Danger Signs for Advertising and Marketing

by Adonis Hoffman

Unless something changes, advertising as we know it today could be headed for a cataclysmic run-in with policymakers who would like to impose more, not less, regulation on the industry. My suspicion—and fear—is that in a dynamic, fast-paced, new media environment, industry self-regulation may no longer be enough to withstand the inclination of government to regulate industries that it does not understand and are too large to ignore.

I believe there are twelve (12) indicators that portend more, not less, governmental regulation of advertising in the future.

Over the course of the next few days, I will comment on these indicia with a degree of, I hope, some insight.

I should say at the outset that none of these indicators have anything to do with a lack of effectiveness of industry self-regulation. As any astute observer will attest, the advertising industry’s self-regulatory framework works extremely well. It is efficient, saving government thousands, if not millions, of dollars in routine oversight and enforcement. It is effective, compelling compliance with well-recognized principles for ethical and responsible advertising. And the system has been lauded by successive chairmen of the Federal Trade Commission as a model for other industries to follow.

But sound reasoning and rationale has never been a deterrent to governmental intrusion before, and I’m afraid it may not be a deterrent going forward in the new media environment.

So, here goes:

The first sign of danger is advertising is a big industry, and it’s getting bigger.

At an estimated $600 billion, the advertising industry is large and growing. Even with cyclical expansion and retrenchment, the sector will continue to grow steadily over the next five to ten years. It is a juggernaut whose tentacles touch every other sector of the global economy.

Since its rather pedestrian beginnings at the turn of the century, advertising has become more sophisticated, more ubiquitous, and—according to its many critics—more intrusive than ever. Its reach is global. Its impact virtually incalculable, even though billions of dollars are spent each year trying to do just that. Measurement of advertising’s value and reach has become a science with its own lexicon and subculture. And the laws that have evolved to regulate, limit and allow advertising are multiplying, as cities and states join the federal government’s efforts to contain the advertising juggernaut.

Advertising is an indispensable element of competition, and competition spurs the technological innovation that makes appliances, cars, computers, personal services, and much of what we need to live, quite affordable indeed.

The tremendous growth of the Internet has opened up yet another medium for advertising products and services. Online advertising dollars recently eclipsed radio, and print, television and cable are sure to follow at some point in the not-too-distant future.

The salient point about the size of the advertising industry is not to stand it in competition with other industries. My concern is that advertising has grown much too large for government regulators and policymakers to ignore or leave alone. It remains one of the biggest industries—outside the Internet—that has remained largely underegulated. Or put a better way, it is one of the biggest industries with its own self-regulatory framework augmented by light-touch government regulation.

(c) 2008. All rights reserved

Global Challenges in Advertising: A Look Across the Pond

Twice a year, a distinguished group of advertising experts and practitioners from around the world convene under the aegis of the International Chamber of Commerce (ICC) to discuss major issues and challenges facing the marketing and advertising sector. The 2006 session of the ICC Commission on Marketing and Advertising was held in New York this week and was focused on emerging challenges to industry self-regulation.

Delegates came from Belgium, India, Italy, Mexico, the Russian Federation, Sweden, Switzerland, Turkey, the United Kingdom and the U.S., representing leading corporations, advertising agencies, media companies, trade associations and law firms involved in marketing, advertising and commercial communications. In addition to a broad discussion on the challenges of self-regulation, a dedicated task force met to review possible changes to the ICC Code of Advertising and Marketing Communication Practice.

While many who follow advertising issues in the United States may not be familiar with this group or the series of codes it promulgates, it is a big deal in Europe where the advertising sector and governments take the ICC's deliberations quite seriously. There, the ICC's position on marketing and advertising practice sets a high standard for a wide range of commercial marketing communications, and plays a key role in advertising litigation and enforcement.

International Self-Regulation

For example, the ICC Code sets out clear guidelines on basic matters such as decency, honesty, truthfulness and social responsibility in marketing and advertising. There is a decidedly protective (and some say over-protective)element to marketing communications directed toward children and young people, recognizing their inherent sensitivities. The Code speaks to everything from sales promotions, sponsorship, direct marketing, and the uses of electronic media to environmental advertising.

At its core, the Code is a self-regulatory framework that complements existing national and international laws. It is intended to bolster public confidence in advertising by showing that the marketing and advertising sector abides by the principles of corporate responsiblity and respect for consumers' privacy and preferences.

In Europe, there remains a patchwork of laws and regulations governing advertising of certain products such as food, and advertising to certain markets, such as children or youth. Variations from country to country make it difficult to plan global campaigns. The ICC Code provides companies with a credible and reliable set of guiding principles that respect those frameworks. As such, it is an indispensable tool for companies seeking to expand their global reach into new and emerging markets.

As the ICC turns its attention to newer practices involving product placement, branded content, and direct marketing, it is paying close attention to the concerns of consumers, regulators and non-governmental organizations in Europe. As it turns out, European concerns are not much different than those in the United States, especially on the matter of transparency and disclosure in commercial communications.

One other message is clear. Self-regulation in advertising, a practice that has been heralded in the United States by serial chairmen of the Federal Trade Commission from both political parties, is alive and well in Europe. The robust self-regulatory regime put forth by the ICC in its Code of Advertising and Marketing Communication practice is something in which the advertising industry can take pride.

Unfortunately, much of the good work and adherence to ethical principles remains hidden from the very consumers it is designed to protect.

(c) 2006 Adonis Hoffman

Food Advertising to Kids--A Winter of Discontent?

We may look back to Winter 2005 as a seminal period in advertising. While nothing has changed, much is changing.

