What agencies need to survive the next decade

Basti Chendra craves change. Any change.

“The world today changes in an extreme speed… However, I feel like most big agencies in Indonesia seems to work in the same old organisational structure and hierarchy ever since Bill Bernbach put art directors beside copywriters,” says the creative director of Wunderman Thompson in Jakarta.

Many industry players share her sentiments. While advertising itself is evolving at rocket speeds, the agencies behind it are mostly chugging along with outdated models and structures.

Perhaps it takes marching into a new decade for some overdue shakeups. Industry experts certainly seem to think that agencies can no longer wait.

Forrester, for example, warns that ad agencies will “upgrade or fade away” in 2020. “This will be the year that agencies of every size and type finally take up the task of deconstructing and reassembling their model in the face of economic uncertainty, looming regulatory action, and a compounding pressure to both perform and transform simultaneously—or risk falling further into irrelevance,” it writes.

In an interview with intelligence firm Contagious, agency veteran and Apple's VP of marcom integration, Nick Law, put it in shorter and blunter terms: “If change doesn’t happen soon in our industry, we’re fucked.”

But ‘change’ is a big word. What improvements do ad agencies in Asia-Pacific sorely need? We asked for a view from within. 

Better together

On the top of Chendra’s wish list is seeing a more fluid industry, as the line between digital and traditional ads blurs.

“It is good to see more and more merging of digital and traditional agencies," she points out. "In fact, I think every agency will be going in this direction for survival.”

Wunderman Thompson itself is a merger between Wunderman and J. Walter Thompson (JWT) in 2018, bringing all its practices under one P&L.

Prior to the merger, Chendra says, different teams had long been partnering up, but not sharing a P&L meant that each team was less committed to collaboration and more focused on meeting its own targets.

The merger, on the other hand, “will result in more collaboration between different expertise and hopefully produce more integrated and channel-agnostic ideas.”

Abby Wong, chief strategy officer of Initiative Greater China, is also looking forward to closer collaboration in her market.

China—reportedly home to about 48,000 advertising firms—is a fragmented playing field. But Wong sees opportunities for more pooling of resources between different agencies to create holistic, client-centric solutions.

“In decoding a client’s problem, part of the solution could be a media solution, but perhaps some other issues along the way may require us to enlist the help of other partners within the IPG group,” she explains. “Instead of building more capabilities within the agency, such as having a media agency like Initiative start a creative department or a CRM department in itself, I’d like to see improved efficiency through collaboration.”

Pride and prejudice

Collaboration calls for trust, but that appears to be in short supply.

Heightened national and cultural pride across Asia-Pacific nations like China, Indonesia and Australia is piling on the pressure to make localised ads. Yet skepticism towards local teams erects a Tower of Babel in pitch meetings.

The challenge, Chendra points out, is that those calling the shots are often scattered across entirely different countries, even continents. For example, she may be creating a campaign for the Indonesian market, but the decision-making team for the brand is in India, with limited understanding of Indonesian consumers.

“What’s they think is cool in India may not be cool in Indonesia," she says. "Working for a multinational agency also means my account team can be in Australia or Singapore, so they can’t back my ideas up because they don’t get it either. A major improvement would be to empower local teams to make decisions—if an ad is going to be played in Indonesia only, trust the Indonesian team to take the lead.”

Richard Zhang, managing director of Initiative China, is no stranger to the tug-of-war between local and global teams. At the agencies he previously worked at, many meetings consisted of the Chinese staff presenting points steeped in local insights, and resisting counterpoints from the global team with the thinking that foreigners do not understand China. The global teams, on the other hand, often insisted on implementing their own ideas because they doubted the acumen of the local staff.

To Zhang, this is all the more reason for both local and global units to team up. “Both sides need to listen better, and the more they work together, the more they will shed prejudices and build trust," he says. "It’s our job as the local team to share our market insights with the global team, and it’s the global team’s responsibility to understand a local market before they give corrections.”

Installing data into culture

Paras Mehta is all for sharing information across teams. Specifically, the head of India at Cadreon wants a robust and connected ecosystem that allows every department to access information seamlessly.

Currently, he notes, data analysis is often happening in silos, with a considerable amount of human-led information exchange that results in delays and data redundancy. This also increases the possibility of human error.

The goal is to build a “data-driven culture”, according to Mehta. This will require talents with acumen towards mathematics and statistics.

“Most agencies do have a few data specialists or data scientists, but that means the ability to draw insights from the data is limited to a small group of people. Ideally, everyone on the floor should understand the basics of mathematics and statistics, so that the entire agency speaks the same language from top to bottom,” he suggests.

