Shift happens – and it’s about time agency networks got on with it

A few days ago, I blogged about how the future of the marketing communication industry is likely to rest on its ability to understand data, use it to craft personalised content, and then distribute that content programmatically. I wish to go back in time for a historical perspective and then forward to discuss possible impacts on the large agency networks.

The 2008 financial crash hit the brakes on global growth, which remained lower than it was before the crisis. Combined with lower inflation, this meant that clients’ pricing power eroded, putting tremendous pressure on marketing heads to deliver more with the same budgets or make do with smaller ones. Costs and cost control became even more of a priority – and the COVID-19 crisis has only underscored it.

These pressures, in turn, are passed on to agencies.

As it seeks avenues for transformation, the industry should go where the growth is. Broadly, four principles should emerge – indeed, they already are – in the months and years to come.

·     Digital = growth: That’s a no-brainer. Global advertising investments were projected to rise 6% this year (before COVID-19). Internet formats were projected to account for more than half of these investments. In 2019, Google pulled in $134.81 billion in ad revenue, Facebook $70 billion and Amazon $14.1 billion.

Now, with the economic carnage of the pandemic, you can throw out the growth projection. However, most marketers and agencies report that, while overall budgets are shrinking, the share of digital is rising even more than before COVID-19.

·     The three-pointed star: It’s what I had mentioned in my earlier blog and above –first-party data, content and programmatic (the media planning and buying equivalent, so to speak, of digital). While programmatic media buying may have started off as a tool for campaigns designed for a direct response (get a sales lead, retarget users who abandoned their online shopping baskets), it is now increasingly used to build brands. It’s making its way very quickly to the top of advertisers’ priorities.

In fact, the first signs of the traditional ad network model giving way to automated media-buying were apparent as far back as 2015. Almost half (45%) of all online display ads were being bought using programmatic technologies.

Today, the structural trends are clear – the scale the networks brought to media buying has waned as technology and data have made messages more targeted.

·     Swifter, superior, more: Again, something I referred to in my earlier blog. It’s a philosophy that resonates with business leaders. Speed is vital, but large networks that have been around for decades don’t usually have it. This is frustrating for clients. At least part of the reason is that networks have an analog business – the legacy component – and the digital part. The analog part is what we understand and take comfort in. So, it’s difficult to shift focus from it, especially in uncertain times.

·     The power of one: Many of the large networks are buying into the idea of a unitary structure. Most industry stalwarts now agree that clients care little about agency brands, simply wanting the best talent working on their businesses.

One of the mind shifts will be agencies thinking of themselves as consultancies and assuring clients that they will offer whatever their business requires – across the spectrum, from content to buying and everything in between.

So, what about the large agency networks that dominate the industry?

Given the pricing and cost pressures, the agency business is structurally challenged. The agency model needs to adapt every quickly and, to their credit, virtually every network is restructuring.

One-firm strategies, most agree, are the way ahead. The problem is that such internal consolidation is tremendously tough – in the short to medium term, it causes great disruption. It usually involves great cost and battle-scarred balance sheets, and who has the courage for that?

To steer a vast network of creative, public relations and media buying agencies into a digital age that demands rapid transformation is a daunting challenge.

The ask, perhaps, isn’t a transformation but a revolution.

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