The revenge of the ad agency
Long declared dead, the 'cockroaches' of the industry are surging
We’ve all talked about the many business sectors that have thrived over the past two pandemic-fueled years: e-commerce, streaming, gaming, Zoom, Peloton (oops) and - ad agencies?
They may not be the sexiest, up-and-to-the right crypto/metasomething startups, but have you the performance of the holding companies lately?
WPP grew 9% in Q1, and raised its outlook for the year. That was after 12% growth in Q1.
Publicis grew 10% last year, and organic revenue was higher than expected in Q1, reported the Wall Street Journal
IPG also upped its outlook for 2022, despite pulling out of Russia and inflation
So did Omicom
Dentsu also enjoyed double digits growth last year
Remember when not too long ago, when some dummy wrote this: The future of ad agencies has never been more in doubt.
Let’s recall the list of things that were certain to kill the ad agency model
The consulting firms like Accenture and Deloitte
Brands were taking everything in house
BuzzFeed, Vice and others were taking over making creative
So were influencers
Ad tech companies let clients just buy media themselves
Sir Martin Sorrell was coming for revenge
Plus, thanks to streaming, no one was going to watch ads anymore (oops)
So what the hell happened?
Well, as many people snickered at ad agencies moving into consulting (such as me), it seems that is exactly what they did. Big holding companies have huge practices centered on helping brands build out ecommerce capabilities and are in pitches against consulting firms for digitization projects.
It also appears that agencies legitimately upped their tech and data chops, after outsourcing such work for the longest time. “The growth you are seeing is driven by these highly relevant capabilities, in the midst of an expanding set of marketer needs for more precise, personalized, and accountable engagements with their audiences at an individual level,” said IPG CEO Philippe Krakowsky
Plus, holding companies have aggressively invested in tech and data of late, despite a suspect track record on that front. Just a few weeks ago, Publicis made a power move to acquire Profitero, a tech and data platform that has deep hooks into retail.
Where is this headed? Last week at Luma Partners DMS event, several moderators joking referred to agencies as “cockroaches.” Kirk McDonald Chief Executive Officer at GroupM, NA, talked about how he had some initial hesitancy before he. took his current job, thinking that perhaps media agencies were built for a different time. That is, until he looked under the hood.
“The worlds not getting less interesting, not more interesting,” he said. “Brands still have the same challenges. It wasn’t that the agency model is dead, it just needed to reinvent itself.”
Part of that is that as the world gets more complex, brands need help from trusted partners, McDonald explained. I wonder if the pandemic actually helped cement some of these relationships - as the ultimate ‘everything’s going to hell and I need someone I can trust in the foxhole” moment. Plus, as ecommerce surged, agencies were poised to help brands master it- and really grow their business.
McDonald said that he’s seeing a renewed interest among brands and their procurement teams surprisingly, are looking to bring creative, media and data science together.
“I think the agency is turning more into an enterprise platform, an enterprise software company,” he said.
I’m not sure if brands see shops like Hearts & Sciences the same way they do Oracle. Agencies are still awfully people heavy. But the fact that the idea isn’t crazy tells you how things have changed.