Madison Avenue: More influential than ever?

Two news items this past week, first, that AOL is moving its corporate headquarters to New York City and that Google is hiring Ogilvy executive Andrew Berndt to supervise its new Creative Lab unit, both belie the notion that Madison Avenue has become irrelevant to the future of advertising. In fact, both developments show that Madison Avenue’s influence on the world of online advertising is growing. Why?

1. Creativity is King

Despite the fact that the self-serve advertising model employed by Google, Yahoo, and MSN has gained traction in the past few years, advertising remains a profoundly creative field. There is only so much creativity that can be expressed in a 40-character text ad headline, but Google and the other engines are rapidly evolving into ad serving networks capable of serving completely new forms of advertising that will be expressive as well as smart. Traditional agencies may be strongholds of creativity, but there’s been a long-standing divide between creative and media buying units. Creativity needs to be redefined as a quality of the message (the traditional “content” of an advertising unit), the properties of a given digital media, and the shape of a given digital marketing campaign. The search engines and specialized online shops have a lot to teach Madison Avenue about how creativity must be redefined, but Madison Avenue’s talent for coming up with compelling “big ideas” should be respected as well.

2. The World Isn’t Flat

One of the biggest conceits of the digital era is the idea that relationships conducted at a distance are always effective substitutes for face-to-face contact. Advertising is very much a “people-oriented business,” a fact not lost on Yahoo’s former chief sales officer Wendy Millard, who presented Yahoo’s case not in a conference room, but at a reserved table at 21, one of the plushest, most storied restaurants in New York. Millard’s success in convincing big brands and big agencies that Yahoo was a preferred advertising platform had a lot to do with her reputation as a world-class shmooze-meister. Unfortunately, Yahoo fired her in June, and my bet is that Jerry Yang will soon regret this mistake (especially because AOL has probably reserved the table at 21 that used to belong to Yahoo).

3. The Online Ad Business Is Still Relatively Immature

Non-search online spend equals 6.6 percent of overall ad spending, according to TNS Media Intelligence. While online spend grew 26 percent in 2006, rates of growth are forecast to slow to 20 percent in 2007. Press accounts have attributed slower growth rates to reluctance on the part of advertisers to make heavy commitments to online ad platforms, including social networking sites that haven’t yet proven their worth. Although everyone realizes that audience fragmentation is a reality that won’t go away, the lion’s share of media spend will continue to be claimed by traditional media for the foreseeable future. Many say that institutional inertia and technological cluelessness on the part of old school Madison Avenue executives are solely responsible for the projected imbalance in spend, but the fact is that major questions remain about the effectiveness of online advertising, which neither creates demand nor has yet delivered on the much-lauded promise of providing transparency and accountability. Some of these issues are so difficult to resolve that it may take years of close collective effort before the online ad medium is able to claim its rightful share of overall ad spend.

So it’s not surprising that tech-oriented companies have decided to forge closer ties with Madison Avenue. Madison Avenue is where the money is, where the issues are, and where the work needs to be done, and technology companies need to position themselves as partners in a process, instead of barbarians at the gates. This means abandoning their rhetoric of confrontation and sitting down with Madison Avenue’s thought leaders to forge meaningful solutions to the profound questions that confront the advertising industry today.

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