The agency model -- its processes, payment structures, and relationships -- is changing because marketing is changing.
We wanted to find out what agency executives think about the threats to the model and how agencies are evolving to meet current demands and challenges. Consider these 17 threats and if your agency should be concerned:
The ad agency model is under constant threat today for two main reasons. First, the democratization of tech and the proliferation of social media has given everyone the tools to go into the business of creativity. From YouTube stars with GoPros to Vine stars, now anyone can be their own “agency.” Second, a brand’s most important asset today is its relationship with its customers. Agencies once were an important intermediary to ensure the right message was crafted and then broadcasted, but there has been a dramatic shift. We now live in the age of real-time dialogue, and the flow of small, trusted conversation is more important than big, powerful themes. Because of this shift, companies will continue to take more ownership of communicating with their customers directly, especially through social. This will further erode agency opportunities.
Speed -- or put into marketing-speak, real-time. Agencies are built to uncover insights (takes time), develop campaign ideas (takes time), plan and buy media (takes time), and produce the creative (more time). Project management moves the work down the factory line, but all of it takes time. A model that is reinforced by how agencies make money -- time of staff. More time, more staff, more money.
Meanwhile, the most provocative branding is done in real-time, where brands have no time to prepare. They just act and do so very nearly spontaneously. I call it 'brand improv' and have even suggested to clients and agencies they hire improv comedians to proactively create these spontaneous branding opportunities, after they are fully briefed on the brand idea. It’s a different kind of talent.
Yes, speed is the 'kryptonite' to the ad agency model.
The single biggest threat to the agency model is by far automation. Natural language processing and algorithm-powered cloud technology platforms are making artificial intelligence a real threat to the agency model. Ads that write, place, design, and optimize themselves according to predictive behaviors of consumers are making all the laggard agencies extinct. This isn’t just going to be ads. It’s going to be emails, customer service, and the way entire brands are ran.
Today’s executives are faced with a myriad of challenges when it comes to navigating the industry’s changing landscape. Legacy business models are out of date and ineffective, and brands are working with a broader portfolio of agencies or taking the work in-house -- not to mention the ongoing need for digital expertise. More business is being conducted on a project basis, revenue is coming in smaller amounts, and leaders have to be faster and more entrepreneurial in their pursuit of success. For modern executives, there are more obstacles and channels to navigate than ever before. Just in the first few weeks of 2015, we’ve seen agencies hiring leaders with fresh ideas that can adapt to the fast, flexible, and agile demands of marketers. It’s these types of leaders who will be able to succeed in what we call 'the agility era.'
Clients are under pressure to bring value and innovation to their brands, yet agencies are increasingly focused on delivering outputs, not outcomes. This means answering client briefs with predetermined solutions based on their existing capabilities.
To bring real value, agencies must focus on finding answers to clients’ business problems, not funding their fledgling new capabilities. At Naked, we call this approach 'radical objectivity' -- an unbiased approach to finding the right answer, even if it entails an unconventional solution requiring capabilities that exist outside of the agency. We don’t have an agenda or predisposition about our output for clients. We aren’t set up to align profit with medium, and we’re positively indifferent about what we make, as long as it’s a radical, objective, and creative solution to a challenge.
The biggest threat to the agency model today is a misunderstanding of what we are actually good at. Think of the ad agency of today as a shell you find on the beach. It looks pretty, but odds are there may not be much inside. That shell is tough; it’s been tossed around and has survived the pressures of a harsh environment. More importantly, all sorts of things can live inside a good shell long after the original inhabitant has moved on. The space itself is flexible and can sustain all kinds of life. This is what agencies are actually good at: developing flexible, resilient environments that sustain creative thinking not found in other businesses. Our future depends on giving all kinds of creative thinkers (not just creatives) a place to thrive and in turn, help other businesses grow. That’s what we have always done best.
I would say staying relevant is the biggest struggle for any agency. With so much competition in the marketplace today, it’s crucial for an agency to offer best-in-class services, in addition to a fundamental understanding of consumer insights to fit its clients’ needs -- all the while staying true to who they are. To stay relevant, it’s important to cultivate an environment that enables curiosity and restlessness for their hardworking talent to execute successful creative and media ideas.
The biggest threat agencies face today is business intelligence, or lack thereof. Clients have more access to data but actually share less of it with agency partners than ever before. Clients are hiring better talent than in the past, which improves their ability to analyze data and develop insight. Now agencies are being challenged to develop insight but without the same access to this overwhelmingly available data. This affects the strategic product, which in turn affects the quality of a brief, which can lead to creative products that miss the mark. It’s a snowball effect that starts with a lack of meaningful insight. Agencies need to develop robust business intelligence units that can obtain data and analyze it in a way that aids strategic decision-making and planning. This will allow the final creative product to drive better results for clients’ businesses, adding the proper value to the agency model.
