Frenemies

Frenemies Plot Summary

Introduction

In March 2015, the advertising world was rocked by a bombshell accusation. Jon Mandel, a former agency executive, stood before a room of marketing leaders and declared that major advertising agencies were accepting secret kickbacks from media companies - payments that rightfully belonged to their clients. This moment marked the beginning of what industry insiders would call "a perfect storm" - a convergence of forces that would fundamentally transform a $2 trillion global industry. The advertising revolution that followed wasn't merely about business models or technology adoption. It represented a profound shift in how companies communicate with consumers, how media is funded, and ultimately how information flows through society. This transformation touches everyone - from the casual smartphone user bombarded with personalized ads to the media executive struggling to fund quality journalism in the digital age. Through examining this upheaval, we gain insight into larger questions about privacy, trust, and attention in our increasingly digital world. Whether you're a marketing professional navigating these changes, a business leader allocating resources, or simply a curious observer of how persuasion shapes our culture, understanding this revolution provides essential context for our media-saturated age.

Chapter 1: The Perfect Storm: Trust Crisis and Agency Upheaval (2015)

The advertising industry entered a period of unprecedented turmoil in 2015 when Jon Mandel, a respected media agency veteran, delivered a bombshell speech to the Association of National Advertisers. Standing before hundreds of marketing executives representing companies that collectively spent over $250 billion annually on advertising in the United States alone, Mandel alleged that media agencies were systematically accepting secret "kickbacks" and rebates from media companies - payments that should have gone to their clients but instead went into agency pockets. This revelation struck at the heart of the agency-client relationship, suggesting a fundamental breach of trust at a moment when the industry was already vulnerable. Advertising clients were increasingly uneasy with their agencies, complaining about steep costs and lack of transparency. The trust issue was especially acute because clients faced unprecedented pressure from digital disruption - smartphones turning banner ads into annoyances, ad-blocking software repelling messages, and younger generations accustomed to ad-free experiences. Mandel's allegations reinforced these anxieties and unleashed a wave of account reviews that would reshape the industry. The stakes were enormous. Advertising and marketing dollars - up to $2 trillion worldwide - subsidized most media and internet companies. As WPP CEO Martin Sorrell put it, this money provided "the oil for the economy's energy." A 2015 study concluded that in the United States, each dollar spent on advertising spawned nineteen dollars in sales and supported sixty-seven jobs across many industries. Without this "free ATM machine," many companies would be doomed. Yet the industry was being disrupted by what Sorrell called "frenemies" advancing from all directions. Technology was democratizing information, giving citizens more choices and ability to skip ads. The advertising community collectively worried that what they thought of as their art - big creative ideas - would be replaced by machines weaponized with data, algorithms and artificial intelligence. The primary machine consumers increasingly relied on was the smartphone, and many in the industry would not be comforted by Tim Armstrong's vision of a future where marketers would have to talk to consumers via their mobile devices. By the spring of 2015, advertising clients reviewing whether to "kiss their agencies goodbye" turned to consultants like Michael Kassan for guidance. The trust issue went far deeper than hidden kickbacks. Bank of America's CMO Anne Finucane believed that financial transparency could be codified in agency contracts, but a larger issue was that agencies were now parts of bigger marketing conglomerates offering a range of services, which pulled them away from "thinking like a client." This fundamental misalignment of interests would continue to plague agency-client relationships as the industry transformation accelerated.

