No one in our industry can ignore the seismic business and cultural shifts that are reshaping our definitions and expectations of the advertising world. One only needs to read Ken Auletta’s Frenemies book—or the annual earnings reports of the ad holding companies—to know that being an advertising agency in today’s world is fraught with peril and derogation. In fact, to many of our clients the idea of an ad agency is either anachronistic or irrelevant.
In 2017, for the first time ever, four consultancies cracked the top 10 of the world’s largest agencies in the world. Consultancies are seemingly taking over ad agencies’ purview because CMOs are now hyper-focused on business growth and not just brand goals. Consultant work is less prone to being scrutinized by procurement departments that make it a truism to bang ad agencies up on fees and hourly rates.
Ad agencies are also being supplanted by in-house studios, content hubs and digital/social departments. Choosing to act more nimbly, effectively, cheaply and with greater insider knowledge of the business strategy, forward-thinking marketers and brands would rather pay their own people than agency folks. Often, going in-house is more lucrative and meaningful for top creative and digital talent, leading to a palpable brain drain at large ad agencies. According to a Forrester study, marketers with in-house agencies increased to 64 percent from 42 percent just a decade ago.
And do I even need to bemoan the tepid revenue growth, shrinking margins and alley fights with procurement that are making the ad agency business model increasingly untenable? Advertising agencies are sailing against strong headwinds. Combined with other turbulent water (ad fraud, #MeToo and diversity tone deafness, ad blocking, etc.), many agency leaders are invariably prompting an existential question: What does it actually mean to be an advertising agency today? Or better still, what should we do to remain in the so-called ad agency industry? I believe there are three factors to consider when answering these questions.
Champion the strategy
Too many recent campaign proposals that I’ve seen are anemic in the strategy upfront. A few slides in the deck are devoted to the thinking and a slew of OOH and banner comps follow. Competitive intelligence, business strategy and deep cultural insights are far too often glossed over or given short shrift in the race to win over the CMO with glitz and glamour.
Ad agencies still have the upper hand in delivering the creative idea, but they are missing out on expanding their scope to encompass working on back- and front-end systems and business pain points. Agencies are too enamored with the “doing” and find the “thinking” to be subservient to the big idea. This is a mistake. To compete with consultancies—and actually continue to exist—ad agencies need to focus on strategic solutions as much as creative ones and distill complex analytics into insights that can be activated across all touch points above and below the line.
Strive for indispensability
Stop me if you’ve heard this before: Ad agencies have become commoditized. In the chase for ever-decreasing margins and fees, ad agencies have increased their offerings to try and become everything to everyone. For any agency not heavily backed by holding companies, this is a tragic mistake. I think specialization is going to become the way forward for small and midsize shops, which will need to carve out a distinctiveness and a core competency that will be sought after by clients rather than optimistically pitched in a sea of sameness. Being indispensable also means not giving away the product; unpaid jump-ball pitches should therefore become unviable for ad agencies going forward. Agencies need to find their one thing and go all-in on it.
Be more human
Advertising from now on should not be seen as a creative product but instead an amalgamation of consumer experiences. All creative work should answer the fundamental question, “Why would anyone care about this work?” More often than not, people just don’t, and we fool ourselves in thinking otherwise. If there’s no meaning, no purpose, no real human-centric reason for the work, it just won’t move the needle. As Wieden + Kennedy’s Colleen DeCourcy remarked at the IAB annual Leadership Meeting this year, “The brands that are audience-centric—human-centric—that are focused on creating value for people, that combine tech with human insight and empathy, that ask and answer: What do real people want? That look at people as more than consumers. They are the ones we will mark in history as the 21st century brands.” The same applies to 21st century agencies, too.
It’s easy to get cynical. But we’re not in this game for the easy answers or the easy money. In fact, if “crisis” is another word for opportunity, then ad agencies are on the cusp of something great. What that looks like is up to each and every one of us.