Has the ad biz lost its lustre?

In the golden age of the 1970s and '80s, colourful executives earned huge fees for classic campaigns like those above. But creative standards have slipped. Alex Benady reports.

Last Updated: 09 Oct 2013

In the bad old days before the British railway network was broken up into dysfunctional rival parts, it operated as a dysfuntional monopoly. Dogged by poor industrial relations, complacent management, government under-investment, a relaxed attitude to punctuality and a casual indifference to customers, it was decided in 1981 that the railways had an 'image problem'.

British Rail's chairman Sir Peter Parker thought an advertising campaign might do the trick. One of the agencies he invited to tender was Allen Brady Marsh (ABM), run by the abrasive but flamboyant Peter Marsh. He was not an obvious choice, being a cigar-chomping ad man who generally travelled by helicopter.

Sir Peter and a posse of BR's top brass duly turned up at ABM for the pitch. They were received by a bored receptionist filing her nails and made to wait in a dingy foyer, strewn with coffee-stained tables and overflowing ashtrays.

After a while she brought them some tepid tea in plastic cups. Minutes ticked by and still nobody came to meet them. Furious at this high-handed treatment, the BR managers were about to storm out when Marsh and his team finally appeared. 'That's how the public sees BR,' said Marsh with a flourish. 'Now let's see what we can do to put it right.' Needless to say, he won the business, producing the 'This is the Age of the Train' campaign, starring no less a celeb than the tracksuited Jimmy Savile.

Those were the days. 'Advertising was about theatre and showmanship. People expected it,' recalls Lord (Tim) Bell, former MD of Saatchi & Saatchi, founder of Lowe Bell and now chairman of listed communications group Chime. There seemed to be almost no limits to its power. It could launch new products, restore the health of old ones, change social attitudes and install governments. (It is often claimed that Saatchi's 1979 poster 'Labour Isn't Working' ushered in 18 years of Tory rule.)

Thanks to books like Vance Packard's Hidden Persuaders, advertising had gained a reputation as a dark art. 'It was widely believed that advertising was a technique so powerful that it could persuade you to do or buy almost anything. It could make you act against your own better judgment and it could sell you stuff you didn't want,' recalls David Wethey, now chairman of 'client matchmaker' Agency Associates and a former country manager for McCann Erickson. Maybe it could even straighten rails and make the trains run on time.

What set British advertising apart from its equivalents in Europe and the US was that it didn't go for the hard sell. Instead, by 1973 UK firms had pioneered a form of salesmanship based on guile and charm. A stream of memorable campaigns like the yoghurt-pot-Martian ads for Cadbury's Smash, the nostalgic 'Golden Hill' campaign for Hovis and the surrealist masterpieces for Benson & Hedges, put the UK ad industry at the cutting edge of creativity.

And unlike much of UK commerce at the time, it was open and meritocratic. It attracted maverick, larger-than-life characters, allowed them to do outrageous things and rewarded them prodigiously. Wethey recalls a story about Jack Wynne Williams, chairman of Masius Wynne Williams, then the second-largest agency in the country. It had developed and advertised Babycham, a highly successful 1960s proto-alcopop. 'One day, his clients the Showering brothers, who owned Babycham, summoned Williams to their St James's offices. He was a little alarmed. But Francis Showering just took him to the window. There parked on the street below was a sparkling new white Rolls Royce. It was a little chairman-to-chairman thankyou for his efforts.'

Arrogant, powerful, lavish and stunningly creative - no wonder the years 1973 to 1985 were regarded by many as a golden age, during which advertising seemed to be one of the sexiest professions on earth.

Even HMG has explicitly recognised its importance by honouring many of the industry's biggest players from that time. Lord Saatchi, Lord Bell, Sir Frank Lowe, Sir Martin Sorrell and this year's honorand, Sir John Hegarty, the creative force behind BBH's long-running Levi's campaign, made their names in this era.

Today, though, its garter seems to have slipped, and advertising has lost much of its sparkle. Many insiders agree that creative standards have fallen in recent years.

