Frenemies: The Epic Disruption of the Ad Business (and Everything Else) (10 page)

Bill Bernbach and David Ogilvy
would be horrified by the behavior of today's restive advertising clients. Those, of course, were simpler times. Ad agencies were once mom and pop businesses that oversaw everything, from devising the strategy to creating the ads to buying ad space. But when the founders of these agencies sold to emerging holding companies, these giants consolidated strategy and media buying
under separate media agencies whose size granted leverage over the TV and media platforms who were selling ads. And as the profitability of creative agencies contracted and marketing functions expanded, holding companies purchased direct mail and public relations and polling and design and other marketing agencies. In place of a single 15 percent agency fee, each agency charged a separate fee for their services.

The media landscape changed just as fundamentally. “Back in Don Draper's day you had three major networks,” says GE's Beth Comstock. “You had people's attention. People had fewer choices.” Today, she continued, “digital changes the definition of what advertising is. A well-done thirty-second spot in the right form is really very good. But luckily it's not my only option anymore.”

Comstock's early career did not herald that she would be an innovator. She joined NBC as publicity coordinator for NBC News in 1986, worked in publicity for CNN and CBS News, returned to NBC in 1994, and became chief of all NBC communications in 1996. GE was the parent company of NBC, and when its top communications job opened in 1998, CEO Jack Welch plucked her for the job. She made it her business to become expert on an array of subjects, from the digital upheaval to social networks and new ways of marketing. After CEO Jeff Immelt elevated her to CMO, she took it upon herself to become GE's digital point person, constantly exploring how digital would change not just marketing but all of GE. Then as vice chair heading Business Innovations, Comstock became the company's chief futurist, attending digital confabs, planting herself in Silicon Valley, scouting and making it her business to know cutting-edge agencies and entrepreneurs, seeking out partners for unusual ways to market. A marketing challenge for GE, enunciated at every monthly marketing meeting chaired by CMO Linda Boff, with their agencies in attendance, is to shift the brand ID of GE from an old industrial to a cool digital company. Cool digital companies are more attractive to Wall
Street because they are perceived as growth stocks, and are seen as welcoming to the young engineers that shape digital companies.

A way to advance this goal was for GE to establish under the auspices of the CMO a four-person office, the Disruption Lab, directed by Sam Olstein, thirty-three, who comes to work with his hair spiked and wearing jeans and sneakers. His foremost task, he says, is to “have a good perspective of trends and technology; of where we see activity of new start-ups forming around, say, messaging, around content creation.” He says they search “for what people think is cool and interesting and primed for growth.” He scans Apple's App Store to check on new apps that break into the top 100. Encouraged by Comstock and Boff, he pushed, he says, to make GE “a publisher, a content creator. What our brand represents is science and technology and the awe around science and technology, and that's a very focused perspective. It's the same focused perspective that HBO has, that Discovery channels have, that the Walt Disney Company has. We want to build a platform with the reach of any other media and entertainment platform out there.” It need not be branded like Disney, but he believes GE can create content and distribute it over its own Web site, over Facebook, Instagram, Twitter, Snapchat, National Geographic channels, or online publications like
Slate
.

As a content creator, GE formed a partnership with the National Geographic Channel “to bring to life great stories” for a six-part series called
Breakthrough
. It was directed by Ron Howard and shaped by Howard and his Imagine Entertainment partner, Brian Grazer. (WPP owns 10 percent of Imagine.) Each one-hour segment covered scientific topics like robotics, the brain, and energy. GE did not suffocate the drama with advertising. Instead, each hour opened by saying it was codeveloped by GE, and Boff says the episodes featured “our scientists or technologies or customers, but in an organic way.”

GE has worked hard to create an image as a “cool” company, a
company welcoming to young engineers. One of their notable marketing campaigns was “What's the Matter with Owen?” A college graduate, Owen decides to go to work for GE, to the disappointment of his friends and family, who grouse that 138-year-old GE is not an innovative company. Owen is a bit of a nerd, but he has a sense of humor. We follow his journey over the course of the marketing campaign, as he—and thus GE—becomes cool. The Owen campaign brings to mind Apple's funny but potent “I'm a Mac” campaign a decade earlier, in which the cool Mac guy in a T-shirt makes fun of the uncool Microsoft “I'm a PC” guy in a suit and tie. GE boasts that its Owen videos were viewed fifty million times on WeChat in China.

