The Advertising Industry

By: Jenna Ritter

What is it?

Advertising is a non-personal communication method of persuading an audience member to buy goods, services, and ideas. But the advertising industry does much more then sell us things. As Sut Jhally analyzes the industry, he concludes advertising sells us ourselves and who we want to be in the name of private profit. Below is a lecture done by him where he discusses that advertising creates commodity fetishism with the ad and the product because through advertisements commodities are given human qualities.

History

 Advertising started to get moving in the 17th century when advertisements started appearing in weekly newspapers in England. In the 19th century the economy started getting larger, so did advertising. Advertisements were usually completely done by the company who wanted to advertise. They did the layout, design and paid the media for space. In the late 19th century N.W. Ayer and Son was formed in Philadelphia and things changed in this industry. This was the first advertising agency in the U.S. that offered services to plan, make and execute completed advertising campaigns for all different kinds of customers.

How is it relevant now?

Well, since capitalism thrives on corporations and corporations thrive on profit, corporations need to sell things. How are they going to do that? Advertisements. In the book Advertising and Market Power, by William S. Comanor and Thomas A. Wilson; the authors highlight how advertising increases profit for corporations. Corporations need advertising, thus advertising is a HUGE industry.

Now a days there are holding companies that control advertising agencies. There are four main holding companies or let me say BOHEMITHS. The main holding companies (The Big Four), control half of this industries revenue. They offer one stop marketing plans for businesses and in our global economy that is attractive.

Who controls this industry:

The Big Four includes: Interpublic, Omnicom, Publicis Groupe and WPP. These companies sit at the very top of the advertising industry. They control a huge number of agency brands across the globe. They are usually not involved in day-to- day strategies, but they work to gain “intra-group synergy” with subsidiary businesses.

Here is a company profile of Omnicom. It ranked as the world’s #1 corporate media services conglomerate in advertising, public relations, and marketing services with over 5,000 clients in more than 100 countries.

Some of the Top 100  advertiser in US include American Express, AT&T, Time Warner, L’Oreal, Walt Disney, Coca-cola, and more. These companies most likely work with an agency who is controlled by a holding company, like one of the Big Four. As you can see, the advertising industry is horizontally integrated because the holding companies control  additional business activities at the same level of production (by owning many different advertising agencies) . This leads to increased market power, synergy, and the ability to have content across all markets, as well as larger economies of scale for these gigantic holding companies.

Problems

Now you have four megacompanies with revenues that are staggering, bigger than some of the companies they serve, said O. Burtch Drake, president and chief executive of the American Association of Advertising Agencies, the industry trade group.

Having this huge of market control is known as concentration or consolidation. Unfortunately, concentration does give into problems like: less diversity, no healthy competition, and the silencing of minority voice. Another way concentration leads to problems is when one agency works for competing clients. For example, Omnicom serves Chrysler, General Motors, Nissan, and Volkswagen.  Some companies don’t like this; Coca-Cola switched the Sprite brand from Interpublic to WPP because it did not want to have put all their eggs in one basket and felt like the holding company had too much control over the brand.

Censorship in the Media

Another issue in advertising deals with censorship. Mainstream media will not run stories that may offend their advertisers and/or their owners. Some refer to this as market censorship and it leads to problems because the media does not report on important issues (like corporate practices). For controversial advertisements the Federal Communications Commission (FCC) helps with regulation and complaints in this area.

Pulling it all together:

Advertisements in Health Magazine are for big popular brands done by agencies that are most likely controlled by a holding company. This profit motive that corporations live by, deeply impacts the content we get in ad-supported media.

These big companies end up having power in what articles Health Magazine will publish.

Besides dominating commercial speech,a $500-billion-a-year industry,

these agency companies and the men who run them —

John D. Wren at Omnicom, John J. Dooner Jr. at Interpublic,

Sir Martin Sorrellat WPP and Maurice Lévy at Publicis

— also hold incredible sway over the media.

By deciding when and where to spend their clients’

ad budgets, they can indirectly set network television

schedules and starve magazines to death or help them to flourish

-NYTimes.

 

These companies control the majority of the world’s ad spending and huge shares of many other businesses as well.

Our entire media system is developed so marketers can sell us things. Sut Jhally explains that our advertising used to be about creativity and sharing your brand or product, but now due to  the expansion of agency companies and the power by which they are controlled, originality is smothered and we get a message that they want us to hear.

Advertising History

Advertising and the Perfect Storm

Duke Library

NY Times Big Four Article

The Power of Advertising

Agency Family Trees

Advertising and PR

The FCC

Publicis USA

Structure of the Ad Industry

WPP

WPP Annual Reports

Omnicom

Intercom

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