Prescription for Healing the Ad Agency Business

Forecast after forecast has been published over the last three months predicting how ad spending will continue to increase over the next five years. But how will these dollars be managed when the ad agencies that traditionally service this industry are faltering and facing challenges to their very own business models? I come from an Agency environment and have spent the last 13 years either building, fixing or scaling digital shops and I think if our industry is going to heal we need to do it from the inside; we can’t wait for someone to do it for us. I think we know what needs to be done, but we need to set the stage for the prescription to work. We need to observe the symptoms and understand the ailments affecting our industry before we agree on the solution and write the prescription.
We need to observe the symptoms and understand the ailments affecting our industry before we agree on the solution and write the prescription.

THE SYMPTOMS
In order for the Advertising Agency business to succeed in the coming years we need to make some changes. It’s no different than a Doctor telling a person with high blood pressure or a person with high cholesterol how to get healthy. We need to make some changes in their lifestyle! We need to find a way for agencies to flourish in a world where there are far too many choices for media consumption facing the consumer and far too many ways to spend dollars to reach those consumers with advertising. Conversely, with the increase in opportunities, there is fragmentation. There are fewer and fewer mass-media outlets and targeting your consumers has become hard so publishers have difficulty finding a way to make money and the business becomes slightly less stable.

OLD PERCEPTIONS, NEW REALITIES
There was a perception in the past that advertising agencies were composed of cubicles full of brilliant people, within creative departments and media departments, who possessed incredible insights into consumers. These people were like interns in a hospital; learning their craft and practicing it every day; capable of operating under duress to save Brands, create messages and campaigns which drove specific consumer actions and drive sales and market share for their clients’ products and services.
I’m sad to say those days are gone and there’s no more magic. Not only have we exposed the public to secrets to our services but we’ve gone and made our efforts more accountable through technology. Technology has exposed the “man behind the curtain” and made the general populace aware of the ways in which agencies serviced their clients in the past.
User Generated Content came along and made it so anyone could create highly effective messages for their favorite brands and distribute them over the Internet at little cost. Google came along and began the current shift towards the advertising marketplace model with products such as AdSense, allowing anyone with a credit card to buy media and reach a targeted audience to sell their products. These and other factors have worked together to commoditize the areas where agencies traditionally make their money; media buying and creative development. These factors have worked together to commoditize the areas where agencies traditionally make their money; media buying and creative development.
The magic is gone; in reality the execution of these concepts were always a commodity but as a result of these strides in technology and the door being thrown open into the world of the Agency, the client’s are now aware and they’re no longer willing to pay for it! Additionally, our ideas are now more accountable than they used to be so not only are we exposed, our effectiveness is exposed as well.