I once had a job interview, arranged by a recruiter, at an ad agency in a city I wanted to live in. I had to fly myself in and put myself up at a hotel for an evening. Then, once I got there, the HR Director tried to haggle me down on my salary—something the recruiter had already settled upfront. Plus, if I got the job offer, I was told I’d have to pay for my own relocation.
It became clear that this was an agency that had virtually no regard for, or investment in, its people. For the agency, the opportunity cost to hire me was practically free. I was the only one with anything to lose. Naturally, I was completely turned off.
I bring this up because increasingly, in both the ad industry and business in general, we’re facing pressures to charge less for goods and services — and there’s a constant insistence on paying less for the goods and services of others. Even more drastic, we’re seeing a trend toward offering things free, or cheap, to entice people to want more.
All this free stuff is gonna cost us, big time.
As humans, we’re conditioned to want something for nothing. There are no strings attached to free stuff. But we live in an ownership society. And once you take ownership of something, you don’t want it taken away from you. You’ll pay to protect it. In recent years, there are people who bought houses with no money down. It’s no surprise they’re literally walking away from them now that they can’t afford the payments.
The trend toward free and cheap is very prevalent in today’s information economy. The Internet hasn’t changed the need for people to make money, but it has changed our expectations in terms of what we’re willing to pay for.
Knowledge is now becoming a commodity. Even art and music are becoming commodities. People who download songs from P2P sites or burn CD’s for friends don’t see the harm—but they’d never steal a CD from a store. As music becomes information to be moved between computers, people don’t ascribe to it the value they once did. And the music industry as we’ve known it is suffering. Lots of people praised Radiohead recently for offering music downloadable for whatever price people chose to pay. 60% of people paid nothing. Having sold millions of albums already, Radiohead can get away with this. An upstart band can’t afford to do it—well they can, but they have to find other means of income to support themselves.
We all benefit from this free and cheap world. We get to read all sorts of things on the internet for free—newspapers, magazines, other content we’d previously have to pay for. Wikipedia supplanted a wall full of Funk n’ Wagnalls encyclopedias. A free perusal of NYTimes.com replaced buying the daily newsprint. Why? because right now, advertising subsidizes most of it. (Interestingly, Wikipedia relies on the unpaid contributions of its editors and on donations. How often do you use it, and have you ever donated?) I write this column for free, but that’s because I have other means of support, and Talent Zoo has a means of income to pay for the website and hosting.
A lot of web content is dependent on advertising, but advertising’s subsidy of new media may not last. Web advertising has very little time to prove its value or demonstrate its impact. As more and more money is being spent, the noise ratio goes up and the impact becomes less and less significant. Ad agencies need to make sure there’s value or impact in online advertising—because if people tune it out altogether, many businesses that depend on the web for income will be hurting.
And the business of making advertising is also being priced as a commodity. There’s already been a litany of ad professionals decrying the notion of giving away ideas for free in a new business pitch, so I don’t need to rehash that argument. But if you’re willing to find them, there are web sites that feature already-made commercials that you can customize with a “slap your logo here” idea. And stock photos which now cost a few dollars as opposed to a few hundred. Ad agencies, our clients and our vendors are all feeling squeezed in the era of free and cheap. It’s a downward spiral.
The ad industry, like other industries, exists to make a profit. The pressure to cut costs or charges has a ripple effect for everyone. Hopefully we’ll find ways to ensure we do good work and make money. You can’t sustain a business doing the former if you can’t do the latter.
So don’t get tripped up by all the gurus who tell you free and cheap is always better. If you’re wondering whether a product or service makes a viable business in the new world of free and cheap, think of these two maxims:
Somebody’s gotta pay for it. And somebody’s gotta profit from it.
That’s just my 2 cents. Hey, advice is cheap, isn’t it?