(Re)thinking on advertising agencies business model

During the past decades biggest agencies spent huge amounts of money in creating local point of presence for each of their brand, replicating time by time the same model based on creativity and production.

Holding more than one brand, works good to let them to have more possibility to win some bid, or work with more than one client in the same industry. On the other hand, the money is strictly and clearly hold by their media center and local managers are day by day less free and more involved in corporate practices.

That model worked good, but until today; for two main reasons: 

1. it is really expensive: you have to hire great professional in any country, you cant really share you experience between experts and teams, etc... 

2. It doesn't take any advantages by the Network.

In this, old, model agencies are not working globally and in my opinion, in the digital era, it must be dramatically rethought.

The idea comes to me while thinking on how could dnsee evolve to the next stage, to 2.0! We are Web's evangelists, we are always promoting the advantages of being connected, but we still hire tens of people here in Rome, we are not able to really outsource the job and we don't take any real benefit of being in 2009!

First of all media consumption is dramatically changing (not yet really changed, it still changing! Think mobile): media planning  is becoming strategic and deeply involved with IT capabilities, social behaviors and experience engagement. Is not buying a 30" during the Super Bowl for the biggest audience, is to create relationship with the biggest amount of users.    

At the top are strategic directors (not creative): those people are so hard to find (and the human interaction paradigm so similar within industries) that it make no sense to try to replicate it locally. You must have a few groups located in strategic cities who are able to share their knowledges within the company, creating an own culture and get real value on that share: it is the exactly opposite of the creative couple. Those team are the heart of the agencies' business for the next decades: to clearly understand what I mean think about R&D for big corporates. They create expertise, they innovate, they go beyond. They can do the difference and it is impossible to replicate tens of times. This is the only added value that a big agency can give to his clients and is the only field in which size (and money) could make the difference.

Yes, the two main keywords are experience and engagement. That given, creativity and technology are just a commodities. The biggest part of agencies business is death: media, creativity and production. As I live in a flat world, I want to pay the best price for the best service. Once upon a time I used to say: good, fast and cheap, just two. Not today. Our life wants good, cheap and fast. And the digital environment make it possible. 

I was saying that nowadays Creativity is just a commodity: if I want the best 30" ad, I am able to buy from the best creative team in that moment for that product. And not always the best idea comes from the most expensive guru!  Technology is a commodity too: we are not required to have the breaking technology, we must be able to dominate the most diffused standards and devices. I'm not saying to fire every art director your agency, I'm just saying that we cannot base our business on that guys, but buy those services from the best offering, internal or external.

The key, in this new model, is the process. It must be totally redesigned to be 100% plug&play, where what you plug in are external and internal services and expertise. You must be able to plug in the best creativity or technology or any other service at the right moment and in the right place without impacting on the project. 

The World goes fast, good agencies must be faster. In this vision agencies become more similar to consulting firms, at the top of a global and multidisciplinary projects. Globally they hold the project, managed by accounts that are like project managers and have the skill needed to manage complex problems. 

What locally they must have is the distribution: a few and really efficient people able to quickly distribute ideas, media and programs to local markets.

Then comes knowledge management: it is absolutely fundamental to share experience, expertise and works. On the contrary what I see is competition between local offices; this is completely wrong. Those big conglomerate of brands and office are not building cultures, they are just selling content to fill super expensive ad spaces. They should invest their money on building a social environment in which each hour spent on any project, must add value to the whole. It is to evolve, not to re-invent (the same think, every time, in every place).

This model cuts dramatically costs and gives a great efficiency to the system in its totality.  

On the other side, what the market will still need are super specialized shops that must remains agile and smart to quickly readapt themselves  to market adjustment. 

Some years ago Seth Godin introduced a very nice idea for the new marketing era: marketing must be in the product, not based on. Well, that was a good insight. But today the scenario maybe is clearer and we are required to create marketing products, not just campaigns. 

So the new era brings new specializations:

  • social media (really related to Sociology more than pure Marketing)
  • user experience 
  • content architectures 
  • Cloud specialists

and so on... 

I love how some companies seems to ride those new waves: IdeoRazorfish and some other are building their business on new personal ad singular culture. 

On the next post I'll go on explaining how local and independent agencies should approach the next decade. Subscribe this blog to be updated or follow me on Twitter