Chapter 2: From Mad Men to Math Men: Data's Conquest of Creativity

The transformation from the intuition-driven "Mad Men" era to the data-obsessed "Math Men" approach represents one of the most profound shifts in advertising history. In the 1950s and 1960s, the period immortalized in the television series Mad Men, advertising executives like David Ogilvy, Bill Bernbach, and George Lois reigned supreme. Creative departments ruled agencies, and Madison Avenue was synonymous with advertising. Agencies were paid a handsome 15 percent commission on all advertising placed - an unusual compensation system where the seller of advertising, not the buyer, paid a percentage to the agency. A recurring debate within agencies during this golden age centered on what constituted a great ad campaign. Rosser Reeves argued that advertising was a quasi-science, promoting what he called a "Unique Selling Proposition." His peer Bill Bernbach had a very different view, relying on gut instinct rather than research. "Advertising isn't a science, it's persuasion. And persuasion is an art," he insisted. David Ogilvy, meanwhile, extolled the value of a consistent brand personality shaped by what he called "trivial product differences." By the 1990s, the business had evolved dramatically. Media agencies spun off from creative agencies, and holding companies like WPP, Omnicom, Publicis, and Interpublic consolidated the industry. The 15 percent commission system that had sustained agencies for decades was gradually replaced by fee-based arrangements that squeezed agency profits. This shift invited CFOs and procurement officers to drill down on costs, questioning why high-priced talent couldn't be replaced by junior staff. As Wendy Clark, North American CEO of DDB Worldwide, observed: "In Don Draper's days there was never a procurement department." The rise of the internet created another inflection point, fundamentally changing how advertising was conceived and delivered. By 2015, marketers were awash in data. Irwin Gotlieb's GroupM planned to retain 40,000 personally identifiable attributes on 200 million adult Americans. Facebook assembled about a hundred personally identifiable attributes on each of its two billion worldwide users. Google merged all the data it collected from its 3.5 billion daily searches and from YouTube and other services. This data could be weaponized by marketers to target messages and ultimately create what's called addressable advertising. Keith Weed of Unilever grew excited as he described how mobile phones elevated data as a marketing tool: "When I started in marketing we were using secondhand data which was three months old. Now with the good old mobile, I have individualized data on people. You don't need to know their names... You know their telephone number. You know where they live because it's the same location as their PC." This granular information allowed Unilever to create "a hundred thousand permutations of the same ad" for products like Axe toiletries, personalizing messages based on individual interests and behaviors. The accumulation of data to predict future behavior was labeled "surveillance capitalism" by Harvard Business School professor Shoshana Zuboff. Its pioneers were digital companies like Google and Facebook that derived their marketing power from shadowing citizens and using data to become fortune-tellers. "The game," Zuboff wrote, "is no longer about sending you a mail-order catalogue or even about targeting online advertising. The game is selling access to the real-time flow of your daily life - your reality - in order to directly influence and modify your behavior for profit."

Chapter 3: Digital Giants: How Facebook and Google Reshaped Advertising

By 2015, the digital landscape was dominated by two giants whose influence over advertising had become nearly hegemonic. Google and Facebook had established themselves as the undisputed rulers of the digital advertising ecosystem, creating what industry insiders called a "digital duopoly." Their size advantage was starkly revealed in the first quarter of 2016 when Mary Meeker reported that of every new digital ad dollar, eighty-five cents went to Facebook and Google. Their dominance increasingly mattered because digital advertising was expected to surpass the $70 billion spent on television by 2017. The rise of these platforms represented a remarkable evolution in their business models. Like Mark Zuckerberg, Google cofounders Larry Page and Sergey Brin initially formed their company with a belief that advertising was corrupting and would ill serve users. In a paper they presented at an Australian Web conference in 1998, they wrote that "advertising-funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers." Yet by 2015, Google's ad revenues had reached $74.5 billion, while Facebook's stood at $26.9 billion and were growing at a faster rate. When Carolyn Everson joined Facebook in 2011, the company had about half a million advertisers. By March 2016, Sheryl Sandberg announced that three million advertisers flocked to Facebook, a number that six months later zoomed to four million. Part of this extraordinary growth reflected the expansion of the Facebook platform - the average user clicked on the site 150 times a day. But it also stemmed from the company's ceaseless efforts to develop new tools for advertisers to target clients, resources unavailable to an advertiser who spent $5 million for a thirty-second Super Bowl ad and had to guess who watched it. The rise of these digital giants created a new dynamic in the advertising ecosystem - that of "frenemies." Martin Sorrell popularized this term to describe companies that both cooperate and compete. Agencies placed billions of dollars worth of ads with Google and Facebook, yet these platforms were increasingly going directly to clients. "They are not agnostic," Sorrell said of Facebook. "They are selling Facebook inventory." He believed they were selling under false pretenses: "They are not a technology company. They are a platform, a media company." By 2016, Facebook and Google were not just platforms but also creative partners. Facebook hired creative directors from agencies and built a team of 220 under its chief creative officer. While Facebook claimed this team's mission was "to inspire the creative agencies," not compete with them, the line between inspiration and competition was increasingly blurry. Facebook's chief creative officer conceded that his team "partners with ad agencies sixty percent of the time," which meant they didn't forty percent of the time. Agencies were naturally anxious not to become superfluous middlemen. They worried that as consumers shifted to online buying on their smartphones, reliable advertising clients like department stores and retail outlets would do more than contract - they would perish. The digital giants had several advantages: they had better data, they could target individuals rather than demographics, and they could measure effectiveness more precisely. Facebook's Carolyn Everson insisted, "We are not trying to disrupt agencies," but agencies remained skeptical as they watched more clients develop direct relationships with these platforms.

