The last season of “Mad Men” is approaching, but let’s not be so fast to bury the ad agency with it.
Media outlets are reading trends and are raising questions.
The Economist has a special report on digital disruption in the advertising supply chain, and is quite taken by how “Big Digital’s” profit margins and programmatic media buying have come to dominate advertising and audience selection. In one article, “Leaner and Meaner,” they’re saying:
The ad-tech firms are gleefully forecasting the imminent demise of Madison Avenue’s middlemen, but they may be wrong, for two reasons. First, ad tech has introduced so much complexity into the business that clients may want to hold on to agencies for advice, and agencies’ creative services are likely to remain in demand when brands are having to churn out so many different pieces of content.
Second, the prediction that technology companies like Google will start to compete head-on with the agencies is likely to prove wrong. To provide full client services they would need to hire thousands of new employees, for limited gains. Google’s margins this year are expected to be around 50%, whereas WPP’s are forecast at just 17%-and that is for the largest and one of the most successful advertising agencies. Perversely, the agencies’ mediocre returns may protect them from being wiped out by nimbler competitors. Their tents in Cannes may no longer have the best views, but the admen will still be there.
Mobile Marketing Watch had its own agency pity-party headline last week, “Are Yesterday’s Advertising Agencies Finally Dying?” reporting on a UK opinion piece:
As the challenges marketers face increase, the solutions from agencies shrink. It’s time for them to step up.
That’s the opinion of Tom Goodwin, founder and CEO of the Tomorrow Group, in a recent post at The Guardian.
“There is a curious tension in the current agency landscape—a vast mismatch between what clients’ needs are and what agencies are working on, and this gap seems to be widening,” Goodwin explains.
True, Goodwin admits, the Internet has been both a blessing (new opportunities) and a curse (change is always hard).
“The internet has been a mixed blessing, a volatile combination of incredible, new possibilities, rampant change and some of the most destructive forces the marketplace has ever seen,” Goodwin contends. “On a communications level, we have a plethora of new media channels, memes circling the world in seconds, the app of the moment bursting onto the scene, and trends like content marketing, native advertising and influencer marketing to navigate and leverage. The options seem more bewildering than ever and more abruptly changing, all in a context where attention is moving onto platforms which become even harder to connect with people.”
What’s to be done? Goodwin believes agencies need to up their games.
What does raising their game look like? Yes multiple screens and a crush of data are inflicting huge demands for content—some of it targeted to a few eyeballs. The scramble for creative, analytics and insight talent must be accomplished as agencies seek to keep their historic role as strategic counsel, with built-in expertise to deliver that counsel all under the same shingle.
That won’t be easy—The Economist says advertising is not the first choice for math students, for one—but skills matching must be a priority of agencies, because brands need guidance through the technology maze, and they need break-through content that engages wherever the consumer may be—something ad tech cannot or will not generate on its own.
By the way, Big Digital has its own death predictors, too.