• by Andrew Bailey , Op-Ed Contributor, September 9, 2020

About 25 years ago the ad holding companies came up with a clever idea – take the traditional, everything-under-a-single-roof agency and break the media department out into its own separate agency. The thesis being that these newly created media agencies would be worth more as standalone firms than they would be tethered to a creative agency.

This fragmentation accelerated with the rise of digital marketing and the corresponding growth of specialist agencies dedicated to increasingly narrow aspects of the overall marketing pie.  

So while separate creative and media agencies may have been the starting point, many large marketers have since progressed to an overlapping mix of digital, CRM, social, mobile, retail and influencer agencies as well. 

It’s a model that’s no longer working.

Even before the pandemic hit, it was a questionable approach, both expensive (all those agencies to pay) and time-consuming (managing all the inter-agency handoffs). Now, as brands look to free up working capital and streamline their operations in response to the current crisis, it’s simply unsustainable.  

What this means for the agency world 

The short answer – more consolidation and fewer agencies. Just as consumers are simplifying their lives, dropping services they no longer consider essential, marketers are doing the same, with a focus on centralizing their operations across fewer partners. As brands gravitate to firms that can manage the full scope of their marketing efforts, it will be increasingly difficult for agencies to hang their hat on being great at a single thing. 

This will generate a wave of M&A as agencies sculpt themselves – whether by choice or necessity – to this new reality. Larger players with access to capital will look to bolster their service offerings through acquisitions of smaller specialist firms and of agencies under pressure due to the pandemic. In fact, Martin Sorrell’s S4 Capital recently raised $146 million in a special share offering for this specific purpose. 

Outside the bulge-bracket (relatively speaking) division, firms with complementary offerings will find ways to work more closely together via collaborative arrangements or mergers. Others may use this time to launch new divisions that enlarge their service footprint, enabling them to provide a more comprehensive solution to marketers. The critical element won’t be in achieving pure scale, but rather bringing a supermarket of capability, including creative, media, tech and data, under a single roof. 

New approach to talent

Yet as the agency business consolidates, we’re likely to see the reverse when it comes to agency talent, with the mass work-from-home experiment demonstrating that people don’t need to be physically present in order to be productive. 

While it probably wouldn’t be wise to take the success of a crash, four-month WFM stress test as a rationale for turning off the office lights for good, agencies are going to be much more comfortable having full time employees who aren’t daily presences in the office. 

In fact, it’s a potentially win-win situation for both agencies and talent. Agencies will be able to maintain smaller, rent-saving physical footprints to reflect the fact that not everyone will be in the office on the same days. They’ll also be able to cast a wider net in hiring with the ability to access talent anywhere in the world. 

On the flipside, talent won’t necessarily have to move to the “big city” for their dream jobs. And those that do will have more flexibility and autonomy in managing their work-life balance, choosing when it makes sense for them to come into the office and when they’ll be more productive working from home.  

The new paradigm will also open up opportunities for workers who might previously been shut out of full-time office-based positions. For instance, in addition to those in geographically remote areas, this could include people who need more flexibility due to their roles as parents and caretakers. 

Having a more distributed workforce can benefit clients as well, allowing them to tap pools of talent in non-domestic time zones for a nearly always-on workflow during pinch periods. 

Greater appetite for new ideas sparks creative opportunities 

Finally, with the pandemic forcing us to figure out new approaches for pretty much everything – from educating our children to keeping the economy afloat – there’s never been a greater appetite for new ideas. Nor a larger list of challenges to choose from. 

In a sense, it’s a perfect environment for agencies to prove their worth, give moonshot ideas a try, source new thinking from overlooked sources and demonstrate the creative insight and audience intelligence that marketers turn to us for. 

In a recent New Yorker article, historian Gianna Pomata sounded a hopeful note, calling the pandemic “an accelerator of mental renewal” with the possibility of kick-starting a broader societal transformation to the benefit of all. While this doesn’t necessarily solve anything in the here and now, the takeaway is that it’s a particularly fertile moment for those of us in the ideas business. For agencies that can come up with the big idea, supercharge it with data and then intelligently execute across the media landscape, the future should be bright.