More brands are in-housing now than ever before, and the digital marketplace has become increasingly scattered – meaning brands will require more specialised guidance, support and agility from their partners to succeed. Yet boutique agencies lack scale, while today’s holding companies and consultancies lack the flexibility required to adequately serve advertisers today.
The way the agency landscape will evolve is highly dependent on how the other actors – "clients" on one end and "publishers" on the other –evolve. Agency clients are likely to continue to move more services in-house, whereas publishers will probably curate their content more and more based on individual needs (the right content for the right channel).
Furthermore, we’ll experience an abundance of channels as new players and platforms enter the marketplace. Given that any consolidation of the big five tech platforms is extremely unlikely, that will leave us with a very scattered publisher marketplace, loads of available technology and advertisers not being able to take every channel in-house.
Amidst these moves, the need for a new partner model is absolutely critical. Here’s how I see the agency landscape shaping up.
Specialised indies are ripe for takeover
Full-service independent agencies are becoming a road less travelled, while the trend towards small agencies that deliver deep knowledge on specific channels grows (for example, an agency that solely specialises in Amazon or YouTube). Today, the deeply ingrained knowledge of these smaller, more specialised indies seems to resonate most with in-house teams who typically maintain ownership of the most commoditised channels.
While these agencies present ideal takeover targets for private equity-funded buy-and-build companies, history tells us that indie agency “takeovers” rarely go well. Often, an agency is simply absorbed, quickly losing all that made it unique. A more effective model is one of partnership—where entrepreneurial owners of the “acquired” agency don't sell out, but instead merge their operations, retaining some ownership and influence in how the new business grows.
Client needs will drive holdco integration
The big holding companies continue to struggle with a legacy infrastructure around offline buying. While offline has been steadily declining—currently a few percentage points a year—that decline typically is not reflected in headcount dedicated to offline. As demand for digital services continues to accelerate, holding companies will need to drop legacy analogue operations and completely shift to (better) serving their customers in a 24/7, always-on digital world—something nearly all have been slow to do.
Holding companies are also struggling with the perception that they’re execution agencies (something they don’t want to be) versus their desire to be perceived as consultants (something that, in reality, they’re not). Greater flexibility and agility than holdcos can offer are required to service global clients’ needs in a time of global disruption. At a time when consumers are gravitating more towards local brands and products, global brands will strive to balance local values with their own global needs. That means bridging together data, technology and creativity into multi-local workstreams that deliver hyper-local relevance and inspire action around the world.
But the biggest shift we’ll see in the next few years is that the holdcos will more broadly move to vertical integration—mostly because that's what clients will demand. Publicis One and Dentsu One are examples of holdcos that have ditched a label strategy. And within five to 10 years, expect to see IPG’s media and creative labels fully merged—which means that Universal Media and McCann Worldgroup will become one (again). This is just one example of what will be many unhappy marriages in which organisations will need to focus inward instead of focusing 100% of their energy on their clients.
Media and creative partners that have truly future-proofed their businesses will provide their clients seamless access to a broad range of services and talents in one completely integrated structure.
Consultancies will seek agility through acquisition
Consultancies are excellent at their core competencies – tax services, M&A strategy, compliance – and most of them are very decent systems integrators as well. For marketing services however, they’re just not agile enough to serve brands the way agencies can.
The next logical step for consultancies is that they will begin to acquire agency holding companies – and Accenture is in the best position to do that. Given its market cap versus that of any holding company, Accenture could acquire a holdco on a Wednesday morning and still do something more impactful in the afternoon. That said, the same rules would apply to best serve client needs – complete vertical integration with seamless collaboration across a range of capabilities and services.
A new model for the future
Amid the current “agency” landscape of independents, holding companies and consultancies, none is set up to adequately meet client needs of speed, quality and value in today’s digital-first environment. A new model is needed to offer brands fast, seamless access to more and more specialised teams, particularly as new channels continue to emerge and grow. Not only that, but continued disruption online and off will drive home the need to reach audiences effectively anywhere in the world – keyed into local values and balancing cultural relevance with global organisational needs.
A truly future-proofed creative partnership, then, will seek to build and connect these capabilities within a fully integrated structure, making themselves better equipped to service clients the way they need and want to be served: faster and better via a collaborative spirit, pooled skills and deep knowledge to deliver innovative, digital-first solutions.
Richard Smoorenburg is the managing director of data and digital media at MediaMonks