What's the Future for Advertising Agencies?

October 19, 2016

Agencies are stuck doing more work for shrinking hourly rates because too often, they don’t know how to quantify the results they deliver in a meaningful, measurable way. Here’s the crux of the issue. As fees have been cut, workloads have increased, and measurement has become more complex, legacy agencies are getting cut out of the equation. Brands are bringing a lot of creative work in-house or they are parsing it out to freelancers or boutique agencies, “project by project, not relationship by relationship.” According to Michael Farmer, 25-year veteran advertising consultant and author of Madison Avenue Manslaughter (great read!).

The Agency World and Media Market Place is Facing Its Own Big Short!

We are facing a subprime media crisis. But too many marketing and media agencies have a vested interest in the escalating digital media business to call it out. At the heart of this looming crisis is the hollow and inflated cost/value of programmatic advertising.

Held up in many quarters as the holy grail of digital media, making ad serving more relevant, valuable, and measurable, even scientific, than legacy mass media, programmatic advertising has in practice done exactly the opposite. Programmatic advertising has added layers of cost and confusion for CMOs; made possible new murky commissions and double billings for agency networks; and meanwhile fuels more junk impressions than ever before for end users to endure.

Worse still, perhaps, junk advertising has broken the trust between publishers and their audiences. Publishers on one hand are not sufficiently policing and curating the advertising served up on their properties, while users are deploying more and more ad blockers and other evasion strategies, thereby depriving publishers of their life’s blood in ad revenue. For now this media house of cards is still standing – still gets bigger indeed as advertisers spend more and more just to keep their marketing afloat. But can it last?

Wannamaker was confident half the money he spent on advertising was wasted. He just didn’t know which half. Today’s brand owner is left even more in the dark.

The subprime crisis of 2008 surprised a lot of people. But looking back, we are almost as mad at ourselves for not seeing it coming as we were at those who created the crisis. Media, specifically advertising, is about to go through a very similar period, and we are going to be just as angry looking back. In addition, unlike (perhaps) Wall Street, Ad Agency are not too big to fail.

We’re really very good in the marketing industry at marketing marketing. At selling agencies and change. What we need is a radical new approach to the agency model itself. Agencies need to start making money in new entrepreneurial ways. No more billable hours. No murky commissions or kick-backs. We need shared risk and reward with bold performance-based remuneration instead of mark-ups, and billable hours.

But you know what, change is unlikely to be that far-reaching or lasting if it isn’t ultimately underpinned in some very real and possibly uncomfortable way by change in how an agency also makes its money. We need to finally “kill bill”—billable hours are the outdated money model trapping legacy agencies into pushing onto clients existing cost structures, revenue streams, skill sets, and overblown management pyramids. In short, pushing onto clients what they do to make money. Whatever the question. Whatever the new possibilities.

Thats why after more than two decades of working with some of the biggest brands and agencies out there, we decided it was time to do something different. A group of us rebellious creatives and risk-taking entrepreneurs (including myself and the former worldwide leader of creative and strategy at Digitas, Mark Beeching) launched Blinding Glimpse of the Obvious (BGO) we not only claim to think and work differently, we actually make our money differently!

“The Future of Advertising Industry” needs to be born of a more open, inventive, and collaborative economy than your father’s ad agency. We need to take on shared risk and reward with clients in a variety of entrepreneurial and progressive ways. We’ll need to pursue impactful win-wins to get bold marketing done. Whatever the question. Whatever the new possibilities.

It’s going to take radical changes in how an agency makes money to unlock far-reaching changes in how it shapes, buys and orchestrates new marketing for clients.

Also found on Quora