Agencies of the future: create, measure and deliver at speed
As clients demand ever more sophisticated solutions that blur the lines between marketing and technology, a new breed of agency is emerging to fulfil their desires for a one-stop shop. It leaves ad agencies facing the prospect of having to rewire their business models, or risk being left behind by the agency of the future.
Agencies of the future
Adland might talk a good game on agility and disruption but many agencies cling to a static, siloed status quo that is being antiquated by a new breed of marketing businesses geared to do what they can’t – fit media, technology and creative together.
It speaks volumes that at a recent industry conference, Diageo revealed how it was forced to act when a cumbersome agency model threatened to derail a social campaign it ran during the Rugby World Cup. Gathering data came from one agency, the creative came from another and the media from a third as the marketer scrambled to keep on top of everything – all while trying to put out reactive messages to what was happening in a match at any one point. Today, a WhatsApp Group was the only way to get all parties talking to each other. But is that really the way forward, especially for a global giant like Diageo?
Nissan’s chief marketing officer Roel de Vries is adamant the agency model will change to one that prioritises integration rather than a compartmentalisation of skills. Mention of these ‘agencies of the future’ is about as frequent in marketing circles as proclamations of the year of mobile but it would seem that the most recent murmurings are more than just bluster. Whether it's Coca-Cola centralising its social media marketing or Aviva launching a digital lab, agencies are being unbundled, with advertisers taking many business-as-usual marketing tasks in-house or outsourcing them to technology companies.
While most agency bosses understand this challenge it’s another thing to tackle it head on. For every DDB that will try and fashion a bespoke model for McDonald’s there’s an exasperated agency boss that’s given up on trying to fuse media and creative together because it’s too difficult to untangle the former.
It’s precarious situation that’s being compounded by the fact that, now, the value placed on advertising businesses is as much about technology as it is the talent. That’s why Dentsu Aegis has gobbled up 16 digital businesses and it’s arguably why Kelly Clark taking the reins as chief executive at GroupM is a sign that new leadership will be required for a new type of fight for agency groups.
But with disruption comes opportunity. Many seasoned industry execs are turning into entrepreneurs and taking on the challenge of responding to totally new environments. Moreover, there is plenty of investment capital available to fund their visions. The rapid rise of You and Mr Jones and Be Heard in a little over a year is arguably proof that the barriers to entry are low and entrepreneurs can get to market quickly.
You and Mr Jones, the self-styled brand technology business founded by former Havas chief David Jones in 2015, had $350m in funding out the gate. Similarly, Be Heard, which was formed by former Aegis chief executive Peter Scott around the same time, has already acquired media buying agency Agenda21 and digital shop MMT for £11.9m and £5m respectively.
These are businesses that promise advertisers they can create, distribute and measure at speed rather than just one (or at a push two) of that tripartite. What’s more, by offering content, crowdsourcing, data and media solutions, they are trying to find greater margins to be made from a combination of tech-enabled services rather than talent. The rationale being that they must offer more value-based pricing to advertisers and be prepared to share the up and down side of how successful they are.
“The last big revolution was TV and there are six big holding companies that have built big businesses by connecting brands and people through this medium,” says Jones, who still insists his own group is not a rival to the old guard.
“We believe that there will be ten companies like ours in a decade who will be built by connecting people to brands amid the next revolution we’re living through.”
As opaque as that fusion between brand and technology is to see through, it’s best summed up in one of the unlikeliest marketing stories of the year – Pokemon Go. The runaway success’s developer Niantic is backed by You and Mr Jones and the advertising veteran sees a template here for those retailers looking to tie harness retail and location. “In the new world, with something like Niantic and Pokemon Go you put a Pokestop in an outlet and you drive enormous traffic; it has huge sales and at no point is there any ad being shown to anybody.”
For all the allure of Jones’ vision, it’s arguably harder for some of the big global brands to adapt to something like this when they are more likely to pigeon hole agencies into boxes. They’ll struggle to engage with the likes of Niantic because they don’t see where that business fits into corporate structure. That said, global advertisers are the biggest spenders and are the first to need the advanced capabilities. If You and Mr Jones and Be Heard are to be there as and when they are needed, then they’ll be relying on the black books of global clients from Jones and Scott in the early days.
Perhaps, the easier “tranche” of clients to target are the “challenger brands that are more likely to buy more than one service from an agency,” muses Tristan Rice, who is the European lead for M&A practice at SI Partners.
“These smaller brands tend to take more of an integrated approach and the agency usually ends up dealing with the c-suite that can make bigger decisions across a wider remit rather than a marketing manager,” he continues.
The bigger cause for concern for those behind these groups is how to fit smaller businesses together. It’s not just about finding a strategic fit; the chemistry must be there in terms of cultures and personalities as Scott is realising. The former agency boss wants to build Be Heard – which currently consists of a digital media agency (Agenda21) and a digital service design business (MMT) – into a £100m-revenue company by 2020 but is wary of finding targets with the right commercial performance, right personality, and the right willingness to commit to something new.
“We’d like to do about four deals a year and over time we’re hoping these deals will get bigger,” explains Scott. “This is about giving clients better solutions rather than selling them services so as we bring new businesses on board we believe that the skillsets will become complementary so that we can offer faster and more effective solutions in what is a complex marketplace. If we build a group of that size then it won’t even be a flea on the arse of the elephants [the big networks].”
Scott and his counterparts are never going to get this balance 100% right but they are trying to narrow the odds. The success of which is in part reliant on good old fashioned strategic insight and ability to handle big client relationships. Those are skills that are harder to find in modern disciplines, warns Rice, who adds that despite some of these new groups being populated with “lots of modern digital skills,” they may “need to buy a fairly traditional ad agency structure which has the people with real industry experience and ability to handle global clients”.
This explains the experimentation seen at groups like Oliver, which builds dedicated agencies combining people, processes and tech for clients from the ground up. Sometimes the solution needs to be more than the sum of the parts, with the business taking its cue from the management consultants by ensuring agency staff work in client offices like BMW and Nike as much as possible so that they can become truly embedded in that business.
Julie Langley, a partner at Results International, sums up the issue by saying it no longer makes sense for clients to treat advertising separately from the rest of the marketing mix. "Agencies of the future should advise on advertising and marketing across a client organisation in a joined-up way. You can view it as similar to the convergence of adtech and martech. It’s about having a much more strategic conversation with clients.”
Reporting by Jennifer Faull and Seb Joseph.