The title of the long-awaited report from the Institute of Medicine, "Food Marketing to Children and Youth: Threat or Opportunity?" may just say it all. The fact that a highly respected governmental body has raised tough questions about food marketing to children at all puts the industry in a hard-to-win position.

Even if we accept that current food advertising to children is benign (and there is ample evidence to support this assertion), the way that companies market, sell and advertise food products to youth, hereafter, will no longer be the same.

The Committee on Food Marketing and the Diets of Children and Youth, along with the Food and Nutrition Board and the Board on Children Youth and Families, all have concluded that "there is strong evidence that television advertising influences the food and beverage preferences of children ages 2-11, and that statistically, there is strong evidence that exposure to television advertising is associated with adiposity (body fatness) in children ages 2-11 and teens ages 12-18 years."

The Committee recommends that food and beverage companies should promote more healthful diets for children, including shifting their product portfolios to foods and drinks that are substantially lower in total calories, lower in fats, salt, added sugars, and higher in nutrient content.

With this and more stringent recommendations, food manufacturers must decide how much resistance to muster against an unmistakable mandate for healthier foods.

For some companies, this will be a simple call: phase out advertising of the suspect products--a move recently aplombed by Kraft and heralded by critics and policymakers alike. For other companies more heavily invested in the kids' food category, the decision could be much more wrenching, as the choice becomes (1)to continue in a significantly changed category or (2)leave it altogether. Certainly no easy call.

Whatever happens in the short-term, the long-term imperative is clear: the companies that make foods which appeal to children not only have to make their products different, but they also have to market and advertise them differently.

Any such changes are certain to affect the bottom lines of food companies and the advertising agencies involved. Only time will tell whether kids will become healthier as a result.

One thing is certain: Congress, regulators, children's advocates and the media will be watching with raised expectations. If for no other reason, that alone should propel the industry to continue its rapid and responsible course of action. In so doing, it will find there is goodwill to be gained among every quarter.

Plus, when it comes to children, everybody knows that a little bit of goodwill goes a long, long way.

(c)2005 Adonis Hoffman

Internet Advertising--A Tale of Two Cities

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received for good or for evil, in the superlative degree of comparison only."--Charles Dickens, 1858

There is much ado about Internet advertising these days.

In New York, the epicenter of the advertising world, interactive advertising is ascendant. Internet advertising has grown from $6 billion in 2002 to nearly $13 billion this year, according to research firm, eMarketer. Google's dominance in Web search and the expectation that it will reach $9.5 billion in ad revenue by 2006 has legitimized the mad migration of ad dollars to the online space.

Predictions by Veronis Suhler that Internet advertising will grow at an average of 24 percent a year over the next five years, compared with 7 percent for the advertising industry overall, add credibility, and perhaps rationality, to the exuberance. Plus, recent maneuvers by Microsoft, AOL and Yahoo to improve their place in the space suggest that the big players have figured things out and are increasingly significant to advertisers.

It seems that in the business world, companies are readily improving technology and techniques to reach consumers more efficiently. That is, after all, what the digital space delivers. As more Americans come to engage media online, marketers invariably have followed.

The tale in Washington is different; policymakers seem to see the world through a set of Dickensian lenses. As earnestly as marketers seek to expand the uses of interactive technologies, Congress is seeking ways to contain them.

Don't misunderstand. It's not that the government wants to do away with Internet advertising altogether. But in its sincere attempt to protect consumers from abusive behavior, government could just go too far.

In a recent meeting with Senate staff, a group of advertisng experts led by the American Association of Advertising Agencies (4-As), Association of National Advertisers (ANA) and the American Advertising Federation (AAF) made that point. In seeking to set the record straight on spyware and adware, their message was, "you can regulate conduct, but leave technology alone."

Norm Lehouillier, Managing Director of Grey Interactive told Senate staff that "when used ethically, adware and other forms of behavioral marketing can offer benefits to consumers and marketers. Unfortunately, like so many Internet technologies, there are bad guys who use the same technologies to deceive."

Mike Donahue, Exec VP at the 4-As reminded them that "reputable ad agencies working on behalf of major companies would be loath to abuse adware. Not only is it not smart business, but it's against industry guidelines which are spelled out in our Terms and Conditions for online advertising." 4-As Washington chief Dick O'Brien added: "We're the good guys. The culprits deploying spyware are not on Madison Avenue--they're taking shelter somewhere in Kazakhstan."

Nick Pahade, Managing Director at Beyond Interactive pointed out that "policies that protect and educate the consumer should not hurt marketers out there that use technology to create opportunity and efficiencies. The attention should be on prosecuting those who are taking advantage of emerging technologies for the wrong reasons."

Following the recent markup of the Burns-Boxer, SPYBLOCK bill by the Senate Commerce Committee, these admonitions should be well-received. The bill now appears to have the buy-in of most industry groups involved in internet marketing or advertising.

Perhaps the biggest paradox in the legislative effort is what Internet security expert Greg Blair of Blair Dubilier points out: "While computer exploits will continue as long as there are computers, we have seen a significant decrease in hijacked browsers and computers compromised by undesired and undesirable software during 2005. We believe this is due to improved security within browsers, better anti-threat software and most importantly increased user awareness of the techniques used by those seeking to install unwanted applications."

The Internet space is so dynamic that the online practices Congress is regulating against today, will soon become, if they have not become already, things that have gone by the wayside for a variety of reasons. There already has been a measurable decline in the type of spyware that seems to be at the heart of the Congressional effort, and the good guys (reputable advertisers and agencies) are simply not involved.

So as Washington continues to search for ways to protect Americans from Web abuses, marketers in New York and beyond are searching for ways to make abuses of Web technology unproductive, unprofitable and one day, perhaps, obsolete.

It is the best of times, it is the worst of times.

(c) 2005 Adonis Hoffman