Eunice Loh, digital and platforms director of Southeast Asia for Wavemaker, harbours a similar vision. Piloting a reskilling initiative within the agency, Loh is training staff with more traditional skillsets to adopt biddable and dashboarding skills. This is part of her goal to create a “precision-majority” culture that goes beyond performance media.

As ad agencies move from a buying role to a more consultative role, she reasons, the skillsets required will be increasingly skewed towards precision marketing – which refers to personalised online ads based on consumer purchase journeys or profiling, automation of systems and business analytics.

According to a report by Nielsen last June, investments in precision marketing by advertisers in Asia-Pacific are likely to rise from 14% of marketing spend to about 19% in the subsequent twelve months.

Uniting for best practices

One thing that the ad industry has not been able to solve: how annoying ads are. Half of APAC Internet users have turned on ad-blockers in 2018.

There are also increasing scrutiny and protection on user privacy. Following the General Data Protection Regulation (GDPR) in European Union and the California Consumer Privacy Act, India is also proposing a similar data consent law.

Tech companies themselves are putting up blockages for user information. Google Chrome has begun testing to block third-party cookies, Apple has already implemented its Intelligent Tracking Prevention (ITP) while Firefox has the Enhanced Tracking Protection (ETP) initiatives.

Loh hopes this is a wakeup call for the advertising industry to eradicate bad ad practices. “We give ourselves a bad name because a few bad hats in the industry did not follow best practices. For example, some campaigns don’t have frequency caps or are clearly targeting the wrong audiences. But if we all take responsibility in making sure that we do relevant targeting and good frequency cap hygiene, we help ourselves in the long run.”

Collective enforcement of standards can also course-correct dodgy pitching processes, according to Dephin Lim, managing director of Mediacom Shanghai.

Agencies desperate to win businesses in an era of tightening ad budgets has long contributed to a power imbalance between clients and agencies. Last year, Campaign reported the uptick in bad behaviours among clients during the pitching process, including not paying for pitch IP and claiming that they own the work.

Many agencies also exacerbate the abuse by letting clients do as they please.

Not Ogilvy in India. Shocking an industry largely allergic to offending clients, Ogilvy dragged the smartphone brand Vivo and their ad agency Dentsu to court last October for airing a TV commercial that bears much likeness to an earlier proposal by Brand David, a subsidiary of Ogilvy.

In China, Lim is still seeing client behaviours that give her pause, such as pricing-driven calls, frequent request for pitches and the staggering number of agencies invited to participate.

“Recently, I encountered clients asking for pitches from five to 10 agencies! When I was working in Hong Kong and Taiwan, this is extremely rare—the most was about three pitches," she says. "Of course, the market size in China is bigger, but requesting such a large number of proposals makes one wonder if the client is clear on their purpose for calling the pitch."

Clients are also increasingly making procurement calls internally without hiring a credible third-party to run the process, Lim notices. She notes that this creates risks for sensitive information leakage—unlike agencies, clients in a pitch process are not required to sign non-disclosure agreements. Another issue is whether the internal procurement team has the necessary experience to vet through the 10 different strategies they received.

Lim believes that most agencies in China would not call out these unfair practices in fear of angering clients. Her hope is that there is strength in numbers—if ad agencies can stand together, they may better protect their interests.

Fixing culture

Amidst the tedious client pitch rate, tightening budgets, higher employee turnover and shorter delivery window, the urgency to survive can dilute what should be an agency’s priority—its people, according to Initiative’s Zhang.

“Building a good agency culture does not always require a lot of monetary investments; it is more about behaving in the way that cares about our people, and we can do that without spending any money,” he says.

It could be as simple as providing a safe and non-discriminatory space.

“I’m a trans woman working as a creative director in a country where LGBT is still seen as a crime,” says Wunderman Thompson’s Chendra. “I think the agency world is probably one of the rare industry who still sees people for what they bring to the table, not who they sleep with.”

To Wavemaker’s Loh, a meritocratic culture also combats ageism—a diversity gap rarely discussed compared to gender or racial equality.

She notes a subtly rising unconscious bias among ad agencies when filling a role. There is a perception that older people are less dynamic or digitally-savvy. On the flipside, younger employees are “discounted by virtue of their age.”

“It’s not about prioritising someone older or younger,” Loh points out. “It’s about looking hard at how a person can fulfill the job function regardless of background, age, or years of experience.”