The attitude that we have towards risk in our industry is embarrassingly amateur.

And I'm pointing the finger at both Agencies and Clients here, who tend to fall into opposite but equally naive traps.

The Agency view, most commonly (but not exclusively) heard from Creatives, is that "safe advertising is actually more risky than risky advertising." The theory here is that if advertising is 'vanilla' it "won't cut through" and is therefore likely to be useless. They rail against Clients' "conservatism", and wish their Clients would have 'more vision' or, moving further down the body, 'more balls.'

Many Clients, on the other hand, make huge efforts to minimise risk. The principal method is via research. If a campaign has 'passed' research, they feel it has a higher chance of being successful, i.e. should give them a higher than average return on investment. If a campaign is similar to things that have worked before, they again feel it has a higher chance of working. If an agency has done similar work before, a photographer or director has done similar work before, they will be more comfortable, because they will be 'reducing the risk' and therefore maximising their chance of a high return.

Both attitudes are so, so wrong.

For a more informed view, we need to learn something from the risk professionals - financial investors.

First of all, they are smart enough to realise that every investment carries risk. Indeed, they classify it. Low-risk investments include short-dated US Treasury Bonds - the chance of the United States going bankrupt within the next 30 or 60 days is tiny. A medium risk investment might be shares in a company like General Electric or Boeing. A high-risk investment could be loans to countries considered at risk of default, such as Greece and Argentina.

The difference with advertising is that financial investors understand that risk and reward are highly correlated. The low-risk 30-day US Treasury Bond delivers only a small return - just 0.03% annually, as of last Friday. Boeing's dividend yield is currently 2.45%, GE's is 3.7%. Whereas a higher-risk Greek government 10-year bond is currently yielding 12.7%, and Argentina 7.2%.

The more risk you are willing to take, the higher your potential reward. It's that simple.

And it's the same for every area of life. Asking a hottie out? High risk, high reward. Working for the civil service? Low risk, low reward.

If only we in advertising could understand this simple correlation. The Creatives arguing for high-risk as a 'form of safety' are idiots. High-risk work is high-risk. It's also potentially higher reward, of course. And the Clients demanding that their work be de-risked should not expect that it will also generate high returns. It won't.

Cadbury's drumming gorilla was high-risk (because very weird and unusual - it could have bombed) but when it worked, the rewards were high. A beer ad that just shows hops being farmed and droplets of water glistening on the bottle is low risk (it's not going to offend anybody) but will be low reward.

TLDR: an ad campaign that has a chance of earning a high return will also involve high risk. A low risk campaign can never earn a high return.


8 Comments