'I sometimes wonder if all the best ideas have been done,' muses Bell. And the principal of another leading ad agency adds: 'I don't want to talk my industry down, but there's no doubt advertising is getting worse.'

Britain has certainly forfeited its place at the forefront of world advertising creativity. This year at the world's leading creative advertising awards in Cannes, the UK won the same number of prizes as Germany, a country often derided here for its stilted and formulaic commercials. This decline in quality partly explains why the public is less interested in advertising than it used to be. One measure of salience is newsworthiness: that has declined markedly over the past decade - or so say those repsonsible for setting our news agenda.

Says John Kay, chief reporter on the Sun: 'Advertising stories used to get front pages because ads were so creative and people became so involved with them. Lesser advertising stories were regularly worth a page lead. Now we run far fewer advertising stories than we did 10 or 15 years ago - largely because the ads themselves are less interesting.'

This view is supported in part by research carried out by BMRB TGI, which shows that the proportion of people who agree that 'ads are better than the programmes' has fallen from 28% in 1987 to 17% in 2006. What's more, the number of people who actively avoid ads when recording a programme has risen over that period from 37% to 74%.

And somehow people in advertising seem less colourful. 'The variety of people has undoubtedly diminished,' says Jeremy Bullmore, MT columnist and director of advertising giant WPP. 'I was attracted to the industry after I was sent down from Cambridge, by its absence of poshness and the engaging nature of the people who worked in it. They were migrants and misfits and ex-servicemen. Now they are all people called Nick and Sarah who have been recruited on the milk round.'

So what went wrong? Symbolically at least, the party stopped for advertising on September 10, 1987 - the day when industry titans the Saatchi brothers made a bid for Midland Bank, with its £50bn in assets. 'The idea that they could run a bank better than bankers could was preposterous,' says Winston Fletcher, a former chairman of both top agency Delaney Fletcher Bozell and the Advertising Association. They made the industry look a laughing-stock. It was then that it began to lose its lustre.'

It was the industry's high-water mark. To understand how it got there you need to rewind another 32 years. What is meant by 'advertising' is usually television advertising. The UK's first TV commercial, an ad for Gibbs SR toothpaste, aired in September 1955, scarcely two years after wartime rationing ended.

'The '50s were a grim time in the UK and advertising, with its promise of abundance, must have offered a vision of a new consumerist Jerusalem to those used to years of making do,' says Dr Sean Nixon, a sociologist from Essex University. Early ads were hectoring and authoritarian, depending on repetition to drill home their bossy messages. They were greeted enthusiastically, nonetheless, by a population eager to enjoy the material fruits of peace.

By the late '60s, British agencies were pioneering a technique called 'account planning', using what we now know and hate as 'focus groups' to develop ads with much deeper psychological resonance. This was married to a new approach to creative work developed in the US by the Doyle Dane Bernbach agency, which didn't treat the consumer as a dolt in need of education but rather relied on wit, charm and understatement to make its point.

The combination unleashed a flood of memorable campaigns from UK agencies like Collett Dickenson Pearce, Boase Massimi Pollitt and J Walter Thompson. Colletts closed in 2000 but is still described by many as 'the best agency in the world ever'; it nurtured a galaxy of creative talent, including the likes of Tony and Ridley Scott, Alan Parker, Hugh Hudson, David Puttnam and Charles Saatchi.

At the centre of this commercial/cultural flowering stood the ad agencies themselves. They were in business, but not as we might recognise it today, in the sense of maximising their top line and minimising costs. Over the preceeding decades, the industry had established a set of cushy work practices and commercial terms that today look barmy. 'Right up to 1969, for instance, industry rules forbade any agency from approaching another's clients,' recalls Wethey. They were effectively prevented from making any efforts to find new customers.

Not that they really needed to. The prevailing commission system guaranteed agencies a hefty 17.65% of everything their clients spent on media. That may have been reasonable in the days of labour-intensive press campaigns with tiny budgets. But when TV came along, with its huge budgets, the commission system was a licence for ad agencies to print money.

I worked as an account executive on the Terry's All Gold chocolate account in the mid-80s. The brand spent more than £1m a year on TV and made a new commercial every two years. Although by then Terry's owner, United Biscuits, had negotiated a reduced commission, the agency pocketed well over £200,000 - just for making one film and providing what my boss described as 'Olympian levels of service'.