The biggest threat to the ad agency model is without a doubt the model itself. Unfortunately, the prevailing new business practice -- competitive, unpaid pitches where agencies have to give away their most precious product, their ideas -- creates an unsustainable dynamic. Agencies put their best people on these pitches, starving paying clients of top talent, which is of course, a great way to lose those paying clients and force them to put work into review. It’s a vicious cycle we must break. The ideal scenario is for an agency to hire extra talent at all levels to provide pitching bandwidth that feeds the beast. Sadly, this is rarely possible due to the razor-thin budgets and margins these pitch processes lead to. It’s not the best idea that wins; it’s the best idea at the cheapest price that wins.
F&P believes the biggest threat to the current agency model is to misconstrue the value of data. Data is not just for brands to measure consumers; consumers use it to evaluate the very brands we are trying to sell. They use the information available online to compare and contrast products and make their purchase decisions -- big and small.
Marketers should empower better decision-making by presenting our brands transparently, enabling comparison, and behaving as if we are part of the bigger fabric of the internet. As marketers, when we put out content that ignores this information reality, we miss an opportunity to grow.
As an industry, we have historically over-indexed on awareness building when we should think about what we can do to help customers make more informed choices and enjoy the decision process along the way.
The biggest threat to the ad agency model is the model itself.
The nature in which consumers interact with brands and technology is changing and expanding at an exponential rate never seen before (and will only continue to increase). Agencies need to respond to this environment by proactively adapting their approach to work and organization. If the name of your game is to create legions of slow-moving teams focused on over-thinking and 'gold-plating' to create the illusion of client value, your days are numbered. Agencies that create small, self-organizing teams focused on actively delivering engaging content they can iterate on quickly are the ones that will thrive.
The bottom line is that agencies need to organize themselves around delivering technology enabled user experiences, not advertising.
Ad agencies are the big threat to the ad agency model. Many have their ostrich heads in the sand, insisting on providing old services on old payment models. What many clients are crying out for are products, but too few agencies try new models, so they continue to fight over an ever-shrinking pie without adopting real change. The way forward is to follow end-customers’ behavior shifts toward digital and achieve media integration, which requires a culture shift from campaign broadcasting to ongoing customer conversations. We also need to package our offerings as products. Only by showing we get our clients' new business reality can we maintain the credibility to advise them on business-critical decisions and take a seat at the boardroom table -- something many agencies cherish but few have real access to.
Shifts in the rules surrounding talent is certainly one of the biggest threats to the traditional agency model today. It’s a fact that the pool of experienced individuals interested in working at agencies full time is shrinking. There are two factors driving this: in-house agencies are becoming more and more pervasive across all types of clients, and these jobs are coming with some significant perks such as high salaries, stock options, perceived stability, and the promise of a more balanced work life. Second, the freelance model has become a more lucrative and viable option for many people weary of the pace and instability of full-time agency employment. What it comes down to is talent of all types have more good choices than ever, making the once coveted agency staff option merely one among many. We are finding ways to take advantage of this shift in the workforce, rather than seeing it as a threat to us. By partnering very closely with our clients' in-house agencies and building a variable layer into our staffing plans, we are able to create an model that fits people’s lives and is powerful for attracting and keeping people in (and around) our agency.
The biggest thread to the ad agency model is to think it’s a model. We live in a constantly evolving and changing world, which is simply fantastic. So, to see change as a threat will be fatal. We in the industry should embrace the change and seize the millions of possibilities it has to offer. Naturally, all this has an effect on the agency model as well. Why not put tons of dynamite next to the model? The new world is for the agile ones. For those who can create brilliant content, put it out there in a channel agnostic way, and react within seconds. Whatever model helps, that is a good one. If there’s none, who actually needs models?
The biggest threat to the ad agency model is the democratization of creativity.
People no longer need to go to one, leading agency for the best ideas and creative work. Creativity has run gloriously wild. It’s online, in-house, pro bono, anonymous, multi-disciplinary, Behance’d and hackathon-ed.
At Safari Sundays we see this is an opportunity, not a threat. It keeps us on our toes and makes us continually challenge our own approach.
We don’t believe in one agency that rules them all. We believe in bringing the right people together -- clients, creative partners, friends, and foes -- to take a collective, creative leap of faith.
Attracting and retaining talented, creative people is the greatest threat to ad agencies today as multiple industries compete for converging skill sets. The overall landscape is changing as millennials have different expectations and career paths. On average, millennials stay in a position for just two years, and they may change jobs up to 20 times throughout their careers. Additionally, baby boomers are retiring, so agencies need to ensure they have a pipeline of new leaders who bring vision and experience to the organization. Maintaining diversity and a healthy gender balance remains a challenge for the industry as well. Agencies should focus on programs that attract the right people and help them reach their full potential once they are there.
17) Technology That Threatens Left-Brain Activities
First, technology’s rapid commoditization of many of left-brain agency activities -- such as programmatic buying. Technology has a long way to go to threaten right-brain agency activities. Agencies have always been places where creative thinkers gathered to get paid to develop compelling stories for brands. Eventually, technology may make the agency as a creative gathering point to get paid irrelevant. Technology has not only enabled creative thinkers to gather and create anywhere, but it can eventually enable clients to allocate micro-payments for brand- and business-lifting creativity based on the value of ever-morphing individual and group contribution.