the new ad game

There’s an interesting article in the new issue of the New Yorker on the evolution of advertising (or should I say, the “intelligent design” of advertising). It’s full of fascinating little observations about guerilla marketing, the way Tivo is changing the ad game, and lots of other stuff. I particularly liked the author’s discussion of product placement. If I’m not mistaken, this is the first time I’ve seen real figures as to what these non-conventional, contextualized ads are costing. Even more interesting, however, were the examples given of companies that once bought advertising now moving into content development as a means of better controlling the positioning of their products. (My idea for a sitcom staring Ronald McDonald and the Marlboro Man is looking more possible every day.) Here are a few clips, for those of you too lazy to follow the link.

Last year, more than five hundred billion dollars was spent on advertising and marketing in the United States–half the worldwide total….

The path to profits was once fairly straightforward: clients paid agencies fifteen per cent of each advertising dollar, and most of those dollars went to the three television networks. In 1965, advertisers could reach eighty per cent of their most coveted viewers–those between the ages of eighteen and forty-nine–just by buying time on CBS, NBC, or ABC. “You could put together a media plan in an hour,” Roy Bostock, the former chairman and C.E.O. of the MacManus Group, recalls. “When we introduced Scope, in the mid-sixties, we were able with television advertising in the first four weeks of the ad campaign to reach more than ninety per cent of U.S. television households ten times.”…

When Apple’s iPod was introduced, in October of 2001, it promised “A thousand songs in your pocket!” According to the advertising-tracking firm of TNS Media Intelligence, Apple spent twenty-four and half million dollars to launch the device, an forty-five and a half million dollars between January and September of 2004. (By contrast Roy Bostock says that to reach the same number of consumers as Scope did when it was introduced would cost at least two hundred million dollars in the first year.) Apple’s expenditures were relatively modest, and surprisingly traditional: only two hundred and six thousand dollars went for Web ads, and ninety per cent of last year’s total went for television, with the broadcast networks receiving twenty-five million dollars and cable just under eighteen million. Yet the real reason that the iPod has more or less cornered the digital music-player market is far simpler: the product was brilliantly conceived and executed. Word-of-mouth and promotion did the rest…

In January, an episode of ABC’s hit show “Desperate Housewives” had a scene in which one character agrees to promote a Buick LaCrosse in a shopping mall, giving much the same pitch that viewers saw minutes later in a “real” Buick commercial.

Today, there are product-placement specialists, such as Frank Zazza, the C.E.O. of iTVX, a Westchester-based firm. The studios and television networks employ people to negotiate placement deals. There are no set fees, but the size and demographics of the audience matter; a quick shot of a company’s logo in a movie can fetch from ten thousand to ninety thousand dollars. Placements are negotiated individually, with payment going not only to a network or a studio but to the producers who integrate a product into their script. A thirty-second commercial on “Desperate Housewives” would cost up to four hundred thousand dollars, Zazza says, while a product placement on the same show–if it lasted about twenty seconds and was part of a script–could cost advertisers the same amount. Product placement may also consist of giving away cars on “Oprah.” Last year, General Motors’ Pontiac division gave away two hundred and seventy-six cars on the show. A single thirty-second ad on “Oprah” costs about seventy thousand dollars; Zazza estimates that the publicity value to Pontiac was worth at least seventy million dollars.

This year, Zazza told me, a billion dollars will be spent on product placement in the United States, up from half a billion last year. Next year, he guessed, the figure will double again, coming to represent a fifth of what is spent on all network television advertising. The challenge for agencies is to figure out how to replace the fees they once earned on thirty-second spots. One method is for advertisers to invest aggressively in programs where they have some control over the scripts. On behalf of Sears and Unilever, for instance, MindShare, WPP’s media-buying arm, has joined with ABC to develop comedies and dramas and share in the profits…

Susan Lyne, the former president of ABC Entertainment, says, “Anything that is complex narrative storytelling–one-hour dramas, narrative miniseries, character-driven movies for television–advertisers don’t believe there is an audience under fifty for these kinds of shows.”…

Brett Shevack, a vice-chairman at BBDO New York, embraces “brand initiatives,” in which agencies become “business partners with their clients, not just advertising agents to their clients.” Ogilvy & Mather’s C.E.O., Shelly Lazarus, recounts how her firm spurred Hershey to enter the retail business. When her marketers were looking for a billboard site for the client, they noticed an empty space at Forty-eighth and Broadway. Better than a billboard, they said, would be a Hershey store. The last time she looked, she says, that store was “the highest-grossing-per-square-foot retail space in the country.” She adds, “Twenty-five years ago, we would just have done a billboard.”

With one billion dollars being spent on product placement per year, you would think that a few dollars would come my way, but so far nothing… If I can make the time, I’ll write a note to Morningstar Farms tonight and see if it’s worth a few hundred bucks to them if I’m chewing on one of their fake sausage patties whenever I’m photographed for this site. I’ll let you know how it goes.

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  1. chris
    Posted March 23, 2005 at 11:22 pm | Permalink

    Speaking of magazine articles, Mark, what did you think of this one ?

    Watching the “L” word this weekend I was enraged to see among the product placements…fucking Dove soap. It was like that shameless Six Feet Under Episode with the Teeth Whitening Strips. It is sad when this happens as I can no longer enjoy the show as I feel they are (what did Mr. T say in the A Team?) playing me for a fool. Its like jumping a mini shark tank.

  2. Ken
    Posted March 23, 2005 at 11:23 pm | Permalink

    I am glad you are doing the hard work so that I don’t have to, but, the link you posted is bad.

    I think Kellogg’s has deep pockets. You should easily pull in a little from them for the Morningstar Farms deal.

  3. mark
    Posted March 23, 2005 at 11:41 pm | Permalink

    OK, try the link again. It should work this time… It’ll change in a week though, when the new issue comes out, so read it now if you’re planning to.

  4. Posted March 24, 2005 at 9:22 am | Permalink is the permanent link now and forever, thanks to

  5. Posted March 24, 2005 at 11:29 am | Permalink

    This is very closely related to the plot of “The Girl Who was Plugged In”, by James Tiptree jr (Alice Sheldon)(which I believe won a Hugo for best Novella).
    Basically it describes a future state where pure advertising has been made illegal, ‘technically’, but has been replaced with cleverly arranged ‘Product Placement’ on holograph (TV) shows. The main character is an ugly girl who tries to kill herself, and is “rescued” by the government/corporation and hooked up to brainwave sensors in a secret underground bunker so that she can remote-control the body of a beautiful genetically engineered spokesmodel that jet-sets around the world being filmed using different products.
    she falls in love. wackiness ensues.

  6. kari
    Posted March 24, 2005 at 4:21 pm | Permalink

    This is exactly why I don’t have a TV. Not that there’s nothing of value to watch, but that you have to wade through so much corporate crap to get to it.

    Mark, I don’t know if Morningstar will pay for product placement on your blog, but I’ve heard of people being paid to have brand names tattooed or hennaed on their bodies ( I think having “Morningstar Farms” across your forehead would do wonders for your new plungerhand persona.

  7. Posted March 24, 2005 at 4:32 pm | Permalink

    kari brings up a good point, mark. Since when are you so high and mighty that you’re opposed to product placement?

  8. chris
    Posted March 24, 2005 at 7:20 pm | Permalink

    Yeah, I know sheez! The next thing you know he will say he has no idea why I would want to lose weightt playing team poker whilst watching channels from arund the world!

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