But at the time, most advertisers were grateful for the chance to be fleeced. There was just one enormously powerful commercial channel - ITV. Even a halfway decent ad could be incredibly effective. Says Bell: 'You could hit most of the population with one ad in the middle of Coronation Street and another during News At Ten. It didn't seem at all naive to think you could air an ad one day and the next people would be beating on your door demanding your product by name.'

With money coming in so easily, cost control was not high on the industry agenda. In fact, many agencies were profligate to the point of madness. Wethey recalls that having won the Spanish government's Valencia Orange account in the '70s, he and his translator lived at the Ritz in Madrid for nine months 'just to get closer to the business'. And they travelled home to the UK every weekend, of course.

The chairman of another multinational agency in the '80s famously submitted expenses totalling £800,000 in one year. The bounty was evenly spread, however. From top to bottom, salaries were far higher in advertising than for equivalent ranks in commerce. Veteran adman Fletcher wanted to write after leaving Cambridge: 'I was drawn to advertising simply because the starting salary was £750 p.a. - three times more than I was offered in journalism.'

Yet the seeds of advertising's decline had been sown before the golden period had even begun. In 1971, Paul Green, media manager at Garland Compton, set up independent agency Media Buying Services (MBS), which dealt in media space only - controversially, it didn't create any advertising. At the root of his move lay a feeling of being undervalued. 'We were known as "media maggots",' recalled Green later. 'The media department usually started where the carpet stopped'. Tired of being ignored, the maggots were turning.

Although MBS was dismissed as a flash in the pan, it was the beginning of the end of the days of carefree, carelessly run agencies. 'If media and creative were no longer together, they had to be bought and paid for separately,' says Adam Smith, futures director at WPP's media-buying arm Group M. 'The commission had to be allocated between them, which for the first time involved negotiation.'

Suddenly, the 17.65% rate was no longer set in stone. Agency top lines were no longer assured. Today, all media is bought separately from creative work. The impact on agency income was severe. According to industry trade body IPA, average agency remuneration fell from about 15% of media billings in 1987 to 8.2% in 2006. And that has to be split between media and creative agencies. Creative agencies often now operate on 5% or less of billings.

If they were to remain profitable, there was only one course of action: to stem their financial incontinence. This they managed surprisingly well, and advertising agency profits have actually increased since the late 1980s.

Accountancy firm Willott Kingston Smith issues an annual survey of agency business performance. In the WKS 1991 survey (based on 1987 returns), average profit margins were 9.8%. Today, they're 11%. 'They've done it by internal cost control,' says partner Mandy Merron. 'They work harder, longer, with lower salaries and better management controls.'

Average labour productivity has gone up by about 17% in the period, from £42,128 in '91 to £49,560 today (measured at 1980 prices).

Of course, that meant goodbye to long lunches, helicopters, Ferraris, first-class travel and all the other careless spending. 'There is no doubt that today we are a much more professional, much better managed and more accountable industry,' says the IPA's director-general Hamish Pringle. He doesn't say 'and less fun', but it's hard to avoid that conclusion.

Many say good housekeeping has stripped out value as well as cost. 'It was the commission system that allowed agencies to be the client's marketing department, to offer a wide range of services - not just advertising - and to be the chairman's wisest council,' says Bullmore: management consultants in sharper suits.

Commission also allowed agencies to put more resource behind the creative work. According to IPA figures, in 1990, creative people comprised 18% of industry employees, and agencies could afford to recruit the very best talent. By 2007, this figure had fallen to 13%.

The focus on cost control in advertising coincided with financial deregulation in the City. City wages rocketed; advertising wages stagnated. 'I always assumed I would go into advertising - until I went to Oxford,' says one investment banker, who left Balliol last year with a 2.1. 'But you couldn't get through three years there without being influenced by the City. Culturally, it has Oxford by the balls and advertising is nowhere.'

He has joined a bank at a starting salary of £35,000 and expects a £35,000 bonus in his first year. By contrast, a graduate entrant to advertising earns on average £18,000, and it could take 10 years to match that £70k City salary.

