Really bad advice

Ad Age thinks Jay Chiat is the man to emulate for the advertising industry:

It's a Crazy Time, so Let's Get Crazy
Taking Inspiration From Jay Chiat

I think a good case can be made that Jay Chiat is exactly the wrong model for advertising agencies.

The advertising business is buffeted by three forces that are destroying its business model. First, clients are spending less on traditional advertising. This is partly cyclical due to the recession. There is also a long-term trend at work, however, as advertisers evaluate their spending and calculate marketing ROI. In all too many cases, the ROI is small and advertising money is shifted to other purposes.

Second, advertisers are squeezing agencies on fees. Traditionally, Madison Avenue pocketed 15% of advertising spending as a commission. Big advertisers no longer blithely accept this pricing. They have reduced the percentage and, in some cases, gone to fee-for-service pricing.

Hence, agencies are capturing a smaller share of an already shrinking advertising pie.

Finally, there are fewer long-term relations between clients and agencies. The latter must invest more money in new business development in order to replace clients who drop them.

The net result is that the advertising industry faces rising expenses even as their revenues shrink.

In such an environment, almost all lessons drawn from Jay Chiat’s career are fatally flawed.

Chiat liked to say of his agency “we’re the pirates, not the navy.” That bold, swashbuckling attitude is great for producing buzzworthy television spots that garner industry awards.

It is precisely the wrong attitude if your goal is to build a long-term relationship with clients.

Chiat was almost proud of the clients he lost. It confirmed, in his mind, that Chiat/Day was edgy, revolutionary, not boring. Many agencies took his lesson to heart. Today, they reap the whirlwind as they scramble to replace lost clients and wonder why there is no loyalty like the old days.

Chiat and his acolytes loved to talk about “great creative”. Unfortunately, great creative usually means commercials that people talk about. Or, more accurately, commercials that other advertising people talk about.

What is rarely discussed is how well the commercials sold the product. Considerations of commerce are beneath the artistic geniuses who made the commercials. Do pirates fill out expense reports? Does Blackbeard follow a strategic plan?

This attitude (and Jay Chiat was all about attitude) constitutes unilateral disarmament in the face of corporate bean counters. When CFOs total up ad spending and demand to know the ROI, the agency can only answer with generalities about “buzz” and industry awards.

Ad Age is right that in these tough times the industry needs to learn from its past. But it needs to learn the right lessons from the right people. If the advertising business is ever going to thrive again, it first needs to recognize that the Jay Chiat path is a road to nowhere.

Getting crazy is not the answer. Getting smart and getting humble is the right place to start.