This edition was a bit in the making. It\u2019s not an everything is sh*t edition. This week we throw a bit more meat on the bone. Many things I knew of (like everyone else) but didn\u2019t know the details (like everyone else.) Also a hamfisted Bruce Lee reference.<\/p>\n
![\"\"](\"https:\/\/substackcdn.com\/image\/fetch\/$s_!BJj2!,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F26765a41-22cb-4049-9f98-007210dc4bba_1200x675.jpeg\")
<\/picture><\/div>\n<\/a> You probably suspected it. Most people who spent enough time inside one of these companies eventually did: that quiet, nagging feeling that the actual product, <\/span>the advertising, was almost incidental to whatever the real business was.<\/strong> That the work you were doing mattered less than you\u2019d been told. That the meetings were long and the decks were elaborate and the clients were managed rather than served, and that something in the whole arrangement was slightly off in a way nobody would name out loud.<\/span><\/p>\n You weren\u2019t wrong. You just didn\u2019t have the sentence for it yet.<\/p>\n The holding company was built on the arbitrage of client ignorance.<\/strong><\/em><\/p>\n<\/div>\n If Leo Burnett (the man) were here today, he might change \u201cclient ignorance\u201d to \u201cclient trust.\u201d <\/p>\n That\u2019s the business. Not creativity. Not strategy. Not the transformative power of great advertising, which is real, and which was always more likely to come from a twenty-person shop with a chip on its shoulder than from a publicly traded entity managing forty-seven agency brands across six continents. The business, the actual underlying financial engine of the thing, was the systematic monetization of what clients did not know. <\/p>\n <\/a> They didn\u2019t know what media cost. You did. The margin between those two numbers, for decades, was enormous and largely invisible and considered by everyone involved to be a perfectly reasonable arrangement. The 15% commission wasn\u2019t a fee for expertise. It was a toll. A toll on not knowing. It persisted as long as it did because clients, many of them, preferred not to know. The not-knowing was comfortable. The lunches were good. The arrangement was stable.<\/p>\n And if they knew, they\u2019d probably have to deal with it.<\/p>\n Agencies had every incentive to keep it that way. <\/p>\n Media rebates<\/strong> that weren\u2019t disclosed. <\/span><\/p>\n<\/li>\n Production markups that bore no relationship to actual production costs. <\/p>\n<\/li>\n Research billed at rates that assumed the client had no idea what research actually cost. <\/p>\n<\/li>\n<\/ul>\n The whole beautiful machine, examined line by line, looked considerably less beautiful.<\/p>\n <\/a> The 2016 ANA transparency report<\/a> told clients what insiders had known for years.<\/span><\/strong> The agencies thanked the ANA for their thoroughness and changed as little as possible.<\/span><\/p>\n<\/picture><\/div>\n\n
<\/picture><\/div>\n