"I've Been Coming to Cannes for 15 Years. For the First Time, Not One Person — I Mean Not One Person — Was Talking About Creativity"

Things may be friendlier than you'd expect: the division of labor in advertising is getting clearer, and both sides think there should be more collaboration.

For the whole of late June, a crowd of creative types took over the little town of Cannes in the south of France for the week-long 2016 Cannes Lions International Festival of Creativity.

The beach in front of the Palais des Festivals was covered with white loungers and sun umbrellas, and at the harbor stood a sign you couldn't miss, its blue flag melting into the sky, declaring the spot "Facebook Beach." Facebook wasn't the only tech company planting a flag here: "YouTube Beach" and "Twitter Beach" had long since staked out their positions, and not far off in town a huge bright-yellow Snapchat billboard stood out against the blue sky.

The New York Times called the tech companies' "invasion" of this stretch of sand a "Normandy landing." The landing party included the Chinese internet giant Tencent, which had come to collect awards of its own.

Wang Kaiyuan came to Cannes this time for Mindshare China, one of the media agencies under the WPP Group, and he found it hard not to notice how loudly the tech companies were present. At the entrance, the photo-sharing company Pinterest and the festival organizers had put up a board hung with several hundred Pinterest-style cards — "100 Places to Eat, Drink and Play in Cannes" — for attendees to take.

In 2011 the "Cannes International Advertising Festival" became the "Cannes Lions International Festival of Creativity." On the surface it is still the Oscars of advertising, where the big agency networks (4A) and the independent shops gather once a year to hand out prizes, give talks, throw parties, and show off the past year's work to their brand clients. But as the award categories kept widening, the tech companies came too.

When Facebook and Google set up dedicated pavilions here last year, WPP CEO Martin Sorrell gave the place a nickname: "Duopoly Beach." This year the trend only grew stronger.

"I've been coming to Cannes for 15 years, and for the first time, not one person — I mean not one person — was talking about creativity." That is how Rob Schwartz, CEO of the New York creative agency TBWA\Chiat\Day, described what he felt: people talked about VR (virtual reality), about ad blocking, about Gwyneth Paltrow (a guest at this year's festival, and an Oscar-winning actress) — "just not much about creativity."

Another Rob — Rob Norman, global chief digital officer of GroupM — told us something similar: "I think there were two Cannes this week. One was about creativity and the awards handed out at the Palais des Festivals. The other was the conversations going on in hotel meeting rooms up and down the Boulevard de la Croisette — talks with media partners and clients about the data and technology needed to reach audiences with relevant messages and get them to engage."

What the two Robs were sighing over is exactly why the tech companies grabbed the beaches of Cannes: to show what change they can bring, and then to talk business. Apart from their own product launches, this may be the single most important stage the Facebooks of the world have to show themselves off.

They Met a Long Time Ago

Technology reshaping advertising is hardly a new subject. Nor did tech companies start coming to Cannes this year. It's just that Facebook and Twitter used to play walk-on parts — show a face, give a keynote.

Outside the show, though, the old order has already broken. Google and Facebook took 64% of the US digital ad market last year, and most of that nearly $600 billion in ad revenue went into the pockets of the tech giants; their share is expected to rise again this year. They can collect enormous amounts of user behavior data and, between the two of them, net just about every internet user there is. According to eMarketer, by 2014 Baidu, Alibaba and Tencent had already reached 3rd, 4th and 9th place in global digital ad market share.

The value of tech companies as media channels was proven long ago. They used "technology" to attract huge audiences, and they claim to bring advertising more precise targeting. Now, beyond simply renting out ad space, their influence on creative work is becoming clearer as well. "A lot of people say the medium has become more important than the message. That may be arguable, but there's no denying the medium has had an enormous effect on creativity," Mark Patterson, CEO of GroupM Asia Pacific, wrote to QDaily in an email.

Plenty of creative ideas really are being born on social platforms. We have reported on at least three big companies (Starbucks, L'Oréal, 20th Century Fox and others) using Snapchat filters for marketing, and Snapchat is happy to hold forth in those stories about what it has learned about "reaching millennials." Luxury brands have moved their fashion shows onto Instagram, for no reason other than the platform's looks-first character — plus the 200,000-odd advertisers already signed up there.

In this year's judging for the Mobile Lions, roughly half of the work entered in that category alone involved tech companies. And the campaign that fought The New York Times' VR app for the Grand Prix was itself a clever use of Instagram:

To get more tourists to come inside (mainly because the gift shop and the restaurant are in there) rather than just posing outside, the Sydney Opera House used data and technology to find the Instagram handles of people who had posted photos of the building taken on site. Staff quickly had performers who were on stage inside film a short hello, then posted it to Instagram and @-mentioned those users. When those users then came in to visit, their visits were turned into more content and spread on Instagram in turn.

