As The Drum launches the research for its second annual Independent Agencies Census, we catch up with some of the agencies featured in last year's report to find out what's key on their agenda.
The first three quarters of 2014 saw a total of 730 marketing communications acquisitions, according to Results International, with advertising holding groups continuing to tot up the deals with the high-profile acquisitions of SapientNitro and Fetch, by Publicis and Dentsu Aegis respectively, at the tail end of last year. But not all independent shops are champing at the bit to jump into bed with a holding company.
Since The Drum’s inaugural Independent Agencies Census was published in May last year, the landscape has changed significantly, with 14 networks accounting for 137 deals globally between Q1 and Q3 of 2014.
Major recent acquisitions include Publicis Groupe's November buyout of Sapient, including digital agency SapientNitro, worth $3.7bn. Tony Walford, partner at Green Square, said at the time the deal was about “reach, not scale” with Maurice Lévy looking to “park his tanks on the digital lawn” by acquiring what Lévy himself deemed as the “crown jewel in the quest for digital business”.
In its Q4 bulletin, Results International predicts that the acquisitions market will continue at pace in 2015, as the big groups look to position themselves in new markets and “establish a broader portfolio”, but what does that mean for those who continue to choose to go it alone?
At the time of the Publicis-Sapient deal, Wieden+Kennedy London managing director Neil Christie told The Drum buyouts by networks were “a good thing for those independents who are able to offer something individual and different” and going by the financial poll results in last year's Census, independence is no obstacle to monetary success.
With such big changes taking place across the agency landscape, the 2015 Census is bound to reflect these shifts in its review of the independent sector, with polls ranking companies on financial performance, client satisfaction and peer recommendation.
So as we launch the Independent Agencies Census research for 2015, we catch up with some of last year’s strong performers to discuss the key challenges they believe are currently impacting independents.
The Independent Agencies Census survey is open until Friday 20 February. Find out more and take part here.
Lindsay Wall, client services director, Rufus Leonard
We celebrated 25 years as an independent agency in 2014 so we've certainly seen lots of challenges over the years. For us the key challenges centre around two main areas: talent and growth.
Firstly, competing in the talent pool; independent agencies are increasingly required to compete with tech start-ups as well as the usual network agencies. A positive for independents is that the lure of entrepreneurialism created by start-ups has meant the safer network agency option isn’t necessarily the default route for talent any more, opening up opportunities for independents especially at the entry level and upper end of the market. It's just that there are a greater variety of credible choices now.
Secondly, investing or up-skilling to create T-shaped talent – We increasingly need our people to do more and to turn their hand to more things. The investment decision becomes do you deliver this through training/up skilling existing staff or recruit more T-shaped talent.
Lastly, growth – increasingly, clients want the flexibility of an agency that understands their business without the necessary long term commitment. Growing client relationships within this context becomes ever more challenging.
Jon Wilkins, executive chairman, Karmarama
As independents we are constantly foraging to grow our own business. We have nobody turning up at our gates with clients won abroad, we have no syndicated business leads to feed off of, we just reap what we sow. Neither do we have 'group referral' models but being master of our own destiny is a lovely feeling. We live or die by the sword; our only problems we create for ourselves and our victories come from our own. That feeling of control is priceless.
We also have to run a business. We have to control costs, focus on margins, ensure salaries and overheads are paid, and make sure we can reinvest our profits into constantly improving our product offering, which is no mean feat in these constantly evolving times.
We have no backstop – many networked agency offices don't make money – it's a portfolio game and some geographic offices are seen as a cost of servicing accounts originated elsewhere – often where the profit lies. The pressures are different.
Overall we'd take the edge of independence any day. The constant pressure, the business acumen you need, combined with the knowledge that it's 'your show', is a buzz that's hard to beat.
Jason Warnes, managing director, Th_nk
The key challenges facing Th_nk are attracting talent, delivering efficiency, differentiating our proposition, and building a committed pipeline.
Digital talent is a very scarce resource. While this is true there has never been more interest from exceptional talent wanting to join our independent, dynamic and challenging environment.
Being efficient and delivering the corresponding margin is a universal challenge. With a team of over 100 digital professionals, we’re large enough to deliver and small enough to care but as we grow there is huge opportunity to streamline our processes and mature our operational efficiency.
The digital industry is increasingly crowded and competitive. There is no shortage of competent agencies offering integrated, digital and specialist services but there has never been greater demand for our independent focus on business transformation through digital innovation.
History suggests that the nature of client relationships change. Whilst we never rest on our laurels we couldn’t be more excited about our independent future, pipeline and the opportunity to plan and build our business.
While these challenges are not unique to Th_nk, we are hugely optimistic about our future and ability to meet the challenges head on.
Jonny Stewart, managing partner, Bulletproof
There are many challenges facing independent agencies, however the most prevalent is resource.
As an independent agency we believe our people and our culture is everything. Clients and projects are bountiful so the key challenge is retaining and recruiting the very best people across all facets of our business. Our agency ethos is to deliver excellence every day with great people who make the difference.
Those great people are the lifeblood of an independent; people who respond when given the autonomy to empower and influence the business, talented people who bare the same open, honest, challenging and entrepreneurial spirit from when the agency was born.
We are fortunate – the agency is in growth and if we want to nourish and grow our business, then we absolutely have to grow our people.
Jon Davie, managing director, Zone
Clients don’t particularly care about the ownership structure of the agencies that they use – they care about the quality of the service and the effectiveness of the work.
In that sense, the challenges facing independents are broadly the same as those facing network agencies – attracting and retaining the best talent, broadening our skills to meet the ever-changing needs of clients, and proving the effectiveness of the work that we deliver.
What’s different for an independent agency is our ability to adapt to these challenges – we have the freedom to evolve and respond quickly, and in a fast-changing digital world, speed matters.