• by Maarten Albarda , Featured Contributor, 8 hours ago

There has been much recent discussion about whether the agency holding company model is becoming obsolete or not. The recent Omnicom/IPG integration was one reason for the debate about “why” of the agency holding company. The other came on the back of the really bad year-end results for WPP, and its subsequent quest for reinvention under new CEO Cindy Rose, as announced on Feb. 26 of this year (with help from McKinsey).

WPP’s new vision is to operate as a single company. Rose is consolidating the sprawling empire of agency brands into four pillars across four global regions. The four pillars are WPP Media (The GroupM evolution); WPP Creative, an umbrella housing the likes of Ogilvy, VML, and AKQA; WPP Production to scale high-velocity content; and WPP Enterprise Solutions (you can take the Cindy out of Microsoft -- her previous employer -- but you can’t take the Microsoft out of Cindy): a new consulting-style arm focused on AI transformation and tech.

WPP will couple this with tech. Everything is to be plugged into WPP Open, which WPP describes as an AI-powered operating system. By standardizing the stack, it is using (forcing?) all employees to use WPP Open to unify research, creative, and media.

And with that comes the most important shift: changing how the company will charge clients for all of this. WPP is shifting its client-charging model toward outcome-based pricing and technology licensing. It is also redesigning staff incentives: Staffers will be rewarded on the basis of WPP’s overall performance, not just their individual area of responsibility. If your pay depends on it, you will of course collaborate and integrate.

So that is a pretty dramatic change compared to the WPP of the past. Whether or not it will be successful and a precursor for how other agency holding companies will evolve remains to be seen. It is a bold move away from what was.

But… you knew one was coming! But perhaps this is the last gap of an industry that is going to disappear, regardless of org and remuneration structure.

In a world where Meta’s Manus, and Google’s and Amazon’s equivalents, offer soup-to-nuts, full stack, end-to-end agency solutions, who needs agencies? For now, big, complex legacy advertisers do, because they are governed by big, complex guardrails, operating principles and legal departments that worry about consumer backlash and IP infringement.

But Meta and the like don’t really care about large legacy advertisers. Per reporting, these types of advertising only make up 25% (Meta and Amazon) to 40% (Alphabet) of their income generated from advertising. And eMarketer reported this week that by 2028, Google, Meta and Amazon EACH will surpass ad spend in all traditional media. Each! And a shrinking percentage of that will be generated by legacy advertisers, who are increasingly doing direct deals with the platforms anyway. Coupled with an in-housed system that is now far more doable than say five years ago (thanks, AI!), agency holding companies offer a less and less relevant set of solutions to an ever-smaller selection of advertisers with a shrinking budget share.

No wonder Cindy Rose is worried. I am just not sure that this reinvention is the solution. Perhaps selling the working pieces to players active in the new ecosystem might make more sense.