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    February 18, 2010 // 9:33 AM

    My Dinner With Google & Madison Avenue

    Written by Brian Halligan | @

    Madison Avenue Last night I had a fascinating dinner hosted by the Massachusetts Interactive Technology Exchange that featured Google's VP of Platforms, a bunch of senior executives from Madison Avenue-ish firms, a senior marketing exec from a Fortune 500 company, a marketing analyst and myself.  The conversation was really rich and enjoyable.  I felt like it ended up being HubSpot and Google arguing for the complete transformation of marketing while the Madison Avenue-ish firms were trying to hold onto the traditional marketing models. 

    I don't know a lot of Madison Avenue bigwigs, so I learned a bunch of things that I'll share with you below.  I'm hoping to create a dialog around what folks think the future of Madison Avenue looks like.

    1. They were all exceptionally charismatic and convincing -- Don Draper in the flesh.  I could see how these modern day Mad Men built huge businesses for themselves.  Regardless of what happens to their industry, their ability to sell will serve them well.
    2. The whole business model of their industry is still centered around the "30-second (TV) spot."  It sounds like they traditionally had made their money as a percentage of their clients spend on advertising, but that most of them had moved to a retainer type model that is closer to how law firms and consulting firms charge.
    3. For the most part, they all seemed to be in different states of denial about the demise of the 30-second spot.  They used clever lines like the only way the car companies are going to "move steel tonnage in volume" is by mass TV ad purchases.  Some convincing stats were spouted that sounded counter to everything I'd been reading, but they were relatively convincing.  To me, the denial feels like the newspaper industry denial 3 or 4 years ago, but I may be dead wrong about that.
    4. I sat next to a great woman from one of the more forward looking Madison Ave-ish firms and part of her job was to manage her firm's relationship with a major Fortune 100 client.  For this account alone, she had 80 people on her staff working on it.  From this conversation, I now understand why it is such a big deal when they lose a big account! It would be hard as hell to backfill those 80 people on a new account as it is really unlikely they are going to bag an elephant of that size around the same time as losing one, and it's also going to be hard to spread 80 billable people around to other accounts in the meantime.  I suspect this type of situation must create major anxiety for managers and workers alike.
    5. There is a massive amount of consolidation going on in the industry by the big boys, but the valuations they pay are small multiples of EBITDA.  It struck me as odd that the big boys haven't been more aggressive in buying some recurring revenue companies like Eloqua, Reachlocal, QuinStreet, etc.  One exception seems to be WPP, who has done some small investments in some really early (risky) startups -- not sure why Sir Martin doesn't swing a bit harder on getting recurring software revenue as it could give him a major competitive advantage.  These recurring revenue streams would smooth out the revenue/people lumps and dramatically improve their valuations.

    I was a little overshadowed on the charisma meter, but I made a couple of points that I didn't think were half bad:

    1. I said that I thought Madison Avenue firms were going to have to dramatically change their business model.  In order to do so, they are going to have to dramatically shrink and then grow again.  My perspective is that they ought to do it willingly and proactively -- rather than die by a thousand cuts like the newspaper executives are doing.
    2. I said that I thought the bright spot for Madison Avenue is that despite what many people say, I think creativity is more important than ever.  Back in 1970, if a 30-second spot came on the air, you basically had to watch it no matter how bad it was because you only had five crappy stations (a couple more with rabbit ear manipulation), no clicker, no cable, no DVR, no Hulu, etc.  In 2010, the content you create needs to be fantastic in order to get watched, get linked to, get shared on social media sites, etc.  I think the creativity bar today is an order of magnitude higher than it was 40 years ago.  Madison Ave has the talent to create remarkable content that will break through the clutter and this will serve them well through what I think will be a very rough decade.

    What do you think:  (a) Is Madison Avenue going to grow over the next few years, (b) is it going to stay flat-ish, (c) is it going to shrink slightly, or (d) is it going to crater?  Vote below in the comments section.

    If you are an ad agency, a PR firm or a marketing services firm and think that the "Times Are A Changin,'" I'd encourage you to check out the announcement I made today on our Company News Blog about our new marketing services transformation programs or download the slides from our marketing services transformation webinar.

    - @bhalligan

    Photo Credit: Joey Parson


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