Chapter 4: Consumer Rebellion: Ad Blockers and the Fight for Attention

By 2016, signs were growing of a wider and more ominous revolt - a revolt by consumers against all advertising, as mobile technology brought ads more intimately and insistently into people's lives but also gave them new tools to block them. Tim Cook, the CEO of Apple, announced that Apple would offer a new operating system for iPhones and iPads containing apps empowering users to block ads. For consumers annoyed by intrusive pre-roll and banner ads, sluggish ad page load speeds, and uninvited marketing messages draining their batteries, this was a welcome solution. Within weeks, Apple's ad blocking foray was duplicated by rival Samsung, which announced that it would include ad-blocking plug-ins to the operating system of its popular Android phones. A study by PageFair and Adobe estimated that 200 million consumers worldwide and 40 million in the United States used ad blockers, a number that jumped 41 percent in 2015, wiping out an estimated $20 billion of ad sales. This number was expected to double in 2016. It was akin, the study concluded, to the largest consumer boycott in history. The marketing community threw various countermeasures against the wall. German publisher Axel Springer filed a lawsuit asking that ad blockers be declared illegal. Twelve hundred American newspapers joined in a cease-and-desist letter to ad blockers, charging that they were "blatantly illegal." Jerry Wind from the Wharton School decried this approach as dumb: "Blocking the ad blockers as some people in the industry want to do is the dumbest thing you can do. The consumer is sending you a message: 'I hate your advertising.'" The industry's preferred antidote to combat ad blockers was native advertising, which was unlikely to be blocked because its camouflage fooled the ad censors. Michael Kassan was a believer, promoting native ads to publishing clients and brand clients alike. Native ads would be much more effective storytellers than their beta version, advertorials. Sounding evangelical, he envisioned a world where consumers wouldn't be able to tell the difference between news and advertising: "Nirvana is when you can't tell the difference between the content and the advertising." The aversion to advertising was particularly acute among younger generations. A study of Generation Z (those twenty-one and younger) found that 84 percent told researchers they don't like advertising. "They like branded content because it is much more real," explained Margaret Czeisler of Wildness, a youth marketing firm. "They don't like to be interrupted." This generation represents 34 percent of the world's population, and they see themselves as "culture creators," not passive receivers of information. Every 60 seconds they upload 500,000 hours of video to YouTube and 528,000 photos to Snapchat. Not liking advertising has a long history. Both in the Progressive era when muckrakers exposed false marketing claims, and again during the Depression, when corporations and advertisers were in bad odor, federal agencies were forged to police false advertising. Perhaps the most renowned critique of advertising was Vance Packard's The Hidden Persuaders, published in 1957, which lambasted advertisers for treating consumers as gullible children and manipulating their emotions. The difference now was that consumers had unprecedented technological power to simply opt out of the advertising ecosystem entirely.

