Why brands will continue to break up with AORs to date startups instead

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There were a number of reasons why Brian Osborn—Yelp’s VP of consumer marketing—decided in the fall of 2015 to stay with a small, feisty startup rather than a traditional ad agency to continue Yelp’s first national television campaign for the review website and app.

Osborn was already a fan of John Reid, a veteran of Crispin, Porter + Bogusky and BSSP and co-founder of the just-launched San Francisco based shop Reid Sheehan Latimer+Crew (RSL+Crew).

And just as significant, Osborn was looking to skirt the lumbering bureaucracy of the agency-of-record (AOR) system, with its inefficiencies and high costs, and find a more nimble and responsive firm to work on a project basis to build the brand’s awareness, relevance and user base.

“I don’t want to pay for things that we don’t need,” said Osborn, who spent time early in his career at Leo Burnett and is well versed on both client and agency sides of the equation. “In my experience with agencies over the years, unless you have an absolutely massive ad budget and constantly need to develop new creative—and few companies fit that criteria—you pay for things you don’t need.”

Osborn added his voice to the growing din of marketers’ complaints about the established and, some would say, antiquated way clients and their agencies work together. Debra Giampoli, director of global strategic relations at snack conglomerate Mondelez—speaking at a recent Association of National Advertisers (ANA) gathering—likened the relationships to a couple who “hasn’t had sex since 1972.”

“If you’re going to build an agency from scratch today, you won’t build one that looks like the big, traditional global agencies we have now,” she said during ANA’s Advertising Financial Management Conference in Boca Raton, Florida. “The world needs more fluidity to respond to change.”

That’s where young agencies like RSL+Crew, Humanaut, Circus Maximus, Erich & Kallman and others come in, responding to marketers who want standout work—on ever-tightening budgets—with more transparency, quicker turnarounds and fewer layers in the process.

“Brands are saying, ‘I need something new,’” said Steven Erich, founder and managing director of Erich & Kallman, which recently won the coveted business with fast-food chain Chick-fil-A after a pitch against industry giants The Richards Group and McCann New York and others. He was also singled out by Giampoli for shaking up the staid, old formula. “Clients have been so frustrated with the existing solutions.” And he should know, with leadership roles at TBWA Chiat Day, The Martin Agency and, most recently, president of Crispin Porter + Bogusky on his résumé.

These nascent agencies are forming with a few seasoned executives at their core while taking advantage of the growing freelance economy to hire top-notch creative talent on an as-needed basis. Most shun the AOR structure in favor of shorter-term project work; though, they’ve already landed repeat business and A-list clients.

“This is a refreshing approach, we think, because we don’t need a marriage. We’re just like a fun date,” said John Sheehan, RSL+Crew co-founder. “If you pay a retainer as a client, you’re buying an org chart. This is more à la carte. We start by finding out what you need and figuring it out from there.”

Several trends in the marketplace have made these new models possible. There’s been a significant shift in work patterns, for instance, giving rise to the gig economy, with veteran ad men and women opting to trade big agency jobs for the freelance life. (Doner Detroit’s Executive Creative Director Steve Silver recently joined the ranks.)

“Talent has left the building,” said Ryan Kutscher, founder of Circus Maximus, New York, whose clients have included Glacéau Smartwater, Telefónica and Jet.com. His shop culls from agency veterans and makes a wider swipe to find unique talent because “there are a lot of tools now to find content creators, social media influencers, all kinds of problem solvers outside the institutionalized ad agency world.”

Those in creative industries tend to be plugged into social media, making their work easier to find and evaluate. And they don’t have to be local, ad executives said, since advances in technology mean that people—like the globetrotting copywriters who work on Humanaut projects—can collaborate from anywhere in the world.

David Littlejohn, founder and CCO of Humanaut (a Sapka Communications client), said he’s able to hire pedigreed creative executives, “Deutsch, Crispin alums,” because they’re available, and his small Tennessee-based agency can afford them since he isn’t paying overhead for the typical 100-plus staffers of a larger shop.

“It doesn’t matter who your agency is. The question is, ‘Who’s your team?’” Littlejohn said. “This is all anyone cares about: Is the work good and did we get what was promised?”

The experienced leaders—the ad MVPs—manage and run point for clients, founders of the new shops said, bringing consistency to the projects. Freelancers from “this giant robust talent pool out there right now” allow small agencies to hire “exactly the right people for a given projects,” Reid said.

The situation is leading to “the democratization of creative,” Littlejohn said, where clients don’t have to go to the biggest, priciest agencies to get award-caliber work.

Osborn agreed, saying the Yelp campaign, with the tagline, “We know just the place,” has been a hit creatively and quickly moved the needle. RSL+Crew’s case study of the ads noted that brand awareness rose to 41 percent (up from 26 percent). This year, Yelp plans to invest up to $50 million in marketing to support the campaign.

“The data shows it’s working,” Osborn said, “and we feel like we’ve invested money where it needs to be invested.”

Ad veterans don’t necessarily expect to see brands abandoning their long-standing agency relationships, no matter how loudly they deride them, but they think there will be more project work for small, scrappy agencies.

“Big brands will still have big agencies, but this is an opportunity for them to pull in smaller creative shops and not silo their entire marketing budget with one creative team,” he said. “What they’ll get is some innovative, progressive, experimental work.”

Steve Sapka is the founder of Sapka Communications

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