each other's turf.

Over the next quarter century, unsettling change was the subject of much of my work for the magazine and for my books, and the advertising industry was often a backdrop for the stories, and usually an underexplored one. I witnessed the flight of advertisers from old to new media with my reporting for
The New Yorker
about Google, which led to the book
Googled: The End of the World as We Know It.
The flight of advertisers from old to new media started in the late 1990s and accelerated in the new century, and its impact was hard to miss. Less obvious was the impact on the ad industry itself. In the public imagination, we were still in the age of Don Draper, but I began to see more and more clearly how this industry that had been intrinsic to the disruption of old media was itself facing fundamental challenges to its existence.

Trying to understand the media without understanding advertising and marketing, its fuel supply, is like trying to understand the auto
industry without regard to fuel costs. A war correspondent would be derelict not to try to calculate whether General Patton had enough gas in his Third Army tanks to race across France in 1944 (he did not). But it's not merely that a reporter covering the communications business would be remiss not to follow the up to $2 trillion advertising and marketing sector; anyone who takes a moment to ponder this pool of money can't avoid the inescapable truth that capitalism could not exist without marketing. True, the force of marketing is often malign, seeking to manipulate the emotions of consumers. Readers of this book will, hopefully, share my rage at the many tricks marketers practice. But marketing has a purpose in a free society, and intellectual honesty compels us to recognize that those who sell products need a way to share information about them with consumers. In a non-state-dominated economy, advertising is the bridge between seller and buyer. It would seem an obvious statement, but I've found it bears repeating. And that bridge is teetering, jolted by consumers annoyed by intrusive ads yet dependent on them for “free” or subsidized media. In this sense, consumers are frenemies.

To dig deeper into this world is to realize that more is being disrupted here than the flow of marketing dollars. The agency edifice itself is being assaulted, as new rivals surface—tech and consulting and public relations and media platform companies—many of whom have long been allied with the agencies and claim still to be. A once comfortable agency business is now assailed by frenemies, companies that both compete and cooperate with them.

For many years, I examined advertising as an aspect of some other story I was telling. It crept up on me that there was much to be learned by turning that around and looking deeply into the advertising industry itself, and through it out onto the wider world—a world of artificial intelligence (AI) and algorithms and big data that raises fundamental issues, including issues of privacy, issues of whether the science of
advertising can replace the art, whether relationships still matter, and where—and whether—citizens get their news.

This book is populated by characters who represent the points of tension within this world. You will meet artists like Bob Greenberg, founder of the R/GA agency, who rail at consummate executives like Martin Sorrell, CEO of WPP, the world's largest advertising and marketing holding company; the scientists, including the engineers at Facebook and IBM, who fervently believe in their machines; the clients, like Unilever's Keith Weed and GE's Beth Comstock and Linda Boff, who must wrestle with trust issues between clients and their agencies; and you will meet Michael Kassan, a charming man who relies on relationships to link the artists and managers and clients and scientists.

This book attempts to peer deeply into this world. I sought to step into the shoes of many important actors and frenemies in the marketing world, old and new, disrupters and disrupted alike. It is a world stocked with passionate and creative people, but it is also a world roiled by anxiety. Ultimately, this is a story of a world whose fate is imperiled, and why that fate matters to us
all.

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