Having plowed through many of the seminal business strategy books of the last few years, I have found myself hearing smart people make comments about the advertising industry that just don't square with the macro view of how our business ecosystems work. We have all learned about Adam Smith's "invisible hand" of the market, been inculcated in the belief that markets efficiently allocate resources, and maybe even read The Wisdom of Crowds. Even though we are all well familiar with the market's efficiency in allocating resources, folks in and around the advertising space continue to deride the industry. I can't count the number of times I have been told that advertising is irrational while the speaker simultaneously praises the rationality of the free market and Wall St. exchanges.
As a newcomer, I look in with an outsider's eye and scratch my head in dismay. According to Dam Salmon's Digital Marketing Hub v2.0 "The global advertising and marketing services industry encompasses around $1 trillion" (2011). So let me get this straight, $1 trillion dollars of global economic activity defies the laws of economics? I don't think so.
So where does the 20-something media buyer come in? Right here. I argue that the 20-something at an IPG, WPP, or Publicis agency is just as rational as the 20-something trader on Wall St. The market works. With the exception of RTB, all of the trading technology solutions brought to the doorsteps of agencies over the past 30 years have been complete failures. It's not that advertising does not obey the rules of economics, it is simply that the solutions that have been attempted did not produce the outcomes that applying these solutions in other industries have produced. As I wrote in an earlier post there have been a few notable attempts to build an advertising futures exchnage, all failed.
20-somethings at agencies should stop being scapegoated as the naive foot soldiers holding back the industry. The advertising industry has collectively 'voted' against these other exchange solutions. We believe that the the collective industry is well aware of what works and what doesn't.
The MASS Exchange difference is that we listened long and hard, defined the business problems in advertising terms, and have the humility of knowing that the industry possess the wisdom of the crowd. It is not that advertising is intransigent and its people are somehow different, the industry does things because they work. There might be a theoretical way do to things more efficiently, but until they are proven out, people stick to what they know. After all, we were all 20-something at some point.