What Madison Avenue could learn from Silicon Valley.
December 8, 2015
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.