Commentary

Welcome To The Post-Agency Era

by Patrick T. Davis , November 24, 2008

The post-agency era is upon us. With staggering speed and efficiency, consumer preferences and digital technologies have coalesced to create a broad and deep cultural demand for direct relationships. In this disintermediated market, do we need go-betweens at all?

We once used agents to purchase auto insurance. No more, thanks to Progressive. Long gone, too, are the days of booking trips through travel agents. They have been replaced by Travelocity's roaming gnome. Real estate agents seem a quaint remnant of a different financial time; commissions paid on top of falling prices add insult to injury. Public relations agents once were required to reach the media. Now, we are the iReporters on CNN, as well as the executive producers, hosts and broadcasters on YouTube. Every "comment" box makes each of us an op-ed contributor.

Surely the next agency to go -- and the one holding on tightest -- is the ad agency.

The current global financial crisis and the downstream fallout of historically low consumer confidence and spending will reshape the advertising industry dramatically. But it will only speed what was already underway. Major marketers continue to express growing frustration with agencies' inabilities to navigate the new consumer and media landscapes. They are finding the agency business model less compelling than ever.

Indeed, we must remember that the term "agency," at its core, signals a very particular type of business structure, one that may well have run its course. Yes, there are shops known for creative brilliance. Yes, there are practical and technical areas of expertise that corporations should not take on internally. And, yes, some agencies do understand the difference between wild inspiration and strategic counsel. None of this, however, changes the fundamentals of an industry that was long-ago built upon an assumption that an intermediary is a required -- and good -- thing.

The recent launch of Google's Ad Planner is a step toward the future, thought it's seen as controversial and limited by some. Ad Planner is positioned to be in the service of ad agencies. In fact, Ad Planner is revolutionary; it goes well beyond a direct challenge to agencies. Ad Planner obliterates the agency model by quietly introducing the concept of advertising brokerage. Google claims it has created Ad Planner to "help media planners...connect advertisers and publishers." In truth, it connects publishers to advertisers, a subtle and key difference, with no agency required. The Ad Planner service is free; care to guess how the money flows to Google? The advertising industry has held on to the agency model for far too long. It was slow to adapt to a changing media environment. And, it continued to value creative sizzle over consultative substance. With advertising brokerage let loose, there are few arguments left to justify the agency structure. The industry left itself open to be leapfrogged in this way. Google may be the world's first post-agency ad firm.

What Google cannot do yet is provide clear, strategic advice. It can simply provide valuable data and persuasive quantitative insight. Agencies would be well-advised to learn the fine art of consulting now. Doing so, though, requires a different mind-set, a different skills set, a different employee base and a different business model. These are no easy tasks; they are a counter-revolution.

Agency leaders would be well-served by challenging themselves to ask what their businesses would look like if they never produced or placed another ad. Is there a sustainable future without the core product?

What would the advertising business look like if it produced advice on consumer-to-consumer marketing strategies or the nuances of developing content ready for the coming semantic Web? Many industries have crossed this type of chasm before, and it is time for the ad world to do so.

Usually, though, there is real genius -- an Edison, a Ford -- who leads the way to a future that seems impossible. The advertising industry does not need creative genius right now. It needs business genius, someone who can imagine and execute success in the post-agency future. Someone who can see an adless agency, as Ford foresaw a horseless carriage.

agency, marketing

3 comments about "Welcome To The Post-Agency Era".

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Fred Leo from Ad Giants, November 25, 2008 at 9:12 a.m.
I used to cock my head like the RCA dog when I heard a Google exec say they were *not* getting into the ad agency business, and even my friends at agencies would accept that contention. You've put your finger on it, I think. They are not getting into the agency business, just performing much
of the agencies' business under a different structure.
Google, however, is not the first to see that the agency model is, at a minimum, in the midst of an era of reduced influence and popularity and possibly inexorable decline. Others (and I work for one such person) have sensed that creative concept, production and ad placement can be managed other ways. Willing, competent and affordable resources exist outside
agencies. If they are simple to manage, dependable, and affordable, the agency has much less to offer. The overarching "big idea" still has to come from somewhere, and some might say that idea is best executed by those who
originally had the idea, but I don't see how that's enough to keep the agency model viable.
By the way, your real estate analogy really hit home with me, and is right on in my experience. Another category heading that direction might be eyeglasses.
Reply

bug menot, November 25, 2008 at 11:27 p.m.