Sydney Opera House Instagram campaign / Online Advertisers Community

"We gave this case high marks on every count." Liu Yang, founder and CEO of the local creative agency Amber and also a vice president of Leo Digital Group, was invited to judge the Mobile category. He told us: "First, you can see they made clever use of an internet company's technology, but it wasn't just a simple technical hookup — the brand experience was excellent. I don't know who did more, the agency or Instagram, but a case that earns this much respect must involve a lot more collaboration between the two."

Behind what Liu Yang says there is an unspoken point. Earlier on, tech companies tended to throw their weight around with traditional agencies, because they held the advantage of a direct line to enormous stores of user data. One advertising executive told us he ran into exactly that while dealing with a Chinese tech company: the compliance rules for ad materials left not an inch of room to negotiate, and there was always the risk of being pulled from the site or app at any moment. His was not an isolated case.

At the same time, tech companies are all building out their in-house marketing teams: Google Ad Innovations, Facebook Factory, and Vice and BuzzFeed have built native advertising arms of their own, promising brands more distinctive, more personal content.

Having the "companies that are changing the world" compete with you always causes a little panic. Still, Liu Yang said: "I do think different companies have different DNA. Tech companies have parts they're extremely good at, but creative people probably understand the brand layer better. This industry has been around a lot of years, after all…"

What Ad People Worry About

That worry is a mood spreading widely among ad people.

Gregory Raifman runs Rubicon Project, an automated online ad platform worth $660 million. Just before leaving Cannes, he updated a piece in Ad Age and wrote, with a trace of despair, that the model which carried advertising for the past half-century can no longer carry the next wave of growth: what threatens our industry is not only ad blocking but the bad ad quality everyone has looked past.

In fact it is bad online ad quality that made ad blocking popular in the first place, and that quality has not fallen only because traditional ad people have been slow to adapt to the new media environment. The automated model tech companies follow, and the flood of user-generated content on social platforms, carry part of the blame too.

As a creative, Liu Yang's earlier worry was mainly this: "the fear that tech companies would also cast themselves as the ones supplying the creative." The fear is reasonable. Media placement usually eats up the bulk of an ad budget, so the industry's habit of "sell the space, throw in the creative free" already existed back in the print era. Now that brands go to WeChat, WeChat may well say: we can do the creative for you too. Liu Yang sighed: "They're just too big, and the part they hold up front — the user data — is too gripping."

Still, during this round of judging at Cannes, he felt he saw a lot of excellent work in which the division of labor was reasonably clear. There is no way to confirm who did more, or whose idea it was to begin with, "but the kind of thing that settles into lasting brand value — I don't think tech companies can do that on their own."

None of which hides how badly digital marketers want user data. Data helps ad people work out why a user clicked on this image ad and ignored that one. One common complaint at Cannes was that Facebook and other tech companies don't share enough user data, which leaves agencies unable to bring clients a stronger proposal.

"We completely understand that user privacy is sacred and not to be violated," Irwin Gotlieb, global chairman of GroupM, the world's largest media buying company, told The New York Times. "But even without compromising on that, there ought to be ways to share data."

Until the two sides can really work together, falling digital ad quality will always be the biggest thing holding the industry back — which is why so many people at the festival were talking about ad blockers. The latest report from PageFair, a firm that studies ad blocking, says more than 400 million internet users worldwide block ads on their phones, and that last year ad blocking cost ad publishers nearly $22 billion. Google, Amazon and Microsoft have had to strike deals with Adblock Plus in hopes of getting their own ads onto the whitelist. In the past, the "wasted half of the ad budget" was impossible to count. Now the exact mobile numbers are sitting in front of everyone, and they are genuinely frightening.

The report also says that as of March this year, 159 million users in China were blocking ads on mobile, which means 15% of mobile ad placements in China were entirely wasted.

"Every day at Cannes someone asked me why there were no Chinese winners in the mobile category. Isn't China's mobile market supposed to lead the world?" Liu Yang thinks cases as perfectly coordinated as the Sydney Opera House's are still very rare in China: "We've grown too fast. It's like having a room full of toys in front of you and not knowing how to use them. And that has covered up a lot of problems."

The Tech Companies Selling Ads

"Facebook Beach" carried an unusually simple message: we come in "peace," and we need advertising.

Carolyn Everson, Facebook's vice president of global marketing solutions, told reporters: "Our view is that the whole industry has to collaborate as it never has before. The industry is going through a huge shift."

That huge shift may mean this: once a social platform's user numbers grow past a certain point, its marketing value starts to fall instead — engagement is beginning to drop even at Instagram, the hottest platform of the moment. According to a report from the social media analytics firm Quintly, accounts with more than 1,000 followers saw engagement fall 35%, and the drop gets steeper the more followers an account has. At the same time, Instagram announced that it had passed 500 million monthly active users.

In the three years since Facebook bought Instagram, it has used its own experience to bring the app a string of changes that serve advertising revenue: stretching short videos to 60 seconds, dropping the forced square crop. The most recent update added an entirely new ad format that lets users click straight through to buy, strengthening the "conversion rate" brand clients care about most.

