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What’s Left for Agencies?

Poor Cannes. This year the parties were way overshadowed by the no-longer-unspoken fear that the agencies we’re most familiar with now may not exist in the future. After all, what can their business models be if everything is automated and media buying has gone in-house?

A sign of that fear were the programming initiatives around artificial intelligence, which half the conference feels would save advertising and half felt would destroy it.

Another sign was Martin Sorrell’s new company.

London-listed S4 Capital, the new company, is being built on the shell of Denniston Capital and named for four generations of Sorrell’s family. Sorrell said he has raised about $67 million for the new venture, which plans to be an “international communication services business focused on growth.”  Sorrell noted he hoped “not to be frenemies” with Google, Facebook and Amazon and that S4 Captial will be structured differently than WPP, though he did not go into detail.

“We are starting at ground zero,” Sorrell said, promising “grand ambition” and end deals with the “highest companies.” S4 capital will be “more creative, more agile, less bureaucratic … I still get the feeling that that our industry is stuck in the past and we need to move into the future.”

Listening to Sorrell, you would think the days of the agency were over, since it will be displaced by his movement into the future. But he’s always been a big talker, and when he says communications services he’s just using code for agency. And that’s because he knows as well as anyone else what the core competency of an agency is.

It’s simple. Agencies have to return to being the brand strategists that connect the company to the consumer. They go back to being what they were in the Mad Men age, the people with the secret creative sauce.

This is a differentiator that is very difficult to destroy, although during the past two decades agencies have done everything possible to undermine their own value proposition, including putting themselves out there as data experts, arbitraging their clients’ media buys, and downright lying to their customers.

There’s a role for an agency trying to do the right thing, because inside companies, there is very little time or energy to undertake really memorable campaigns. However, Sir Martin, who presided over so many of those lies in his previous incarnation, may not be the person to lead it.

 

Agencies Merging in the Face of GDPR

One of the ways agencies grow is by buying smaller agencies. In theory, that gives them access to more clients, a fresh creative staff, and a way to create scale to ward off competitors. However, mergers and acquisitions are only as good as their integrations into the mother ship.  According to an article in AdExchanger,

There were 398 acquisitions in 2016 with a total investment of $14 billion.  The Big Six – WPP, Dentsu, Havas, Publicis, IPG and Omnicom – were responsible for 89 acquisitions, at a value of more than $3.3 billion.

Figures through September showed 291 acquisitions this year. And in this game of agency supermarket sweep, many of the targets come from the data, digital and programmatic aisle.

This could prove tragic in the long run. The good news is that at long last agencies seem to understand that digital, data and programmatic are capabilities they need to have. But they are one step behind in the race to the future. As a result of coming new data privacy regulations, such as the European GDPR (Global Data Privacy Regulations), many marketers have data at the forefront of their minds, but for the wrong reasons. They know they are going have difficulty using it the way they did in the past, because now the consumer will be in control of her data.

What the big agencies really should be doing is studying up on those regulations and coming to grips with the limits that will be placed on the use of data in the future. Agencies are usually headed by people who may know the creative side of the house but don’t keep very good tabs on data. There will be an amazing culture clash when the data-driven geeks arrive in the house. There will be equally big problems because programmatic itself is coming under scrutiny for brand safety issues and ad fraud. So far, the geeks and the creatives have been kept separate, in separate companies. If they come together under one roof, that holding company will have to tighten its controls to make sure that the data flowing through its acquisitions is in compliance with the new regulations, or the fines will be significant.

So what the agencies will need now is a new cadre of management familiar with aspects of the business that have been lumped into a separate bucket called “martech.” And they will probably have to beef up their compliance departments as well.

In the rush to integrate acquisitions and learn more about how to manage data, guess what will get short shrift again? True creative, the kind that makes advertising users want to see.

Agencies Face Radical Transformation in 2014

“The future does not fit into the containers of the past,” said Rashad Tobaccowala, Chairman of DigitastBi and Razorfish, somewhere in the middle of a thoughtful keynote address at iMedia Agency Summit 2013. “The way agencies and marketers were organized in the past won’t work now.”

 

Why not? Because most clients and agencies are organized according to traditional lines, with the emphasis still on analog forms like print and TV. But now that mobile as come along, the analog (the people) and the digital (connected) realms have come together. Mobile means the ultimate empowerment of the consumer, who can choose how and when to receive marketing messages.

 

This empowered consumer will necessitate real transformation in both agency structure and brand marketing structure that relfects the new ways of getting to market. No longer can you deliver a message to a consumer on y9ur schedule; instead, you must be ubiquitous, in case the consumer happens to want your information.

 

Nobody welcomes transformation, no matter how much they give lip service to it. For agencies, the need to transform has brought about a mindset: the agency business must be declining or shrinking. For marketing people, that same need has produced confusion and operational neurosis. Brands are doing everything and nothing — becoming polygamous in their agency relations on the one extreme, and on the other taking everything in-house. They feel threatened, because everything in marketing has been built on identifying the “who.” Now, they can feel the emphasis shifting to the where and the when as well. Not only do they have to reach the right consumer, but they have to reach her at the right time in the right place.Tobaccowala used the example of Apple’s iBeacon, which takes the “who” for granted, reaching for the “where” and the “when” of the shopper in an Apple store, and then trying to deliver the right message.

 

It’s difficult to be an agency when marketers and consumers are the only people who matter. Technology, even fancy stuff like programmatic and RTB, is merely plumbing. At heart, marketers know this, and that’s why they want to engage directly with the customer without an agency filter.

 

For the consumer, what matters is the quality of a product or service. To live in the current world of the empowered consumer, brands must constantly improve product and service. And every brand has to be API-friendly, so the customer can decide how and when to interact with the brand. This means brands are no longer in control; they’re in partnership.

 

For brands, what matters is the consumer.

 

For agencies, what matters is both of them.