Michael Farmer on the State of the Advertising Industry Today and in the Near Future: Part 2

Jack Myers amp160Last week we talked about the deterioration in agencyclient relationships fee cuts shorter relationships inhouse agencies etc amp160You said that agencies were downsizing and liquidating their capabilities becoming less capable of helping their clients solve amp8220brand growth problemsamp8221 amp160You predicted that this would lead to financial problems for the holding companies This did not paint a very optimistic picture of the industry amp160Where do you think things are headedMichael Farmer amp160Thereamp8217s a difference between where things are probably headed and where they could be headed amp160In a funny way Iamp8217m still optimistic about the potential for a turnaround in the industry amp160As long as advertisers have performance problems stagnant brand performance for instance there are attractive opportunities for problemsolving partners amp160The question today is whether the current leaders of advertising agencies and holding companies will transform their operations and help them become the problemsolvers that their clients need amp160This is where I have concerns and doubtsJack amp160So this is a leadership problem rather than a lack of opportunityMichael amp160Exactly amp160Somewhere along the line senior agency executives lost a sense of the purpose of their agencies which was to help clients grow and become more profitable amp160David Ogilvy said amp8220We sell or elseamp8221 amp160Granted agencies have been preoccupied adjusting to a number of very big changes in the industry being bought by holding companies seeing media commissions give way to laborbased fees dealing with globalization having to work with procurement adjusting to digital and social mediaamp160 These are massive changes and I think that agency CEOs amp8220lost the plotamp8221 amp160They became more tactical and transactional worrying more about amp8220how do we make profits for the holding company in the midst of these changesamp8221 rather than amp8220how do we rekindle growth for our clientsamp8221Jack amp160Do you blame the holding companies for these problemsMichael amp160Not really although I do think that they could have been more mindful and helpful along the way amp160The holding companies expected their agencies to become more efficient and profitable and to be paid in a professional way amp160They did not expect their agencies to rely 100 on downsizings to generate profits amp160Martin Sorrell once told me amp8220We pay the highest price for the best CEOs in the world amp160Surely they are not so stupid that they donamp8217t know what work theyamp8217re doing and how much they should charge for itamp8221 amp160Unfortunately he was wrong Scopes of Work and fees are unmanaged by WPP and other holding company agenciesJack amp160What about amp8220results for clientsamp8221 amp160Advertisers compete with Amazon and other online retailers amp160Baby boomers are dying out and Millennials donamp8217t buy in the same way amp160No one is sure how well digital and social media perform compared to traditional channels amp160CMOs are in and out every three years or so amp160Are you suggesting that agencies should solve these problemsMichael amp160Absolutely but theyamp8217ll have to dig out of a deep hole first amp160They donamp8217t have the talent or problemsolving cultures amp160If they canamp8217t help their clients solve these problems then theyamp8217ll continue to declineamp160 Whatamp8217s really happened over the decades is that it has become more difficult to generate brand growth amp160During the Creative Revolution days after 1960 advertisers only had to spend lavishly on TV and agencies only had to develop amp8220creative adsamp8221 amp160The economy was growing baby boomers were buying and brand growth took care of itself amp160Weamp8217re in a different place today amp160The market is saturated with goods brands have less meaning future economic growth is uncertain Millennials are saddled with debt and media has fragmented in a thousand ways amp160Agencies still say that amp8220creativityamp8221 is the answer amp160Theyamp8217re kidding themselves amp160Whatamp8217s needed is amp8220problem solvingamp8221 supported by creativity amp160Whatamp8217s missing is the problemsolvingJack amp160It sounds like youamp8217re describing a consulting firm rather than an advertising agencyMichael amp160Thatamp8217s pretty close amp160Given the complexities of the marketplace today agencies need to evolve into amp8220consulting firms with creative capabilitiesamp8221 amp160That may explain why Accenture Deloitte IBM and PwC are so aggressive in the industry today amp160They are consulting firms and theyamp8217ve acquired creative capabilities amp160They can solve brand strategic problems and then carry out the creative media and production work as implementations amp160Problemsolving first creativity secondJack amp160So thatamp8217s the opportunity amp160Agencies becoming consulting firmsMichael amp160Consulting firms with creative capabilities amp160Each of the holding companies is headed in this direction by amp8220downgradingamp8221 the existing agency brands and repackaging agency talent in new ways amp160Mark Read is merging agencies in part to create greater problemsolving capabilities Arthur Sadoun is refocusing Publicis Groupe to become a single mega problemsolving agencyamp160 Omnicom created We Are Unlimited to help McDonaldamp8217s solve its wellknown performance problems along with doing its advertisingThe direction is clear the big question is amp8220will it succeedamp8221 amp160My fear is that the holding companies and the agencies have no pricing strategies to be paid consultinglike fees and that they will continue to be stuck with underpaid and overworked people amp160If so the agency ship will sink along with the holding companiesJackamp160 Weamp8217ll know sooner rather than lateramp160 Thank you Michaelamp160 MediaVillage will watch and report on the transformation of the industry in the coming yearsClick the social buttons above or below to share this content with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writersamp160

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Michael Farmer on the State of the Advertising Industry Today and in the Near Future: Part 2

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Jack Myers

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Michael Farmer on the State of the Advertising Industry Today and in the Near Future: Part 2

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