But these product changes, which engineers make easily, don't touch ad creative at all. A platform can faithfully record that a user clicked an ad; it cannot explain why. A few years ago Facebook invited advertisers to build fan pages free of charge, and then, as more and more companies came rushing in, decided to close the gate. Social platforms do exercise some deliberate control — but quantity is the easy thing to control. Quality is much harder.

The price of a WeChat Moments ad has dropped from 5 million yuan a post in early 2015 to 50,000 yuan now, and well-made ads are indeed rare. Novelty has something to do with it. When WeChat Moments ran its first four ads, more than a few ad people interviewed by QDaily at the time said that once the novelty wore off for users, the business would end up competing on creative — and that is where real differentiation would come from.

At Cannes, a fresh deal was also struck: Tencent and WPP formed a strategic partnership to set up a "China Social Marketing Lab." Before this, the companies that had reached deeper or shallower agreements with WPP already included Google, BuzzFeed and Facebook. The aim in every case is to trade data and place ads more efficiently.

Leave content production aside, and the easiest thing a tech company can do to sell ads is improve its algorithm, change the logic by which information is displayed, and charge the advertisers who gain from it. But after watching Twitter and Weibo decline, everyone else has grown more careful about touching "the algorithm." The latest evidence: on June 29 Facebook said it would show posts from friends first — hardly a helpful move for advertisers, but one that protects the value of "social interaction."

"There is no algorithm in the world that can generate cool." The Cannes Lions website gave prominent play to that line from Mike McCue, founder of the news aggregation app Flipboard. It read rather like ad people borrowing his mouth to shout back at the tech companies.

Rob Norman told us by email that the work would probably divide more sensibly this way: tech companies can solve the problem of sorting audiences, turning hundreds of millions of individual consumer impressions into meaningful groups; creative and media agencies can then use that data to send only relevant messages to the right audiences, and help brands market more effectively.

Another Kind of "Technology"

While the tech companies were seizing this beach, an interesting thing was happening: everyone was talking about "technology" on an entirely different level. The lead role still belonged to VR, which you have probably heard about many times and are still confused by.

Last week Kevin Gentzel brought a group of salespeople and VR specialists to Cannes. They spent a week watching the VR performances on site. Those displays of technical wizardry may be a little showy, but to Gentzel they mean real revenue.

Gentzel used to run North American ad sales at Yahoo. Last July he moved to Gannett, the parent company of the news site USA Today, as chief revenue officer — a title that says what the job is: make money for the group. The company recently signed an agreement with a new client to make VR content for the brand, according to reports.

Hardware companies like Samsung invited visitors to try their Gear 360 VR headsets, and online platforms like YouTube did their best to show off whatever cool they could manage, as if the whole thing were a trade fair.

Asked which technology had the biggest effect on advertising this year, Lin Shengyuan, chief innovation and technology officer of isobar China, the digital agency under Dentsu Aegis Network, said VR, without question. "In three or four days I saw countless VR demos. Going by the festival, whichever technology gets talked about most is the one closest to being real."

Lin Shengyuan thinks advertising is the testing ground for new technology, and that showing off technique always draws more eyes. "When I got into this business Flash was all the rage. Before that there was a stretch when it was fashionable to print something on paper and make a dinosaur appear on it — augmented reality. Then came real-time positioning, facial recognition, 3D printing, drones. We have to make a lot of things in a year. We play with everything." For these novelties, he said, the job of creative work is to convey to ordinary people a feeling they cannot grasp without experiencing it: "It's like before televisions existed — how would an ordinary person know what a TV was for?"

Hardly anyone really knows what VR feels like, but at Cannes the question may have come slightly into focus. After "cool-headed thinking," Liu Yang and his fellow judges chose a VR case for the Mobile Grand Prix. When they put on Google Cardboard headsets and watched the on-the-scene news VR short made by The New York Times, they were genuinely shaken. By the paper's own figures, NYT VR has been downloaded more than 600,000 times since it launched last November.

On whether the Grand Prix should go to NYT VR or to the Sydney Opera House's Instagram campaign, the judges finally agreed: the first represented the future, the second was the most perfect combination available now. So "we actually cast our vote for the future."

Mobile Grand Prix: NYT VR

Still, before VR is fully developed and reaches consumers, its standing in advertising may well already have been taken by the next fashionable technology.

"In the fairly messy digital ecosystem, innovation and technology are what every company is fighting over," Lin Shengyuan said. In a sense, the arrival of the tech companies means the industry's metabolism is speeding up. The 30-second TV commercial ruled this market for decades. Now an ad built on a mobile livestreaming app has a life of two months at most — after two months you're out of date.

Before he left for Cannes, Liu Yang joked to us about how the festival had picked such a flat theme this year: Thank You, Creativity. But after making the trip, he felt he could read it this way — Cannes was trying to use the one thing everybody respects to tie them all onto the same boat.