Chapter 5: New Competitors: Consultancies and Publishers Enter the Arena

By 2016, the advertising business was being invaded from all directions, with two particularly formidable new competitors emerging: management consultancies and media publishers. These new entrants brought different capabilities, relationships, and business models to the marketing world, threatening traditional agencies' position in the ecosystem. Management consulting firms like Accenture, Deloitte, IBM, and PricewaterhouseCoopers were aggressively expanding into marketing services. According to an analysis by Advertising Age, Accenture Interactive's digital marketing revenues ranked number one in the United States and the world in 2015, followed by IBM. Accenture had recruited almost 40,000 design and creative professionals to work in marketing, while IBM's Interactive Experience division employed more than 10,000 people performing creative and marketing work in thirty locations worldwide. These consulting firms enjoyed several structural advantages. First, they already had established relationships with top management at major corporations. "They already have an edge because they have relationships with top management," explained John Dunham, a former management consultant. Second, they commanded significantly higher compensation than traditional agencies. "The average employee at Accenture makes three times as much as the average person at WPP," observed Terry Kawaja of Luma Partners. Perhaps most importantly, these consultancies positioned themselves as data-driven problem solvers rather than mere creators of advertising. Joanna Peña-Bickley, global chief creative officer for IBM iX, explained that while traditional agencies were "in a race to the bottom" because they had "commoditized their creativity," IBM saw "a hole in the market" in using data to solve larger corporate problems. "The people that will win the race in the end will be the people who can fundamentally refine and make new products out of data," she argued. Meanwhile, media companies were stealthily building out their own in-house advertising agencies. The New York Times employed an advertising sales team of 325 people, and nearly half were coders, designers, and copywriters creating ads for clients rather than just selling ad space. Under chief revenue officer Meredith Levien, they worked for the T Brand Studio, whose purpose she described this way: "We are now in the business of making advertising. Our ad sales person goes out with a content creator to meet clients." The Times aspired to serve as a near full-service agency. They bought a digital company, HelloSociety, that offered audience analytics and strategic alliances with influencers. They trained ex-journalists and hired videographers to craft native video ads for mobile phones. They sold consulting services and recruited employees skilled in distributing content on social networks. "We're helping clients figure out how to use social media platforms," CEO Mark Thompson said. "We're beginning to offer a broader portfolio of useful marketing services." Other publishers followed similar paths. Vice Media formed Virtue Worldwide, a global ad agency helping clients like Lululemon and Unilever shape marketing campaigns targeting younger consumers. Refinery29 positioned itself as "a creative tool set for brands," helping them reach 140 million monthly female visitors. Philippe von Borries, a Refinery29 co-founder, explained their value proposition: "Brands need us because we have an audience and we have data." For traditional agencies, this represented a troubling development. Michael Kassan observed that while he initially believed media agencies faced the greatest disruption threat, by 2016 he had changed his mind: "I think the most likely to be disrupted now are the traditional creative agencies." Publishers were telling brands, "We can bring you ideas. We actually know how to create it," with the unspoken implication being: "Why do you need a traditional advertising agency?"