A more offbeat marketing campaign materialized when GE stretched to try to make, in Boff's words, “GE more relatable” to young people, especially aspiring engineers. The idea they settled on was to produce a trendy hot sauce that would be packaged in a ceramic container composed of such advanced materials as silicone carbide and a nickel-based superalloy used in making GE's jet engines. These materials are able to withstand temperatures of 2,400 degrees Fahrenheit. Using two of the world's hottest peppers, GE manufactured a limited supply of the hot sauce and sold and promoted it on Thrillist, a popular men's shopping site. When it sold out, the news went viral. Message: GE is
cool
. GE's Podcast Theater produced ten- to fifteen-minute science fiction stories that over eight weeks, according to Andy Goldberg, Boff's deputy and chief creative officer, were the most downloaded “podcast on iTunes seventeen straight days, generating four million downloads.” The only advertisement was “Brought to you by GE” at the start of the podcast. At the end of the podcast, Goldberg says, “The consumer says, ‘GE gave me a great piece of content.' They don't say, ‘GE makes great engines.'”

For almost a century, GE has relied on the same lead ad agency, BBDO. Reflecting another change in the agency business, GE now
farms their work out to a half dozen agencies and to many outside project partners, like the
New York Times
. Once a month, Boff chairs a meeting of all the agencies. “The belief is that you have to have different points of view in the room,” says Goldberg. “Not every agency is good at everything.” VaynerMedia, for instance, is expert at social media marketing, a reason they're invited along with a couple dozen attendees. “I don't know who half these people are,” Alan Cohen, a cofounder of Giant Spoon, said after one meeting. But, he adds, “The GE model is to pick people they like. So we feel like we're employees of the company.” David Lubars, the creative director of BBDO, says he welcomes “other partners” and that “healthy paranoia” drives all agencies to better performance. Linda Boff insists that the agencies are not competitive with each other, that they collaborate because they want “to be their best selves.” Perhaps. It's a noble sentiment. But the Buddha is not often among us, particularly in times of wrenching change, when much of what is solid melts.

But there is no question that GE's marketing efforts are widely and justly admired. For a relatively puny annual marketing budget of $100 million, because GE has been innovative its footprint is much larger. Lou Paskalis, an experienced marketing executive who today is a senior vice president of marketing at Bank of America, praises the team culture GE and Linda Boff have forged among agencies to deliver amazing work. “Linda is so far ahead in what she is doing in content marketing. She is the gold standard of turning jet engines and trains into iconography that people love and that speaks volumes about the commitment to the environment, as well as trains and jet engines! Actually, they're performing alchemy over there. I envy that.” The alchemy, however, has not impacted GE's stock price, which fell 27 percent between September 7, 2001, when Jeff Immelt was anointed CEO, and June 13, 2017, when it was announced that he was stepping down.

The marketing team effort
can fall short of Boff's teamwork ideal because talented people do not easily restrain the ambition that accompanies talent. Take Gary Vaynerchuk, who admires how GE “tries different things,” yet makes it clear that the agency he founded, VaynerMedia, is competitive and will not be content just doing social network marketing. “I know we'll get a bigger piece and one day take over the TV ads that BBDO does,” he says. More than once, Vaynerchuk, who bristles with ideas, has phoned Boff with creative ideas for TV spots.

VaynerMedia is emblematic of the type of digital-first independent agency that aims to disrupt both advertising and its big agencies. Presided over by forty-one-year-old Vaynerchuk, the eight-year-old company had revenue of $100 million, the bulk of it from Facebook marketing campaigns. He delights in sticking his fingers in the eyes of the advertising establishment. “You're going to die,” he declared when invited to address the ANA's Masters of Marketing Conference in October 2016. “It's an amazing time to be in this industry if you're on the offense. It's the worst time if you're on the defense, and ninety-five percent of you are on the defense.”

