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Opinion and Insight

The Agency Model: Will it Survive 2017?

Pat Murphy asks whether next year may be the beginning of the end for the established agency model

The Agency Model: Will it Survive 2017?

Haven’t we been asking that question every year, for years?

So what’s different this year? 

Well, if you’re in advertising and you haven’t read about the range of dubious, devious, even dishonest practices now under scrutiny, then you’ve been living in a hole this year. And I believe we may only be scratching the surface.

In 2016, the agencies really have not done themselves any favours. We have already seen the huge brouhaha about media transparency, and, more recently, the potentially seismic US Department of Justice investigation into bid-rigging by in-house production companies; clients will certainly go into 2017 questioning whether they can really trust their agencies to ever be straight with them, more than ever before. And once you lose that trust, it’s nigh-on impossible to get back. 

It is a question freighted with jeopardy for agencies, given two concurrent trends: the accelerating fashion for clients to build their own in-house content studios (Unilever, Nestlé etc); and elite management consultancies investing in mainstream creative shops (Accenture and Karmarama merely the latest manifestation of this). It adds up to a unambiguous shot across the bows of the industry. Clients are questioning the big agency structures, their fees, their ability to deliver more and better advertising content, in a smarter way. 

Agencies are struggling to keep their revenue up to cover their overheads but very slow to change the shapes of their businesses, which means that the better motivated and more flexible insurgents have an incentive to  build something much more streamlined and attractive to clients. Clients want their investment to be in creative talent and best creative output. Not in big overheads, jobs-for-the-boys and especially not covert revenue.

The agencies will do whatever it takes to persuade the clients to pay those eye-watering fees. They are quick to charge for a “senior” producer, but in reality only have a junior on the job when you check their LinkedIn profile. 

One example: a client asked us to cast our eyes over a small project recently. It was for Online and VOD only, and I assumed would be straightforward: the production budget was small and I felt sure that the agency resource allocation would be tight and fit-for-purpose.  

But, to my astonishment, I saw a bit of the CEO’s time, and the Managing Director, and the strategic planner, and the junior planner, and the Exec  CD, and a senior creative team, and a junior creative team, and bit of the Head of TV, and a senior producer, and a Junior Producer, and a TV PA, and a TV Admin, and an Account Director, and Junior Account Director and an Account Supervisor. Oh, and a Project Director. 

Utterly laughable, but I am sure that will feel familiar to some clients and the aware more agency folk reading this. 

And believe me when I say this does absolutely nothing to endear clients to agencies when they can go direct to a nimble creative company and get this for a fraction of the cost. 

I fear that 2017 will be the year that agencies risk losing all commercial credibility, and clients cease accepting anything their agencies tell them as regards the financial aspects of their relationship. 

But the jeopardy may be even greater than this. 

Once government agencies begin to turn their steely gaze on the customs and practices of any industry, those industries can rarely withstand such sustained focus without severe collateral damage. Advertising has signally failed, over years, to get its house in order. How well do we think this is going to go for adland once the DoJ and any authorities in Europe begin to sharpen their pencils?

So let me issue a heartfelt plea:

If there are any agency producers reading this article, however this Justice Dept investigation plays out, be careful what you do. You will know if you are playing fairly with the bidding process. And if you are not sure, well then you might not be. And if that’s the case you may be deemed to be conspiring in an illegal act that might have personal consequences, even once you’ve left the agency. Press your Head of TV, FD and CEO to clarify and address your concerns. 

Another unhelpful theme that I foresee getting some column inches next year is the ageism of the business. It has long been a gripe of mine that agencies lost far more than they ever bargained for when they began to bet the farm on youth, and energy, and moxie over grey hair and contemplation and experience.  Why would you ever do this? Well…it’s all about the money. I’d like to suggest to agency chiefs that the better creatives (and planners and suits) ARE the ones who understand a brief well, can bring a lifetime’s perspective to the challenge, generate astonishing briefs and ideas that translate into any channel, and won’t throw their toys out of the pram when a client doesn’t buy their idea. More often than not these are people who’ve been round the block a bit. It’s a false economy to put great talent out to pasture if it is still delivering.

And, trust me, clients know this. 

As a result of all these diverse challenges I’ve discussed here, I think we will see clients take more control of their destiny in 2017. They will continue to pay well for great ideas but now they have alternative solutions to make stuff, and with agencies showing that they cannot be totally transparent in the process of production, why wouldn’t clients look for a better way? With all of the great independent production suppliers in the world keen as mustard to work directly with clients with faster, cheaper and better outcomes, the heat will be on. It’s a buyers’ market, and clients have never had it so good, if they want it.

So in 2017 I believe the industry will be tested greatly. Clients are demanding rightly that their creative “partners” prove that they deserve that status. ‘Transparency’ is the word I would use that will dictate the outcome. If agencies can show that they have the best interests of their clients, buying well and passing on costs without margin, great creative ideas, innovative in the way that the ideas are executed, and transparent fees that are focussed on the right talent, the best talent without the temptation to make a fast buck, then just maybe we’ll be in a healthier position 12 months from now. 

Genre: PR , People , Strategy/Insight