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Finding the new agency model: is it all about the money?

By Paul Jacobs | Managing partner and co-founder

September 20, 2018 | 6 min read

Our category is unanimous in the view that a new agency model is needed. But if those new agencies cannot prove their alternative model is cheaper, will they all wither and die?

Finding the new agency model: is it all about the money?

Finding the new agency model: is it all about the money?

So let’s start with a current favourite new model: creative and media back together. And the simple fact is that should be cheaper.

You see I don’t think clients realise how much money they’re wasting by separating out their media and creative agency budgets.

I’ve looked carefully over a number of my former clients’ campaigns from a creative and media perspective, with a particular focus on the resources deployed and, with a few assumptions, estimate that approximately 6% of that resource cost is duplicated across different agencies. The duplication has arisen because creative and media agencies are fighting each other for the moral high ground when in some areas they do exactly the same stuff. Now, some might consider that ‘keeping them on their toes’, or ‘seeking alternative strategic solutions’. But it just sounds expensive to me.

Then, looking at the activities associated with campaign creation from strategic, creative development, and media planning and buying perspectives, I identified approximately 4.5% of resource cost wasted on media and creative agencies toing and froing behind the scenes because they’re separated. Toing and froing: how strategic is that?

On top this you have the client team doing some similar toing and froing because they have multiple agency teams in different organisations. After a few sense checking conversations with my brand side chums, that amounted to approximately 5% of the client-side resource cost.

It is by no means a perfect science but imagine being able to reduce your overall agency costs by more than 10% and save 5% of your own staff costs by streamlining your creative and media partnerships. So, from a modest advertising budget of £1m that’s £100,000 saved in one hit. Every year.

But I would worry if clients only shifted their business to the reunified full-service agencies to save money. That’s because the main benefit will not be cost. It will be better work.

Better work is vital to secure the future of the entire category, with overall trust in advertising declining, clicks declining, and resistance to re-targeting increasing. It’s worth pausing to consider how we have arrived at this parlous state.

When agencies started breaking off into media planning specialists, big buying groups and creative hot shops it would have felt as if they were really making progress. But with the benefit of hindsight were the interests of the client really the drivers of this fragmentation?

The big buying groups were created to shore-up rapidly thinning margins on media through scale. Then they could demand even better deals from the big media brands.

The media planning specialists took the strategic high ground and hoped their relative impartiality and improved thinking would be rewarded with fat fees.

Just like the creative hot shops who also wanted to fill their cabinets and egos with Cannes Lions.

For all but the biggest and smartest brand owners, I’m not sure any of that was truly client-centric.

So here we are, with most observers challenging the current agency model, and some even predicting its demise. I maintain that reports of its death are premature and will instead make case for producing better work through an enlightened return to the old ways.

By the old ways, I mean Mad Men (without the sexism, racism and homophobia please). I may have acquired a romanticised version of the age thanks to David Ogilvy and Don Draper, but there was one structural fundamental that instinctively feels right - having media and creative together.

I don’t mean sticking a media and a creative agency in the same skyscraper and calling it a day – that worked for a while but won’t wash today. I mean carefully weaving creative and media minds together from the outset, taking the best bits of the old, original model but reinventing it for the modern world.

When running as separate entities (and if all you’re sharing is a cafeteria you’re still separate) creative and media have become so siloed that they certainly don’t work together and, in some cases, actually work against each other.

I maintain that much bigger benefits can arise if creative and media, message and medium, are integrated effectively.

First, you get more creative media solutions which are, by definition, more effective media solutions. Yes, creative people exploring content and distribution together.

And that is made possible because, secondly, you have all your media insight on tap to fuel the imagination of your creative colleagues. All too often nowadays the media insight is never shared with the creative agency.

And with creative and media integrated, your ongoing optimisation becomes second nature. That creates a virtuous circle of continuous improvement: Creative driving media driving creative. You gain value and you remove confusion from the fragmentation of media.

So, a much better creative product improved advertising performance, typically a 10% reduction in agency costs, and 5% reduction in a brand’s marketing resource costs. Who wants to give Don Draper a call?

Paul Jacobs, managing partner & co-founder, Wax/On

Advertising Agency Digital Advertising

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