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.