What Madison Avenue could learn from Silicon Valley.

By Gonzalo López Martí   –    LMMIAMI.COM

  • The US Eastern Seaboard used to be the cultural & industrial gravitational center of the country.
  • Possibly of the world.
  • Particularly New York, the city of finance, media, fashion and foodies.
  • Not anymore.
  • Power is shifting to the west.
  • At breakneck speed.
  • The left coast not only has Hollywood now.
  • It’s got Silicon Valley.
  • No new news there.
  • D’you know LA is the metropolitan area with the most manufacturing jobs in the country?
  • What remains of them, at least.
  • Who would’ve thunk.
  • The shifting gravitational pull has many explanations.
  • One of them: the Bay Area’s digital siren song.
  • That alternate universe where vast fortunes are made by buccaneers armed with an unfinished college degree and a 10 chart-long PowerPoint presentation.
  • Or so the myth goes.
  • What they don’t tell you is that thousands of wannabe Zuckerbergs are running in place like hamsters on a treadmill.
  • Going nowhere fast.
  • Maxing out their credit cards.
  • Bootstrapping their way back to mom & dad’s basement.
  • Don’t get me wrong, y’all.
  • I totally admire and envy the swashbuckling, devil may care attitude of them Silicon Valley hustlers.
  • However, what we are witnessing there is a prodigious amount of cash and brainpower devoted to coming up with the next hot way to share DIY porn and videos of dancing cats.
  • How come we don’t pursue the same funding techniques to start ad agencies?
  • We marketing & ad people are THE masters of spin, smoke, mirrors, appearances & red herrings.
  • We should get a piece of the action too.
  • Why are we not getting the love?
  • When was the last time a young entrepreneur went around looking for investors to start a new and revolutionary ad agency?
  • It is true though that the average profitability of your garden variety ad agency is lackluster to say the least.
  • 10.7% in 2014, according to industry sources.
  • It’s unlikely that Sir Marin Sorrell will give you the time of day with an EBITDA barely above the single digits.
  • However, that’s a nice solid ROI compared to the thousands of Silicon Valley startups going belly up every quarter.
  • I repeat: make no mistake, there’s only a handful of profitable Silicon Valley companies.
  • Google, Facebook, Linkedin and that’s about it.
  • There’s only a handful of profitable Silicon Valley companies.
  • Google, Facebook, Linkedin and that’s about it.
  • (I don’t include Apple on this list because I consider them a different animal, they actually manufacture stuff. More on that next week).
  • The vast majority of them do NOT turn a profit or do so meagerly.
  • And I’m not even talking about the scam of the so-called “unicorns”: companies with billion-dollar valuations based solely on expectations, projections and pure, unadulterated hype.
  • I am referring to the lackluster operating margins of established behemoths like Amazon, Twitter and YouTube (the latter a perennially money-losing subsidiary of Google).
  • A pioneering and pretty resilient bellwether like Yahoo! has been the butt of Wall Street jokes for years now.
  • Even Uber -truly a brilliant idea- still needs to prove it will be able make money some day.
  • Let’s call their bluff: Silicon Valley is a greedy game of musical chairs on steroids, fueled by seed money, rounds of private funding, hearsay, publicity and spin.
  • A Ponzi scheme.
  • A big con game.
  • Once again, I can’t stress it enough though: I’m not criticizing them.
  • I certainly admire their megalomaniac appetite for salesmanship, entrepreneurial reinvention and risk.
  • But still, it is what it is: a casino that happens to be run by a different kind of mob.
  • Wise guys wearing hoodies and Birkenstocks.
  • To be continued.

 

 

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