In 2018, after one of the biggest growth spurts in the history of our agency — the result of an incredibly high new business conversion rate — two of our larger clients kicked us to the curb. This was largely as a result of the dreaded New CMO Syndrome, but of course it hurt like hell. And the truth is that our loss was more the rule rather than the exception.
With the huge increase in agency and CMO churn rates, one would assume that there would be more new business opportunities in the industry pipeline. It seems that this is simply not the case.
Last year, two of our wins were smaller pieces of business with an appropriately small annual fee, but we had to pitch against some of the industry’s greatest, most creative players. These are agencies that wouldn’t have gotten out of bed for less than a $10 million fee only a handful of years ago.
The total number of significant new business pitches across our entire industry seems to shrink every year, and the big creative AOR assignments of yore are now few and far between (just ask any new business exec). According to 4A’s data, there were 633 account reviews in 2015, 606 in 2016, and 559 for 2017. The scarcity of meaningful pitches means that agencies have become more cutthroat, more aggressive, and more competitive with each other. Plus, we are willing to invest even more of our own time, energy, and money to get that win, almost at all costs.
All this turbulence resulted in 14 agencies closing between 2017 and early 2019, and in 2018 there were 301 agency mergers or acquisitions compared to 258 in 2016. This year, we witnessed the merger of VML and Y&R, and said a tearful goodbye to JWT.
With talent being everyone’s priority, can we continue to attract the right people to an industry with an unpredictable future? Well, in 2018, 48% of the people who voluntarily left Hill Holliday Boston left our industry altogether, opting for a different career path — typically client-side. When asked why they were leaving the industry, most stated that they were unnerved by the pace of change, the instability, and the lack of security that the advertising industry could offer them today. In a study done by the 4A’s and LinkedIn, 54% of former advertising employees said a major reason they changed career paths was because they “felt there was little opportunity for advancement.”
According to a 2018 Atlantic article (“Where Did All the Advertising Jobs Go?”) that cited data from the Bureau of Labor Statistics, for the first time on record, the number of people working in the advertising industry is declining during an economic expansion. Agency jobs decreased by about 5,000 in 2017, while employment in media-buying agencies has remained stagnant since 2013.
Our economy is relatively healthy but, counter to this, our industry is shrinking. Why is this happening?
For a start, the reign of Google and Facebook in the online ad space, along with the fact that many retailers are having their margins squeezed by giants like Amazon, is leaving companies with tighter marketing budgets. In addition, many clients are building in-house agencies, or they are splitting their already meager budgets among many marketing services, including consultancies like Accenture and Deloitte. The latter have convinced clients that their expertise in machine learning and sound knowledge of data helps them to better connect with consumers, thus more successfully influencing their choices and behaviors.
Have we been slow to react to these changes? Some agencies have, while others have successfully predicted these shifts and adapted accordingly. Some time ago, we created our Decision Science practice, merging our Data & Analytics group with our in-house research team. We have also attracted “Big Four” talent into our Business Intelligence unit, and made exceptional additions to our Innovation and Technology practices. We have created a slew of proprietary tools to complete the data loop, starting with business data all the way through consumer, channel, and performance data.
We feel we are competition-ready. Most of our clients rely on us to do this kind of work. But there is always that little doubt in the back of your mind that makes you wonder what’s around the corner, and whether you can always be ahead of it.
All of this change leads me to believe that 2019–2020 may well be The Year Of Natural Selection, with even more agency mergers and more shops closing, and more skittish people continuing to leave the industry.
Natural selection is a painful but necessary process. It will make what is still a great industry, healthier. If we can continue to adapt and evolve to meet the dramatic changes in our industry then, hopefully, a period of shrinkage will leave us with more business to be shared among fewer agencies. This may be enough to help us not only thrive, but also attract new non-risk-averse talent (this has never been an industry without risk) with the right skill sets. This would also give hope to those of us who have a deeply rooted love of our business, and a stubborn resolve to hang in there and keep moving forward.