Even if you are hugely successful in advertising these days, the rewards do not compare to those on offer elsewhere. Sir Martin Sorrell, head of world-leading WPP and elder statesman of the industry, is said to be worth £125m. That's an enormous fortune to most of us, but a piddling amount compared to the hundreds of millions or billions made by private-equity chiefs and hedge-fund managers.

However, the world around the industry has changed, too. You could say agencies have been a victim of their own success in establishing the business case for branding. 'If half the value of your business resides in your brand, you are hardly going to entrust it unchecked to some spiv in a loud suit and a sports car,' quipped the marketing director of a large financial services company recently.

Then, of course, there's the mediascape in which UK advertising operates. In 1980 there was just one commercial TV channel. By 1997 there were 58 pay-TV channels, 172 radio stations and 7,088 periodicals. By late 2003 there were 296 pay-TV channels, 263 radio stations (and a further 43 digital multiplexes with nine channels each) and 8,338 periodicals. Today, 797 TV channels are licensed to broadcast, making it harder and more expensive to reach consumers. And with fragmenting audiences, advertising is losing much of the cultural currency that comes from critical mass.

Perhaps the most ignominious sign of the adman's descent in the corporate pecking order is the fact that, increasingly, it's the procurement rather than the marketing department's job to buy advertising. The intrusion of purchasing professionals into advertising contracts drives many in the agency world to distraction. 'These people know the price of everything and the value of nothing,' fulminates a Top 30 agency chief. 'How on earth can you value imponderables like a great film script when you are talking to someone who was buying bog rolls by the yard just an hour ago?'

But it's not all gloom. Despite media fragmentation, the ad spend has continued to grow at about 3% or 4% a year to nearly £19bn p.a. And, contrary to received wisdom, there's no evidence that advertising is losing share of marketing spend to other disciplines.

Figures from the IPA put the proportion of marketing budgets devoted to advertising at a steady 33% for the past five years. Meanwhile, studies by media agencies Zenithoptimedia and Group M put the share of advertising closer to 50%. Both say it has remained pretty constant for six years. 'There's more gloom about advertising than the figures really warrant,' says Jonathan Barnard, head of publications at Zenithoptimedia.

Finally, there is the growth of the internet and digital media, which threatens to destroy or at least undermine the business models of the paid-for media that advertising traditionally relies on to do its work. The jury is still out on what the effect will be on the advertising industry, though we must be doing something right. Britain (along with Germany) leads the way in revenue migration to online media.

Many in the industry are optimistic. 'It plays right into our hands,' says the creative director of a top 10 advertising agency. 'We are experts in short-form content - aka 30-second ads. What is the most popular form on the internet at the moment? Short-form content - all those 30-second films on YouTube.'

So, really, what happened to the sexiest profession on earth was that it grew up. Like you and me, it was at its most alluring when it was young and carefree. When it got older and its parents stopped its allowance, it had to start paying its own bills, to start acting in a responsible, businesslike way to make ends meet.

It may not have the glamour it once had, but it is a far more tightly run industry and, compared to many 'professions', it still looks like a pretty exciting place to work.

(early '80s, unless stated)
One commercial TV channel
17.65% all agency commission
18% creative employees (1990)
9.8% average profit margins (1987)

(mid-Noughties, unless stated)
797 commercial TV channels
8.2% average agency commission
13% creative employees (2007)
11% average agency profit margins (2006)

1980: John Hegarty, Nigel Bogle, John Bartle
(& martin denny) Bartle Bogle Hegarty
1988: Tim Bell Lowe Bell/Chime
1990: Rupert Howell Y&R/HHCL
1978: Maurice & charles saatchi - Saatchi & Saatchi
Alan Parker - Collett Dickenson Pearce
1987: Jeremy Bullmore, JWT
1989: Winston fletcher (flanked by DELANEY BROTHERS), Delaney Fletcher
Bozell, Ridley Scott, Hovis ad
1989: Sir Martin Sorrell, WPP Group
1974: Frank Lowe, Lowe Howard Spink

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