Is the ad agency business model dying?

André Bose do Amaral writes a very interesting article to convince his readers that:

all advertising agencies out there should get rid of their swanky offices, fire every single one of their staff (with the exception of the relationship owners and the creatives), and move all their Excels, Powerpoints and Photoshop files to Google Drive.

Amaral has three “grudges” with the ad world:

First, there’s an issue with incentives. Institutions are motivated to sustain the problem to which they are the solution, and the advertising agency business is no different. Agencies are still keen on keeping the media-buying model that James Walter Thompson helped make popular around 1877 (yes, that old). There are no incentives to change that, and still (as far as I know), there isn’t an automated online marketplace for traditional advertising space. Google, hello?

Second, a traditional agency is usually two steps behind true innovation. In general, they only start working when their clients have reached out for them in the form of a brief. The folks issuing briefs, on the other hand, are incentivized to play it safe. Any marketing manager I’ve presented campaigns to throughout my career will rather choose constant 3% sales growth year-on-year than the possibility of 30% growth if there’s also chance of market loss.

Third, it’s a highly concentrated business. Four or five of the holding companies control the agencies that manage almost the entirety of the available communication budgets out there. I’ve worked for three of these, and I can assure you, they are trying as hard as they can to persuade clients that they are still the best service provider out there.

And what does the future hold?

A completely new business model for ad agencies. One that relies on only the two pieces that deliver true strategic value to clients: the relationship owners and the vision shapers. That’s it. All the rest is superflous. The secretary? Ditch her. Accounts payable? Harvest can automate that for you. When you remove all the fat of an agency, all that remains is the guy who truly understands the business problem, and the other guy who can solve it.

I’m currently trying to turn this concept into a reality through a collective I’ve founded called Mecenato. We have no offices, and never will have. We’re just a bunch of business and creative people scattered around the world bearing web-connected MacBooks. We all worked in big agencies before. All our finance, cash flow, time sheeting, file management and production systems are up in the cloud (right now as a big mash-up of different web services, but ideally a cohesive browser-based offering that will be the first digital product we can sell to the very ad agencies we now wish to destroy).

The fallback plan has always been to go back to work in an agency if this experiment fails. After all, they are everywhere, they work in the exact same way, use the same jargons and their offices are identical in their belief that they are all different. Thinking again, maybe I should change the post title.

Convinced? Maybe, but not sure:

While it is true that advertising is being disrupted, new competitors are arising from many different directions and that the agency rebate model of the past is being marginalized by Google & Co, it’s not only about whether Ad Agencies are ready to evolve and de-centralize.

But, in the end, it’s more about whether and when their clients will become ready for audacious change, that, while inspiring, always creates uncertainty and risks, to which most of C-level decision-makers are still very consistently averse.

+Whatever the case, to declare the death of any status-quo is always appealing to human behavior, so enjoy “the last advertising agency on earth”, a promo video for a conference in Toronto a few years back: “Don’t become the last advertising agency on earth. Attend FITC Toronto April 25th to 27th, 2010”

flickr photo, scary dinosaur, by Christian

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