The end of Advertising agencies as we know them

This is pretty much a completely lifted article by Sean Carton posted on ClickZ.com, but I just thought it was so well put that I wanted to paste it across. I have taken the liberty of amending it in a few places to make it more UK recruitment industry relevant (talking about TV ads isn't really us), but I think the parallels are so striking overall it holds up. See what you think (oh - and there are some great posts linked to from the article too - so give yourself 15 minutes, get a coffee and have a good read).

The end of Advertising agencies as we know them

Do we really need advertising agencies anymore? Are we witnessing the great "reboot" of the advertising industry hastened (but not caused) by the current recession?

It's pretty obvious to any reasonable person watching the tens of thousands of layoffs in the industry along with the simultaneous implosion of the newspaper industry that the ad biz as we know it is in serious trouble. Couple that with the ongoing decrease in advertising spending along with new studies (such as this one from Microsoft) that predict that the Internet will overtake TV in 2010, and it's clear that advertising as we've all grown to know it is on the way out.

I'm not predicting the death of advertising. That's baloney. If anything, we're witnessing the rebirth of an entire industry that's going to expand in ways we've never thought of before -- especially if we expand our concept of what advertising means. And we'd better. Before we blow it like the newspaper industry has.

To understand the tectonic shift we're in the midst of now, it's helpful to remember where ad agencies came from. Originally advertising agencies were "agents" for newspapers, placing ads produced by clients in newspapers. In 1877, the J. Walter Thompson Co. figured out it could sell more advertising space if it created the ads instead of relying on clients to create ads. The modern agency was born.

As new media developed, the advertising agency adapted. Radio and TV required new creative skills and new people. Agencies kept growing and adding more overhead. Agencies became more unwieldy, more rigid, and more set in their ways.

Then along came the Internet and all that changed.

It took a while, but today advertising is less about the big colourful press ad campaigns and more about producing measurable results across a host of media and channels. Social media, search marketing, and online direct response (with its associated need for candidate-relationship management and other data-handling technologies) have required new skills and and a new way of thinking.

And that's the crux of the issue. Advertising as we've known it has always been about an "interrupt" model that requires candidates to pay for content by sifting through pages of classified print ads. It's been about grabbing and holding attention in a linear way because that's how media worked.

It doesn't work that way anymore. And neither does the advertising agency as we know it.

Why? The full-service monolithic agency model worked fine in a world where there were a small number of national newspapers, a local/regional champion or two and perhaps a niche industry magasine too. It doesn't work when you have to deal with dozens of media channels and a plethora of options within each that change on a nearly daily basis. New technologies pop up (social networking, Twitter, online video, etc.) and new skills and new thinking are needed to deal with them. Large organizations with large payrolls, hierarchical structures, and well-defined (and well-defended) areas of expertise can't possibly hope to make any money when they have to staff themselves with a constantly expanding cast of experts to deal with new media challenges. Add to that a compensation model based on a world that's long gone (retainers and media commissions) and the agency model we've all grown up with starts to look like a relic of the past. Turmoil in the industry provides proof.

So what to do? Simple: explode the idea of the monolithic agency. Get rid of the concept that only an agency that does everything can possibly create and manage large campaigns. Look for more flexible and fluid models that expand and contract as needed, bringing in new expertise when needed and ditching it when it's not. Think distributed, not centralized. Think "collective," not "company."

As more people get laid off and can't find jobs at other agencies (who are also laying people off), more people hanging up their shingle and do whatever it is that they do best, creating an explosion of entrepreneurs and experts who (without the overhead of a big company) can do things cheaper, faster, and more flexibly than their counterparts at big companies.

If this sounds suspiciously like the "free agent" and "new economy" predictions we heard eight years ago, it kind of is. But there's one big difference: now we have the (free!) tools to actually make it happen. Social networking, collaborative tools such as Google Docs, and advances in mobile technologies make it possible to create a distributed team that doesn't need to be in the same place to work effectively.

So what's the agency of the future going to look like? Probably a lot smaller and focused on strategy, account/project management, creative leadership (but not execution), and media strategy (but not planning and buying). Most agencies will revolve around these hubs if they're honest with themselves. Agencies will exist to provide high-level strategic guidance that clients need in a media-chaotic environment. Agencies will expand or contract as needed or will explore radical solutions such as crowdsourcing to get work done for less money.

Whether this scenario turns out to be completely accurate or not remains to be seen. But nobody can look at what's going on today and say that the agency of tomorrow is going to look much like the agency of today or yesterday.

So what do you think? Has Sean hit the nail on the head - or am I just part of that "explosion of entrepreneurs and experts" and therefore my judgment is clouded by desperately hoping that the new world that Sean talks of is to become the new reality?

Comments

[ben]

It's an interesting one Uncle H, and certainly as I was reading through I wasn't totally in agreement, but then his second to last para does seem to bring a little more reasoned perspective on matters.

However, having worked at a WPP agency previously, and worked with the larger WPP group at times - seeing how the 'larger agency' operates, it is likely that, once the market picks up again, they will grow and evolve as they always have - simply buying up the smaller agencies/specialists that enhance their offering to clients, and bringing the income in-house, rather than paying someone else to deliver a product/project. Ultimately, it makes commercial sense.

There will always be room for smaller specialist operations - especially those with a real passion and belief in their specialist area, but at the same time, there will still be lots of organisations - clients - that feel more comfortable buying from one (trusted) supplier.

Well, at least, that's my thoughts on your post.

Who knows...

[Alex Hens]

I hear what you're saying - but from what I've observed across the Advertising/Marketing industry is attempts at assimilating small/niche businesses actually snuffs out what makes those businesses what they are in the first place - namely their ability to be creative, fleet of foot and pioneering.

You're absolutely right about the clients wanting to have a single interface though, someone/thing reliable and as an easy go to - but I guess the proposition from Sean (and one I concur with) is that the future is for these big boys to be ever more conduits to and facilitators of services than an all servicing one stop shop themselves. It's constantly bolting on bits here, there and everywhere and constantly changing what they do and how they do it that makes no commercial sense - especially when some may be little more than a passing flash in the pan.

But in one thing you are absolutely spot on - "who knows..."

:-)

[Peter Gold]

Yes there will be change but it is always slowed down by the customer who is often risk averse; that's why the bigger agencies survive. Not because they are good or bad per se but they give confidence to the client.

I'm on your side Alex but think it will take a lot longer than you (I/we) may think. Stockdale thinking needed on this one rather than hope and optimism!

[Ben]

I always expected the larger advertising agencies to move in and take over the digital space from the smaller digital outfits. It just hasn't happenned and, having worked with both types of organisation, I now think that it is unlikely to.

You touched on the monolithic nature of advertising agencies and this is pretty key: they have largely failed to engage with digital, regarding it as just another media that can be negotiated as part of a multi-channel campaign.

Of couse many consumers prefer a single supplier, but surely no consumer who really takes digital seriously would consider using one of the larger advertising agencies?