Chapter 6: Mobile Dominance: The Smartphone Revolution in Marketing

The smartphone revolution fundamentally transformed how consumers interacted with content and advertising, creating perhaps the most significant inflection point in marketing history. Speaking before the Mobile World Congress in Barcelona in early 2016, Martin Sorrell castigated big agencies and advertisers for being late to comprehend the mobile upheaval. Mobile was not just "an extension of digital, just a way to reach consumers," he said, but perhaps the most important channel "that has been developed, and it changes the way you live your life, by virtue of the fact that it is always on, it's 24/7, and we've never had this." The reaction to the mobile revolution was perhaps most significant at Facebook. When the company went public in 2012, its IPO filing said it did not "generate any meaningful revenue" from mobile. Yet founder Mark Zuckerberg knew his users were switching from desktop to mobile. He abruptly ended a 2011 meeting when members of a product team came in with a desktop computer markup, insisting, "If you come in and try to show me a desktop product, I'm going to kick you out." Over the next eight weeks, all Facebook engineers were retrained to prioritize mobile development. By the end of 2012, one quarter of Facebook's revenues came from mobile; by 2016, 80 percent did. Mobile devices created both challenges and opportunities for marketers. The small screen size meant traditional banner ads no longer worked well, necessitating new formats that could be integrated into the content stream. As Meredith Levien of the New York Times explained, "Mobile left no adjacent space on the page," pushing publishers toward native advertising solutions. At the same time, smartphones offered unprecedented targeting capabilities. Keith Weed of Unilever noted: "From your mobile I know whether you stay in four-star or two-star hotels, whether you go to train stations or airports," allowing for highly personalized marketing messages. The intimate nature of mobile devices also changed consumer expectations. Carolyn Everson of Facebook observed that "in a mobile world consumers have more choices. Marketers have to earn the attention of consumers." This represented a fundamental shift from the interruptive advertising model that had dominated television and radio. On mobile, consumers could simply swipe away unwanted messages or install ad blockers. This forced marketers to create more relevant, valuable content that consumers would willingly engage with. For traditional media companies, the mobile revolution created existential challenges. Newspapers and magazines found their print advertising revenues plummeting as readers migrated to mobile devices, where ad rates were significantly lower. Television networks worried as younger viewers increasingly consumed content on smartphones rather than traditional TV sets. Les Moonves of CBS predicted more sponsored shows, product placement, and shorter ads to adapt to mobile viewing habits. The mobile shift also accelerated the rise of location-based marketing. Smartphones allowed advertisers to target consumers based on their physical location, creating new opportunities for retail businesses. A consumer walking past a Starbucks might receive a coupon for a discounted coffee, or someone browsing shoes online might see ads for nearby shoe stores. This capability blurred the line between digital and physical retail experiences, forcing traditional brick-and-mortar businesses to adapt their marketing strategies. Perhaps most significantly, mobile devices created direct relationships between brands and consumers. Companies like Nike built membership communities through digital products like Nike+ and FuelBand, allowing them to communicate directly with customers without media intermediaries. Unilever purchased Dollar Shave Club for $1 billion partly to capture its membership community. As Anne Finucane of Bank of America observed after Donald Trump's successful direct communication strategy in the 2016 election, this approach "makes me think of going directly to our customers more often."

Chapter 7: The Future Battlefield: AI, Personalization and Authenticity

The future of advertising will be shaped by three powerful forces: artificial intelligence, personalized marketing, and the quest for authenticity. IBM stands at the forefront of this transformation, having built a team of more than ten thousand professionals performing creative and marketing design work. IBM's Interactive Experience division uses artificial intelligence through Watson, a supercomputer that uses AI and software to answer verbal questions, similar to Apple's Siri or Amazon's Alexa, but with the goal of being capable of cognitive reasoning. Watson searches the internet for what millions of people write on social networks and blogs. Instead of using standard measurement tools - clicks, CPMs, demographics, geography - it identifies personality types and interests that advertisers can precisely target. IBM is betting that ads directed at individuals will result in highly relevant marketing that may please rather than annoy. It worked for Unilever when it partnered with IBM's Weather Company and created Watson Ads, allowing consumers to tap into their mobile phone or computer and ask for a mayonnaise recipe using favored personal ingredients. Personalized marketing will be the ultimate battlefield. Keith Weed of Unilever grows excited as he describes how Unilever can "create a hundred thousand permutations of the same ad," as they did with a thirty-second TV ad for Axe toiletries aimed at young men in Brazil. If they knew the target was fond of cars, or sci-fi movies, a particular soccer team or type of music, each ad could be personally tailored. Michael Hussey, CEO of StatSocial, explains how his company has constructed consumer profiles of 600 million citizens based on their public activities on social media, and in partnership with IBM's Watson, identified 50 million citizens and segmented each into "fifty-two personality types." However, this data-driven approach must be balanced with authenticity to succeed with younger generations. Research into Generation Z (those born after 1995) revealed a cohort deeply skeptical of traditional marketing. Margaret Czeisler of Wildness reported that 84% of this generation disliked advertising, with their highest social value being "to be true to themselves." Unlike millennials, who ranked wealth as their second most important goal, material success didn't even rank in Generation Z's top twenty priorities. "They hate ads," Czeisler explained bluntly. "They don't like to be interrupted." In response, many brands have embraced purpose-driven marketing. At the 2016 Cannes Lions Festival, Unilever's Keith Weed delivered a keynote arguing that successful brands must convey they are "a purpose-driven business." He cited research showing that Unilever products with social message ads grew 30% faster than those without. Jim Stengel, former CMO of Procter & Gamble, shared a similar perspective based on his experience with Pampers. By repositioning the brand as an advocate for babies' healthy development and partnering with UNICEF, Pampers expanded from a $2.5 billion to a $10.5 billion business. The advertising industry also faces a future where traditional TV will be streamed over the internet just as Netflix is, and "all TV will be bought and sold programmatically," according to Brian Lesser of GroupM. Les Moonves of CBS resists this notion, believing that if he turned over ad sales to machines it would take the skill and timing of the salesperson out of the equation, reducing CBS's leverage. But the trend seems inevitable as consumers demand more relevant, less intrusive advertising experiences. In this new world, agencies must adapt or perish. They must become more agile, more data-driven, and more focused on solving business problems rather than just creating ads. As Joanna Peña-Bickley of IBM put it, "The people that will win the race in the end will be the people who can fundamentally refine and make new products out of data." The future belongs to those who can harness technology to create personalized, relevant marketing that consumers welcome rather than avoid.

