The Evolution Of The Ad Agency

These days every business category on the planet is facing disruption. From Communications to Transportation no category is safe. If your industry is among the lucky few that hasn’t been touched yet you can bet that it is only a matter of time before innovative and hungry entrepreneurs start showing up at your doorstep. Advertising agencies are no exception. Advances in technology and media are changing the way people consume media and marketing pitches.

Disruption is by no means new. Ever since the dawn of time merchants have sought to build better mousetraps to create better lives for their customers while enriching themselves in the process. Many have found the courage to challenge the norm and innovate creating better goods and services. Industrialist Henry Ford was once quoted as saying “If I had asked people what they wanted they would have said faster horses.”

I started in the advertising business in the mid-nineties when the category was just beginning to come under siege from the advent of the internet. The attack came on two fronts; technology that allowed for the hyper-targeting of potential customers and the revolt of clients tired of paying costly retainers. Agencies reluctant to change doubled down by investing in costly overhead and staff which only accomplished digging themselves into a deeper hole.

Over the past 10 years I’ve listened to clients who have grown frustrated with agencies. At the root of their issue has been dozens of agency folks on their business with no clear understanding of what role each team member plays other than billable hours. Procurement and financial officers have grown weary of the costs associated with developing and implementing creative campaigns with ambiguous at best metrics. One only need to look at the plunging share prices at publicly-traded advertising agencies over the past few years to see the effects disruption is having on the industry. British based communications group WPP has seen it’s share price cut in half over the past year as it struggles to re-invent itself.

However a new model in the advertising world is emerging. A business model based on solving client challenges versus hip spaces and expensive talent. The new model focuses on keeping costs lower to the client and bringing in category specific talent to work on their business. It seeks to provide clients with a transparent fee structure which eliminates the need for ongoing retainers.

In the digital arena it is naive at best and foolish at worst to assume that one agency has the ability and talent to solve all of a client’s interactive and social needs. The new model intelligently assesses client needs and then brings in experienced talent to develop exceptional solutions to their challenge(s).

For years clients have been questioning the value of the retainer. For years agencies resistant to change and dependent on the reoccurring revenue pushed retainers when a project fee would be more palatable to the organization. I personally have found in most cases clients are willing to pay a premium for the a la carte menu versus the buffet.

Project based work takes the fear out of a long-term commitment. Goals are assessed and fees are based on the successful attainment of them.

From an agency standpoint deals are much easier to close because the commitment level and price tag are often much lower. When the agency delivers it only opens up more opportunities and the clients come back for more.

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