NEWS: Ad Leaders See Web’s Threat and Promise

Ed: Legacy media separates agency, publishing, and distribution roles. With new media, the roles have become blurred.

Should WPP and Omnicom fear Google and Microsoft?

Just read an interesting article in The New York Times, Ad Leaders See Web's Threat and Promise.

The premise is that because Google and Microsoft are spending billions of dollars, buying up all the major digital advertising networks -- the DoubleClick and aQuantive acquisitions are cited as examples -- the major agency conglomerates such as WPP and Omnicom are being shut out of the future.

According to The Times, they fear that these tech giants will transform advertising from ...

Ad Leaders See Web’s Threat and Promise

Eric Gaillard/Reuters

An advertising festival in France has shifted its focus from carousing to assessing the industry.

By ERIC PFANNER

Published: June 23, 2008

CANNES, France — The growing advertising ambitions of technology powerhouses like Google and Microsoft are creating alarm in the executive suites of ad agencies.

At an annual gathering here, executives harshly criticized Google’s recent agreement to place ads next to Yahoo search results. The move could strengthen Google’s dominance over the most lucrative portion of the fast-growing online advertising field.

Ad executives worry that Google and Microsoft, which is moving to bolster its capabilities in search and other areas of online advertising, will not stop there. They fear that the companies want to extend their reach into traditional advertising — transforming, as they see it, a business built on creativity to one controlled by the sterile algorithms of computer programmers.

Google “clearly wants to replace the advertising industry in its totality,” said Cindy Gallop, a former chief executive of the New York office of the ad agency BBH. She added, however, that she thought Google would be “fundamentally undermined” by what she saw as its antipathy toward traditional advertising.

Despite the alarm, advertising executives sometimes seem flattered by the attention. Even Rupert Murdoch, the chairman of the News Corporation, dropped in this year at the gathering, the Cannes Lions festival, formerly just a boozy awards show but one that has become increasingly businesslike. The conference ended Saturday.

Ad agencies are also eager to take advantage of the technology companies’ new tools. WPP Group, the second-largest advertising company after the Omnicom Group, spends $900 million a year of clients’ money on Google search ads, said Martin Sorrell, the chief executive of WPP.

Microsoft paid for 550 people — its own employees and those of clients — to attend the conference, roughly 5 percent of the total number of attendees. Its advertising ambitions, and the tensions that they have raised, were demonstrated when Microsoft announced at the festival that it had acquired Navic Networks, a company based in Waltham, Mass., whose software helps direct cable television ads to demographically desirably audiences.

Mr. Sorrell said ad agencies were being priced out in the quest to acquire companies like Navic and upgrade their own digital capabilities. “We coveted them, too,” he said during a panel discussion with representatives of Google, Microsoft, Yahoo and Time Warner’sAOL. “But we didn’t have the resources.”

While WPP and other advertising companies have acquired a number of digital ad specialists, the biggest prizes have gone to the new entrants, with Google spending $3.1 billion to buy DoubleClick and Microsoft $6 billion to add aQuantive.

Mr. Sorrell also questioned Google’s recent hiring of a number of ad executives, saying it suggested that the company planned a broader move onto the agencies’ turf.

Henrique de Castro, managing director of European sales and media platforms at Google, played down such talk. “The best results are when we work together with agencies,” he said. “The overall trend is that we work better and better with them.”

Hilary Schneider, executive vice president for global partner solutions at Yahoo, said agencies should not worry about the Yahoo-Google combination because it allowed Yahoo to continue running its own search service and to link up with other partners, thereby preserving competition.

Microsoft, too, tried to portray itself as a friend of the industry, urging agencies to join it in what it said was a struggle against a common enemy, Google.

“In an industry that is consolidating around a small number of advertising platforms, we think people are better served when there is n number of platforms, where n is greater than one,” said Kevin Johnson, president for the Microsoft platforms and services division.

Even some ad executives who said they had good relationships with Google expressed unease about its deal with Yahoo.

Derek Robson, managing partner of Goodby, Silverstein & Partners in San Francisco, not far from Google’s Silicon Valley base, said he placed his hopes in Google’s corporate creed, “Don’t be evil.”

“That mission is the right one, because they could become evil so quickly,” he said. “Nobody wants to work with a monopolist.”