Hi, it's Shai here.
I can't decide what's more predictable these days: a holding company folding its agency brands or ad agency folks bemoaning the news with some variation of: "For an industry that sells on the importance of brand, we do a crappy job of maintaining agency brands!"
This hollow self-referential argument is precisely why the industry continues its slide into irrelevance.
Really listen to Levitt
In one of the most iconic marketing papers of all times, McGill University’s Theodore Levitt coined the term marketing myopia to describe the short-sighted focus on selling products rather than understanding and meeting customer needs. His HBR article warned businesses against defining their purpose too narrowly - like seeing themselves in the railroad business instead of the broader transportation industry-leading to missed opportunities and decline.
His argument was simple to understand (if sometimes hard to act on): to stay relevant, companies must adopt a customer-centered view and adapt to changing markets
Ad agency folks abused Levitt's marketing myopia for years trying to convince soap companies they're in the business of female empowerment or whatever, while trying to convince themselves they're in the "business of creativity." Both are delusions.
The lesson from marketing myopia is that soap companies are in the business of cleaning bodies and ad agencies are in the business of providing advice that unlocks commercial value for their clients.
"Brand" is merely one type of advice. But it can’t be the only one.
Inescapable fundamentals
Would "brand" have saved Yellow Pages from Google? Could Blockbuster's brand have saved it from Netflix? Could the UK's Carphone Warehouse's brand have protected it from smartphones?
Of course not.
The world around these businesses changed, deeming them increasingly irrelevant. No amount of "brand" or "creativity" would have saved them.
Their only path to survival was to consolidate, cut costs faster than revenue is declining, and pivot to areas where they might have a fighting chance.
WPP (and Omnicom and everyone else) is facing a similar reality. Digital advertising accounts for approximately 77% of total advertising spending and 74% of that money goes to the big platforms. That's the whole ball game.
So yes, WPP et al have to cut and consolidate. And no, brand has nothing to do with it.
Beyond the brand
I dislike the "we should practice what we preach" argument in this context because agencies who are finding success practice and preach differently.
They focus on value that cannot be easily commoditized, they shed unnecessary costs, and their evolve their business model to respond to market realities.
And spare me the argument about how the world’s biggest spenders are the big tech platforms, proving that they themselves believe in advertising. They’re big spenders in ultimate terms but not in relative terms to their revenue. Besides, no one said advertising is going away, just that the money pie from advertising is being split differently and agencies who rely on that pie are going hungry.
Thriving in the post-execution era
If you’re in the business of providing sound advice that unlocks commercial value, thriving starts from understanding where that value can be delivered.
- Add value to people, not to companies: Look at ways to make a client’s job safe and easier. You are not serving the interests of the organization, you’re serving the interest of the decision makers who work for that organization.
- Expertise over execution: The commoditization of creative production means you must shift upstream to strategy and business transformation consulting or downstream to specialized execution. FundamentalCo was spun out of Blackstone as a consultancy that, from what I can tell, cares little about cheap execution, prioritizing high value strategic services.
- Business model innovation: Replace billable hours with value-based pricing. Sell products, not just services. Everyone’s talking about performance-based models, and they should. But good luck getting paid for metrics you don’t yourself own. One excellent example of this is Block Report, a recently launched agency that charges on a monthly basis based on output they provide.
- Talent arbitrage: Strip out unnecessary management layers and focus on talent that delivers value in models you can flex up and down. Companies like BTDT lead the way in this approach.
- C-suite fluency: Agency leaders must speak the language of the boardroom, not just the creative department. You need to be able to have an intelligent conversation about EBITDA, CAC/LTV ratios, or capital allocation, you're irrelevant. Anomaly’s Jason DeLand is one of the best in this game. You won’t hear Jason talk about amorphous terms like “the value of creativity” - he’ll talk to boardrooms in language they understand.
Tough times ahead
The future requires embracing the hard truths agencies often hide from: you need less people, you need to shift away from execution, and you need to be comfortable with constant change.
Is this unfair to the talented people working at these agencies? Absolutely. It sucks. But capitalism isn't fair and the good old days are not coming back.
But I do believe good days are still ahead and opportunities are still out there for those curious enough to look for them.
Shai Idelson,
Healthcare Marketing Executive