Agencies Mourn Lost Status

Like every other industry conference we’ve attended in the past few years, SXSW 2017 featured a bunch of agency executives and former agency people desperate for the good old days when agencies actually led their clients through the process of creating and buying advertising.

This will never happen, as long as the agency model retains its old expense structure, because clients find the old agency-of-record model too pricey for what they receive in exchange: inexperienced media buyers who may allow their brands to appear in inappropriate places, demoralized creative teams, and account executives focused on the wrong metrics.

While agencies would like to return to the days of “winning” an account for a year or more, which allows them to predict staffing needs, clients are more ready to work with them only on a project by project basis, preferring to take the coordination into account and use an a-la-carte methodology to choose the right agency for a specific task. All this began when agencies didn’t get on board quickly enough with digital, and brands had to have both an agency of record and a digital agency. And then also a social media agency. And a search marketing partner. And a few freelancers for things like illustration, animation, or copywriting.

Thus the agency has been dismembered in the past twenty years, and agency veterans believe the result is poor campaign coordination.

But agencies are not the only industry affected by this change in work styles. Led by the technology industry, where startups may be composed of remote teams contracted for non-core functions, brands now believe that marketing, too, can be improved by using freelancers who are experts in small niches necessary for a specific campaign. This is a change in staffing models and hiring practices not unique to the media industry. In health care, the hospital no longer hires a staff of nurses or even doctors; rather, it uses staffing agencies who provide nurses on demand. At Starbucks, most of the employees are not on the payroll.

Agencies can lead again if they are willing to come into the 21st century by getting rid of legacy business models that raise costs and do not improve quality:

1)Close all those overseas offices they don’t really need and rely on contractors and freelancers who are familiar with the territory;

2)Give up those prestigious mid-town Manhattan locations and make better use of shared workspaces — or turn their own office leases into shared workspaces for outside freelancers

3)Flatten their management structures to be leaner and meaner.

4)Give up expensive sponsorships at Cannes and other events that don’t generate business or showcase agency talents.

5)Outsource non-core functions like data management and mining to people who are already experts.

In short, agencies should give up the full service idea as “so last century” and embrace the idea of selling only their strong points.