In a pitch to a prospective client, Chase Bank, that wanted to hire an additional agency to do their social media and digital marketing, Vaynerchuk took a seat in the middle of a crowded white Formica conference table wearing jeans and a crew-neck sweater. After his business affairs executive described how VaynerMedia had grown, Vaynerchuk shared a partial account of his own life.

Born in the Soviet Union, he immigrated to the United States with his family in 1978, when he was three. They moved from a studio apartment in Queens to Edison, New Jersey, where his father would
eventually open two liquor stores. Cursed with dyslexia, Gary was a poor student who didn't play sports or date girls. His dream was to be an entrepreneur, and starting in elementary school he sold baseball cards and comic books, opened a lemonade stand, and arranged garage sales. After graduating from Mount Ida College in Massachusetts, Gary took over his father's Springfield, New Jersey, store in 1999. He learned everything he could about wine, became known as an expert, and launched a transformative online sales Web site and a daily wine Webcast. A year after YouTube surfaced, he inaugurated his own YouTube wine show channel. Soon after Google's AdWords advertising platform went up in late 2001, he invested the wine store's ad dollars. When new digital companies appeared—Twitter, Pinterest, Snapchat—he was an early adapter, posting wine news. His WineLibrary.com became the country's largest online retailer of wine, outselling such familiar names as Sherry-Lehmann and Zachys.

He and a younger brother started VaynerMedia in 2009. A couple of years later, with the wine business having expanded from $3 million to $65 million, Gary stepped aside to work full time at VaynerMedia. Convinced that the big ad agencies were ignoring social media, he shaped his agency's identity around social media marketing. His first client was the New York Jets football team, and eventually other clients—PepsiCo, Anheuser-Busch, Mondelēz, Unilever, Toyota, and GE—followed. With money he and his parents made in the wine business, he invested in start-ups like Facebook, Twitter, Uber, and Tumblr. Appearing regularly on YouTube, his fast-talking, clever rants went viral, leading to a multibook contract. The first of these, a Web marketing book,
Crush IT!: Why Now Is the Time to Cash In on Your Passion
, became a national best seller.

By 2016 he had produced four best sellers, had a YouTube channel, served as a Miss America pageant judge, and became a regular panelist, along with Gwyneth Paltrow and will.i.am, on Apple's
Planet of
the Apps
, a reality TV series that evaluates pitches by app developers seeking funding. Today he will announce to strangers that he has watched every play of every Jets game since he was in sixth grade, when he says he told a friend, “I am going to own the Jets one day.” He is neither modest nor demure. “If you've never seen me onstage,” he writes in his fourth book,
*
“I model my performance after the comedians I idolized in my youth, like Eddie Murphy, Chris Rock, and Richard Pryor.”

“Our religion is attention,” he told the Chase marketing executives, explaining that what he loved about constructing marketing campaigns on social media is that they were “underpriced.” There was little “ad waste” because he could try out so many alternative messages, and because in the digital realm results were often measurable. And unlike agency holding companies, which peddle expensive and unmeasurable broadcast television ads, he assured them that Vayner “sold on depth, not width.” He showed several Vayner online campaigns. Soon after the pitch meeting ended, Vayner won the Chase account, including its new upscale Sapphire Reserve credit card.

In a creative brainstorming meeting about Chase's new travel credit card with six members of his team some weeks later, Vaynerchuk stabbed with his fingers at pieces of sushi from a take-out order and tried to frame Vayner's purpose and the business opening that yawned: “VaynerMedia was built on ‘We're going to do a deal with apps and start-ups that nobody else is doing because we come from that world.' We did. It helped us grow.” But now they've grown and proven they can craft video and TV pitches. They no longer have to sell themselves as just a digital agency. Vayner can siphon business from traditional agencies. “We've established traditional chops as believers in storytelling,” he
continued. “Now we can walk in and say, ‘We can make video for you. We can make TV.'”