'Agencies Are Putting Themselves Out Of Business'

by Steve Smith , January 24, 2016

At last week's Mediapost conference on trust and transparency, "The Reckoning," explored the imperiled state of the agency/client relationship. According to Michael Farmer, Chairman & CEO, Farmer & Company, the basic formula for the decline of the agency model is already clear and responsible for agency downsizing and erosion of AOR relationships. They are "putting themselves out of business," he claimed.

Video of the entire session, "In Procurement We Trust: Is The Client/Agency Relationship Really Worse Than It Ever Was?" is available at the agenda for "The Reckoning."

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7 comments about "'Agencies Are Putting Themselves Out Of Business'".

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Ed Papazian from Media Dynamics Inc, January 25, 2016 at 10:24 a.m.
If the agencies put themselves out of business due to progressively lower fees paid by advertisers and the resulting decline in service quality, what's going to replace them? Will advertisers take all of the agency services---media planning/buying, account handling, research, legal, marketing, and most important, "creative" and ad production in-house? Somehow, I doubt it. More likely will be a huge increase in the number of "creative boutiques" and independent media buying services, with the likely outcome being higher collective fees paid by "the client" but, not necessarily for better service. While no one is defending the current state of the agency business---too much work for too few people, poor training, rigid departmental silos, a reluctance to depart from the "norm", etc. At last some of the problem in getting the most value from your agency rests with the client who, often, isn't asking the right questions or providing meaningful direction and, to be frank, avoids risk taking like the plague.

I learned lots of things during my 20 years at BBDO and one of them was that agencies are creatures of their clients. If you compared the quality and leadership involvement of the people who worked at one major account with those on another you would never think that both groups worked at the same agency.

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Henry Blaufox from Dragon360, January 25, 2016 at 10:45 a.m.

Ed Papazian nails it, again. The problem, with its multiple componenets, has existed and been discussed for many years now. But resolution, probably along the lines Ed summarized (smaller specialty shops focused on different aspects of the client service relationship with other work migrating toinside the client) will occur incrementally, not as an onslaught. It appears to me that the creative work will stay at the agencies, perhaps along with in depth media research and planning. Buying and other functions that are increasingly automated are likely candidates to move inside the brands' offices.

Craig Mcdaniel from Sweepstakes Today LLC, January 25, 2016 at 3:54 p.m.

As a publisher who has worked with a handful of agencies for years. I have held the belief that moving client's dollars is more important than understanding than who they spend the money with and the return value. Dollar verses dollar, I know the agencies get more from me but rarely do you hear from them. I am just an account name and number. However when the sponsors/advertisers work with me directly, they are friendly and want to know how I am doing personally. So the problem with the agencies from my point is the personality that was once there is now gone.

John Grono from GAP Research, January 25, 2016 at 6:31 p.m.

I'll throw another on in Ed.

How will these independent media planning and buying services afford to pay for the syndicated audience measurement research that underpins all such decision making?

I know when I was in charge of audience reseach for the BBDO affiliates here in Australia it was a multi-million dollar expense and second only to salary costs consuming just under one-in-ten of dollars spent.

Ed Papazian from Media Dynamics Inc, January 26, 2016 at 2:49 a.m.

John, I assume that like here, the TV ratings will be priced on a basic flat fee plus a small percentage of the buying agency's TV billings. Normally the fee that the buying shop earns for its labors---say 1% for Network TV, 2-3% for cable 3-4% for spot TV---covers that.

All of this raises another issue. One of the major selling points of the current agency megashops and the large individual entities like BBDO, Y&R, O&M, etc. that preceded and sired them is the notion that the client benefits from the pooled experience of all of their client servicing---both on the markeking and "creative" side as well as media. While this isn't always the case, I have found it to be more true than false, depending on how well the agency is organized to exploit such knowledge and how open the client is to learning. Switching to small creative boutiques and media buying shops---especially of the "data" oriented programmatic type leaves each client more or less on its own.

Brook Shepard from Mason Interactive, January 27, 2016 at 11:45 a.m.

Well not necessarily. We're 13 people strong at my shop, and we will bend over backwards for a client spending $100,000 monthly. They will not get that level of service from BBDO.

Robert Barrows from R.M. Barrows, Inc. Advertising & Public Relations, January 30, 2016 at 5:29 p.m.

Dear Advertisers...
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Sincerely,
Robert Barrows