Summary

The advertising revolution of 2015-2016 represented a fundamental power shift in a $2 trillion global industry. Traditional advertising agencies, once the gatekeepers between brands and consumers, found themselves challenged from all sides - by technology platforms with direct consumer relationships, by consulting firms with C-suite connections, by publishers creating their own branded content, and by consumers themselves who increasingly rejected interruptive advertising. This perfect storm of disruption was driven by the convergence of mobile technology, big data, and changing consumer expectations, creating what Martin Sorrell aptly called a landscape of "frenemies" - companies that simultaneously collaborated and competed across the ecosystem. What emerged from this transformation was a new paradigm for how brands connect with consumers. The future belongs not to those who shout loudest, but to those who provide the most relevant, authentic, and valuable experiences. Successful marketers must balance the science of data-driven targeting with the art of storytelling, must respect consumer privacy while delivering personalization, and must demonstrate authentic purpose beyond profit-making. For consumers, this revolution promises more relevant advertising experiences but raises profound questions about privacy and attention. For society, it reshapes how media is funded and information is distributed. The advertising revolution thus reflects a larger transformation in how we communicate, consume, and connect in our increasingly digital world.

About Author

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Ken Auletta

Ken Auletta has written Annals of Communications columns and profiles for The New Yorker magazine since 1992. He is the author of eleven books, including five national bestsellers: Three Blind Mice: How the TV Networks Lost Their Way; Greed And Glory On Wall Street: The Fall of The House of Lehman; The Highwaymen: Warriors of the Information Super Highway; World War 3.0: Microsoft and Its Enemies; and Googled, The End of the World As We Know It, which was published in November of 2009.Auletta has won numerous journalism honors. He has been chosen a Literary Lion by the New York Public Library, and one of the 20th Century's top 100 business journalists by a distinguished national panel of peers.For two decades Auletta has been a national judge of the Livingston Awards for journalists under thirty-five. He has been a Trustee and member of the Executive Committee of the Public Theatre/New York Shakespeare Festival. He was a member of the Columbia Journalism School Task Force assembled by incoming college President Lee Bollinger to help reshape the curriculum. He has served as a Pulitzer Prize juror and a Trustee of the Nightingale-Bamford School. He was twice a Trustee of PEN, the international writers organization. He is a member of the New York Public Library's Emergency Committee for the Research Libraries, of the Author's Guild, PEN, and of the Committee to Protect Journalists.Auletta grew up on Coney Island in Brooklyn, where he attended public schools. He graduated with a B.S. from the State University College at Oswego, N.Y., and received an M.A. in political science from the Maxwell School of Citizenship and Public Affairs at Syracuse University.

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