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A Financial Market View from the Advertising World
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The mood was somber on the 5:52 a.m. train as it pulled into Greenwich last Monday. A week after passengers had been shaking their heads at the Lehman epitaph, Goldman and Morgan Stanley were sending out releases that signified, in the words of The Wall Street Journal, that “Wall Street…will cease to exist.” I am a train and peHUB rarity. I don’t work in finance. I am a Partner at what used to be called an advertising agency. While Super Bowl spots and catchy taglines might be the public perception of what our value is, our core expertise resides in developing large-scale marketing, awareness and CRM programs that are aimed at driving corporate/product growth and profitability. Accountability comes quarterly, and if the numbers aren’t there, neither would we. The Chief Marketing Officer and the CEO follow shortly thereafter. Our intrigue with the VC, PE and LBO worlds came after our industry began suffering from margin erosion, thanks to macroeconomic turbulence and procurement scrutiny. As the economics of the agency business had been based on the time to construct business programs and not the impact they had, we reaped little for the upside, but could be held to the fire if business goals fell short. It seemed ridiculous not to base our compensation on bottom-line results, a la the finance world. As such, we’ve been in the process of re-architecting our business model within the $155 billion advertising industry, benchmarking everyone from Wall Street titans to boutique seed companies. With all the discussion about fundamental recalibration of the financial markets, perhaps it’s appropriate to relay some of the lessons we’ve taken to heart in evolving our business model.
By no means do I expect the agency business to rival the financial world’s in terms of total upside and personal income opportunities. I do sense, however there will be a relationship between the two. And maybe it will lead to more advertising talk on the 5:52 a.m. train. Michael Duda is a Partner at Deutsch Inc. based in New York City. (www.deutschinc.com).
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October 8th, 2008 at 7:53 am
As a colleague and friend of Mr. Duda’s, I enjoy his if I may say it, out of the box thinking, when it comes to business arrangements. As a finance professional, he and I share the same drive to find the right arrangement for our business partners. Some deals may not be right for others and in this crazy economic time we live and work in, the creative, but ethical and legal, financial arrangements are the ones that stand out and help make our organizations stand out.
October 14th, 2008 at 3:49 pm
Mike,
It’s a really intriguing post.
“It seemed ridiculous not to base our compensation on bottom-line results, a la the finance world. As such, we’ve been in the process of re-architecting our business model within the $155 billion advertising industry . . .”
I think this idea is very much in line with charging clients when customers engage with digital marketing (”cost per engagement”).
Undoubtedly, the agency model needs to evolve in this environment, but, as you say, think of the upside.
October 14th, 2008 at 5:15 pm
Michael Duda is very smart. Ahead of his time. And he has “the force”. He’s someone to be watched - he’s going far. Very far.
xxoo
October 14th, 2008 at 5:16 pm
Michael Duda is a secret weapon. A man with vision more powerful than his stature would suggest. Stick with him and he will guide you through the universe.