I don’t see the death of good agencies anytime soon (stress good). The Google AdPlanner is revolutionary, but I would never put a big budget against it. Who do you hold accountable? And from what I’ve heard, you’re getting a bunch of remnant advertising. If a plan is strategic, this isn’t the path to go down.

From the way this is written, it would seem that Mr. Davis has never worked as the client or for an agency. The main takeaway I got from this was that bad agencies are…bad. In reality, a good agency can save a client money. Does Apple really want to sever its relationship with Chiat Day and bring that creative process entirely in-house? I highly doubt it.

The greater truth is that clients should empower their agency to be part of the team. Make them an agency partner rather than some entity that is merely hit with fire drill after fire drill (and to his credit, Mr. Davis seems to touch on this with his consultative talk, though I would change the way that is phrased---more in a bit). When the agency is empowered, the agency actually feels that it is working as the client rather than constantly for the client, and the decisions made by the agency will reflect this. Again, Chiat’s relationship with Apple is appropriate here. They are part of the process from start to finish. This takes a certain amount of trust on the part of the client, but in the end, it’s beneficial to all for this to happen. (Full disclosure: I have a vested interest in this, but I strongly believe it to be true.) It’s only natural. If you feel empowered and important, you’re bound to make well-meaning decisions. If you’re treated as an after-thought and only meant to put out fires, then you will behave as such.

I would caution Mr. Davis on going too far down the consulting only path. The biggest, and worst, change that I have noticed in my career in advertising is the rise of consultancies, and these are the true harbingers of death for companies. Producers of nothing but a bunch of unread documents and criticizers of everything, they add virtually zero value to companies. They are vastly overpriced and they don’t actually create anything, so they aren’t held to anything. I’ve watched company after company destroy their bottom lines hiring these bozos and never seen any value added. If I had one piece of advice for any company, it would be, if you must, hire A consultant, pay them a reasonable rate and hold them accountable to results post-consulting. In this way, you can see the actual impact of their hire. And my guess is you won’t see much.

Stanley Bing covered this perfectly in 2000: http://money.cnn.com/magazines/fortune/fortune_archive/2000/05/29/280646/index.htm

The key line for me is “You don't really know anything about our business or our company.” It’s so true. The consultants come for the cash and to hear themselves talk and make others feel inferior, thus they destroy morale. And in the end, after hundreds of thousands of dollars, that’s all that actually happens.

The main point, and I do feel like Mr. Davis at least comes close to hitting this perhaps unknowingly, is that agencies or partners (or whatever new term we devise) should have a vested interest in the process and the client. This means being part of everything from start to finish and working as a team. Chiat and Apple are a team and it shows. Thus, truly, we go back to the agency of record model, which, when the agency has the best interest of the client in mind, seems to be the best model we’ve got, though perhaps some payment structures could be tweaked, as Mr. Davis points to some of their inherent and antiquated flaws.

Thanks for the article, Mr. Davis. It’s always good to get the dialogue going.

John W.
C+P

John Osborn from Ultramercial LLC, November 28, 2008 at 12:10 a.m.

I might add to Mr. Davis's theory that since the unbundling of full service agencies in the 1990s, the creative agencies now operate like consultancies, and it is the media agencies that were "spun out" that are in the greatest need of "business genius". The original advertising agents were those that purchased media for clients from media providers, keeping a commission as agents in other industries do. The media buying function for most of the 20th century was such a cumbersome process requiring fiscal (and audience delivery) accountability, and negotiable for those with spending leverage and/or the right connections, that the "middle-man" agency model made some sense. In the 21st century, it is the availability and growth of new methods of placing ad dollars in a more efficient and accountable ways (auction-based search, AdPlanner, etc.) that threaten the media agency business. What is still missing with these new methods is the ability to sort through all available types of media and strategically plan the right mix of media types to move the profit needle for clients. As other media like TV move to census based and trackable types of advertising (similar to those in the online world) from companies like Ultramercial, Visible World and InVidi, smart media planning strategies and the application of cross media results to ever-improving strategies might just save the best media agencies from extinction.
-- John Osborn (Ultramercial Advisory Board)