Are we seeing the emergence of a new advertising model?

The dismissal in March of a once omnipotent Sir Martin Sorrell felt like a truly symbolic moment. In the lead up to his departure, WPP had failed to meet revenue estimates in the last three quarters of 2017 and questions over the effectiveness and sustainability of his methods were mounting. “The company feels like it’s lost its way a bit, and that it’s not fit for the modern era. Increasingly, he looks like a man from the past” were the words of one of WPP’s largest investors, who clearly had lost faith in Sorrell and the intensity of his ways. The ousting of a man who presided over WPP’s ascent to becoming the world’s largest advertising agency was significant not only in the context of the company itself, but more broadly it has magnified some of the structural flaws of the industry as a whole, emphasising the need for wholesale changes.

When he took over at Wire & Plastic Products over 30 years ago, Sorrell pioneered a blueprint which revamped the entire marketing industry, allowing for the maximum possible extraction of cash. His approach sought to transform the company into the all-consuming empire it is today and his ideas were influential in turning the other big agencies of today into voracious acquisition machines, assembling a web of smaller agencies and market research groups with their own P&Ls en masse. The marketplace during the last few decades has become a complex battle between the giants of advertising and the tentacles of WPP and its competitors today (notably the likes of Publicis Groupe, Omnicom, IPG and Dentsu Aegis) reach ever further from its centre, covering such a vast proportion of the market. This framework has enabled these firms to perform a myriad of services, ranging from production and media to data, PR and brand strategy. Yet, it is this horizontality, once a great strength of the industry conglomerates, which has left them unable to adapt to a radically changing landscape.

 

sorrell

Scrutiny of the methods of agencies has been fuelled by several factors over the last 6 months, which have illuminated the unsustainability of the traditional advertising model and reflected the need for change. The expanding influence of tech giants Google and Facebook, who have a 60% hold over of the digital advertising marketing world, represents the single greatest threat big agencies face and their presence allows for advertisers and clients to bypass their services, feeding into the sense of change and urgency palpable across the industry. The rise of in-house production facilities is the culmination of these new possibilities and have forced agencies into a position whereby they must fight to prove their worth, or risk losing a significant proportion of creative work.

Keith Weed of Unilever expressed his dissatisfaction with the modus operandi of agencies at IAB Engage in London this week, emphasising that “the world has moved very fast and in my experience, the agencies haven’t moved fast enough”. Weed has long been of the view that big agencies exist for themselves and not to serve clients interests and oversaw the emergence of the Unilever’s ‘U-Studio’ in-house unit which now operates in over 20 countries. Another detractor of the advertising model is Procter & Gamble’s Marc Pritchard, who condemned the excessive layers and silos found in agency resources, few of which can be seen as contributing to creativity. He has called on them to “strip away anything that doesn’t add to creative output”, after P&G announced plans to slash its marketing budget by reducing the number of agencies used from 6,000 to 2,500 and by June 2021, as the FMCG giant seeks to become more self-sufficient.

Inhouse

Another factor which is accelerating the reinvention of agency is the threat of consultancy firms, which represent a further disruptive force which point the way towards a new way of doing things for brands. Accenture have recently been aggressive in their attempts to expand into marketing services and spearhead a new model of advertising and has made 22 acquisitions over recent years in order to facilitate this. Accenture is hoping to offer the kind of integrated multidisciplinary services which can cater for the needs of brands and two weeks ago announced that it is setting up a service which will buy and plan media on behalf on clients, allowing them to work more efficiently and internally. With the sheer depth of understanding they have of the industry, the idea that Accenture could offer a compelling package which covers all the client’s needs in an integrated and cohesive system appears convincing and their services could therefore enable clients to work effectively in-house.

 

ogilvy

 

By necessity, agencies have cut back on acquisitions and begun to reorganise as part of an effort to offer more client-centred approaches to marketing. The move forward to how agencies can once again be trusted to drive the value for its clients has centred on the streamlining of services and greater collaboration, as we depart from that traditional model. In the absence of Sorrell, WPP appears to have taken some of the criticism levelled at the company on board, and has begun to simplify its structure and become more flexible. Last week, Ogilvy & Mather, one of WPPs key assets, announced a new corporate identity which would enable for the company to “build a new model for our industry” according to its Chief Executive John Seifert. In this, all of the various disciplines, Ogilvy One and Ogilvy Public Relations would be blended into one entity ‘Ogilvy’, simplified not only by name, but also by structure and reflects this shift towards a new and more cohesive business model. As part of this emphasis on collaboration, the company also announced the introduction of a new networking tool ‘Connect’, which bears resemblance to the Publicis’ Marcel software, both of which aim to connect their various employees and improve efficiency. It has also been suggested in many quarters that WPP is preparing to sell of its data insight group Kantar, estimated at around £3.5bn.

Publicis Groupe have been a trailblazer in establishing a new model, having foreseen some of the challenges the industry would eventually face and already taken measures to become more integrated. Change within the agency was set in motion back in 2016 when it introduced the ‘Power of One’ strategy to offer clients access to all of its 4 solution hubs, Publicis Communications, Publicis Media, Publicis.Sapient and Publicis Health. “The need for reinvention is stronger than ever. At Publicis Groupe, we haven’t waited to act. We have broken the divide between data, creativity and technology. We have broken our silos through the ‘Power of One’. Today, we are breaking the barriers between talent and opportunity with Marcel”. 

The irony of it all is that the high-powered, agencies with important legacies are arguably less equipped to manage creative affairs with the challenges of this dynamic industry landscape than those smaller and more agile ones. Thus it is hardly a surprise to see the big players gravitating towards a simpler, more flexible way of working and the removal of excessive accountants and procurement teams as well as “excess buildings and overhead” as Marc Prichard put it, instead opting to manage work under one roof. Perhaps these alterations could prove the salvation of the creative industry as a whole.

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