2018 For the Agency Business

There’s no doubt that advertising is changing very fast and that traditional agencies must adapt. WPP has already admitted this in several different ways: first in their earnings reports, and second in the way they are buying up small agencies in order to get customers and economies of scale. That might be a mistake, since they’re only adding to their infrastructure. And even if it does work for now,  this tactic will not work forever because what is changing is the nature of advertising itself,  not just the nature of the agency.

Yes, it is true that  the agency of record concept is going away. Building a brand is difficult and requires everything from brand strategy to messaging to communications to internal training to advertising and public relations, not to mention navigating legal issues around privacy and security. As we all know the privacy rules are changing next year and there will be new standards we in the business all must follow. Most agencies don’t have equivalent expertise in all these skill sets.

Most brands know that they need more than one agency to get the job done. But that’s the symptom and not the cause. The cause is the consumers’ changes in buying habits. As an example,  Millennials do not buy goods, they buy experiences. Therefore sponsorships of concerts and other experiences, brand partnerships and infrastructure advertising are going to grow. A small agency in Phoenix Arizona that does only large format and outdoor advertising, Blue Media, has found itself suddenly a $60m company in only a few years.

Traditional media growth, not so much.  All advertising now must be contextual.

Even digital media is going to have to adapt to this rapidly changing environment. It will have to meet users where they already are without interrupting them. This is tricky.

However, It is doable. Consumers can be incentivized or rewarded to watch ads that are non-interruptive when they are playing a game or on social media. They can also watch ads that provide information on products for which they really are in the market.  The success of the New York Times’ Wirecutter blog is an example.

Contextualizing will involve better geo-targeting rather than more invasive personal information targeting. For example if a consumer is already in a Ford dealership, it’s not invasive to show them a Honda or Chevy. They can be assumed to be in the market for a car.

To capitalize on the growth of advertising, which will be a smaller subset of marketing, the agency of the future will be smaller – sorry WPP – and more nimble then past agencies, able to expand and contract more regularly because it will have more 1099 workers than employees. It will also have to know a great deal more about business and about online marketing strategies that work —  including inbound marketing and content marketing.

Hiring is an old fashion way to respond to the typical situation agencies find themselves in today, where they are working on projects and have the need to ramp up or contract almost immediately.  The best agencies will realize this, and give up some legacy infrastructure for long-term survival.