Sterling Cooper What Happened to You?

As a shameless tag along to last night's Mad Men premiere, I want to develop a hypothesis that I've been kicking around about how agencies, companies, and other elements of the marketing value chain have evolved since 1963.

Back in the 1960s, I've heard from some reputable sources, agencies were much more "do it all marketing companies." The distinctions we make today between a digital agency, an old line agency, an experiential marketing agency, and a marketing strategy firm would be foreign and meaningless back then, because agencies, in many cases, handled all elements of a client's customer facing presence. This was marketing in it purest form. The agency handled research, ideas, creation of message, art, and getting it out to the market. In many cases, agency folks would do things they had no idea how to do, but succeeded anyway. From what I've heard, it was (even removing all the booze, womanizing, and other crap,) a much more exciting time.

I work in a marketing consultancy. We do things that agencies would have done in the 1960s without knowing they were doing them. Did they do those things as well as a specialist would do today? Probably not--but I'm also willing to bet that marketing has lost something to over-specialization and fragmentation. Having all of the people thinking about a brand under one roof has huge benefits. Network effects drove huge creative outbursts and incredible innovation in marketing in the 1960s and 1970s. This is similar to a Google today, at least what I imagine Google to be. You have a company trying to do a whole bunch of cool stuff; specialization has not yet occurred, and innovation happens.

Much more of marketing has been brought in house by companies trying to save money. A lot of this was definitely good, but I think it can also be stagnating. Having people working on your customer facing presence who were working on, say, London Fog last year has benefits. I'm not saying that companies should look to "re outsource" the marketing function, but it's an interesting idea. H1: A company that came along today looking to trade on network effects of multiple creatives handling all elements of a company's customer facing presence... from sales to TV to database to you name it... and really executed on it (and not just said it) might actually be able to make some serious hay.

This is why it would be tough to make a Mad Men today about a company in the "marketing business". If you were going to make a show that good about a company today, it would probably take place at Google. Actually, let's try "company shows" most emblematic of their decade:

• 1960s: Mad Men (Advertising)
• 1980s: L.A. Law (Legal)
• 1990s: Office Space (IT.. ok, it's a movie, but give me a better one)
• 2000s: Project Runway (Fashion)

Seems like a Google show needs to get made.

P.S. As far as Mad Men last night, while initially underwhelmed, I've been thinking about the episode all morning, which probably means it was actually really good. I didn't like the birth flashback at first, but I now think it was really clever. I loved the London Fog sales call, and I guess the thing that struck me there was that Don was essentially out of ideas and looked pretty impotent. The Sal scene with the bellhop was so awkward but great... and finally Pete's behavior as the junior executive we love to hate reached new levels. Lots of great aesthetic pieces too--the Japanese porn, the Stolichnaya as a cuban cigar equivalent, the use of raincoats as metaphor for (staying in the closet; hiding from the past)... By the way I'm headed to Baltimore tonight. Should I be worried?

Ways Around Click Fraud?

Click fraud is getting a lot of attention in the mainstream press. The Economist had an interesting article this week on the problem, suggesting that it could be the number one threat to Google's market capitalization moving forward. Google's engineers are quoted glibbly proclaiming that "they're having a lot of fun" keeping up with the fraudsters. This attitude is probably not appreciated by the folks buying the adwords or banners.

I've talked to a bunch of online marketers about where this is headed, and I've heard some really interesting ideas (one of which is mentioned in the Economist article.)

1. Begin tying pay-per-click back to some more concrete pipeline metric. The problem with comping search vendors on clicks is akin to compensating B2B marketers on leads (with no strings attached.) Smart B2B marketers demand to be measured further up the pipeline--for example to qualified leads or even to closed deals. The added credibility of "real revenue" far outweighs the potential for "the incompetence of the sales force" or other such drivel. Marketers / search engines should start thinking of ways to pay little for clicks and a lot more for qualified leads or even wins. This takes better systems, sure--but Google should have no problem with this. Witness the ease with which they've been able to get people signed up for Adsense!

2. Begin thinking about impressions as well as clicks because of the attitudinal component. Google could get around the clicks issue largely by starting to look at unique served impressions across some segmentation--the idea that Google isn't just in the business of filling the pipe but also in the business of changing impressions. Even if someone doesn't click on it, if Oracle comes up everytime someone does a database search, that's gotta have an effect on attitudes (if anyone knows of research showing this, we'd love to hear about it.) This gets around click fraud because Google could start looking at research-driven test / controls--essentially changing the game.

3. Just keep going with the arms race. Hackers are constantly thinking up new ways to fool Google on what makes a legitimate click, and of course Google "has fun" responding. Not getting into all of the specifics, the danger is that Google will eventually start cutting into more and more legitimate clicks--which will harm their revenue streams and also the reputation of search and online advertising in general over the long haul. All of this is statistical or algorithmic in nature--thus not perfect. If we've learned anything from years and years of Microsoft / hacker battles, there's no sure fix for anything like this. Unfortunately, this option is both most likely in the near term and also least likely to be effective.

For those of you interested in the original article in the Economist, you have to be a subscriber or view a short advertisement for a day pass, but here's the link.

Google's Continuing March Forward

“We believe the company is rapidly becoming the digital advertising agency for every company in the world.” --Stifel Nicolaus & Co. analyst Scott Devitt

http://www.kansascity.com/mld/kansascity/business/15811833.htm

Google's market capitalization ($143 B as of Friday, October 20th) continues to blow by various old media, software, and computer hardware companies. Is the valuation justified? There does seem to be a bit of the extrapolation-driven valuation going on--the same methodologies that drove up the prices of Enron and Global Crossing in the late 1990s. However, the difference is that Google's business model is actually simple, understandable, and makes money. There are three big questions that dog Google today and basically form the "beta" around the stock's current meteoric rise.

1. Barriers to Entry. I don't think there's any question that if Google can grab up 40-50% of the online advertising and media game over the long-run, the current valuation is actually pretty conservative. However, what is preventing others from joining the party? This is really the YouTube question. Sure, YouTube has the lion's share of Internet video today, but there is really nothing behind it. It would take a Microsoft a couple months to throw together a competitor--wouldn't it? Google needs to get barriers to entry up fast, and I still think it's an open question if barriers to entry are even possible in an open-standard Internet.

2. SEC Action. Uh, remember when Microsoft had all of the OS share and was using it to sell Office, Media Player, etc. etc.? We're not there yet, but I have to think that the SEC's lawyers have a list somewhere in Washington and Google is on it. The difference is that so far they haven't done anything anti-competitive, but at this rate, they will be a Monopoly over multiple forms of digital media, and it'll be harder and harder for them to argue that they're not stifling competition and innovation. Google needs to figure out how to grow smart, leaving just enough competitive pressure out there to avoid a costly SEC investigation. Was it just coincidence that Microsoft's transitition from growth stock to mature stock happened just when the SEC investigation reached its peak?

3. Transition to Old Line Media. Google has publicly stated that they want to move into TV, radio, print, etc.--essentially optimizing media for its clients across both online and offline channels. Why? Is this the first sign of a company losing its focus? This strategy could dilute Google's strategy and definitely could turn into a boondoggle. The reason is simple--you can't write code to track the effectiveness of offline media, and there are about 10,000 companies creating, buying and measuring offline media today. It's true that Google's smart people could be scary here, but isn't there a lot more room to grow online?

So will Google see a real competitor emerge in its core search and online advertising business? Will the company start down the dark path towards anti-trust? Will their non-core business forays distract what has been an extremely deliberate and effective growth strategy thus far? We'll see. I'll revisit the topic in a year and we'll see how they're doing.