Collaboration, inhousing, tech lead agenda at Campaign's Year Ahead
In January each of the UK’s leading media trade press titles, Campaign, MediaTel and The Drum, host a 'year ahead’ event to mull the key issues they expect to frame the year. A few weeks ago I attended Campaign’s event, chaired by deputy editor Maisie McCabe.
Alongside Brexit, the macro theme seems to be the changing nature of agency/ client relationships and business models - and most useful part of the event was, for me, a presentation by Results International, a company that advises on M&A.
Partner Julie Langley highlighted three core themes; collaboration, in-housing, and technology. Each of these themes are instructive for agencies’ PR, not just because it’s what journalists are paying attention to, but also because each points to a rapidly changing sector where new agency brands and models will emerge and others will fade away.
It’s critical for any agency to have a clear vision for what the future will look like and demonstrate why it’s on the right side of history.
Collaboration. Easy to say, hard to do.
Collaboration, like the word ‘agile’ has become a fuzzy buzzword to express an attitude. After all, which agency would hang its hat on a ‘un-collaborate’ message? But collaboration has proven hard in practice to deliver on because of how agencies are paid, and an in-balance of power that risks leading to those with the best ideas (for the client) pushed aside for those who have the best ideas (for the agency).
The problem seems to stem with the network model. The primary way agency founders are paid is with earn-outs, where they are rewarded through the performance of their their own business. This makes inter-network collaboration hard; clients are advised to invest more in creative, media or digital depending on who is in the room, and nigh-on impossible when the client wants to work with independents as well as networks.
Langley said that while Though ‘equity merger’ single P&L deals like S4Capital & MediaMonks are becoming more common they’re not yet the norm. Perhaps Sir Martin Sorrell’s experience of trying to drive collaboration within WPP (mostly unsuccessfully) was instructive.
Technology. Stick to the knitting; partner, don’t copy.
The second theme was technology - specifically, a move away from agencies building proprietary systems, particularly in media planning and buying. There is a clear logic in building technology; it can give you a USP and a higher valuation. But it’s hard to do things you’re not expert in cost-effectively in house (pretty much any agency's reason for existence) which is why many are instead opting for tight partnerships with a ‘best in breed’ technology partner (see image below).
Much of this is due to data; clients seem unwilling / unable to be as open with customer data as they’d like, and the duopoly seem so far ahead in terms of audience profiling, many feel it’s too late to catch up. This may accelerate consolidation in the martech/ adtech sector with CRM platforms and data brokers leading the way.
Inhousing. It’s not binary, but about finding the right blend.
The ANA media scandal led to a breakdown in trust, putting pressure on the networks’ traditional model where media drove overall profitability (media owner rebates and opaque trading desks). This, combined with digital's growing share of advertising spend (and the duopoly’s dominance in mobile in particular), has led to more clients wanting to do planning and buying in-house. As more large formats become 'addressable' (ie buyable online - like connected TV, & digital out of home) in an automated way this point towards agencies going back to basics; transparent on trading, remunerated through fees, focused on customer service, and world-class at planning & strategy.
Creative in-housing has also taken place with mixed results; where Pepsi’s Kendall Jenner disaster was a cause celebre. Creative agencies make the very valid point that creative talent can get bored and go native when in housed, and focused on one firm. In-house teams may be able to do more creative executional stuff - repurposing and interpreting brand campaigns for dynamic digital ads and doing low-level content marketing - British creative agencies remain world-class at branding.
It’s a challenging market for independent creative agencies. The market is over-supplied and margins have been eroded over time by networks loss-leading on creative to sell media. The most-valuable part of the industry is also the worst-paid, and as we’ve seen in other creative sectors the rock stars tend to do OK but there’s a long tail of talent struggling to make ends meet.
Digital tends to exacerbate that problem, and as creativity is rooted in personal individualism it’s hard for creative consultancies to scale - though having a strong culture that successfully balances consistency of product and process with supporting individualistic creative talent - certainly helps. It’s the aame problem in PR.
Perhaps those agencies focussed on helping brands to figure out how to optimise the balance between in-house teams and consultancy (rather than focusing on how to extract maximum revenue from a relationship) will be those who prosper in the long term? It will be interesting to see how the sector evolves.
Other interesting nuggets I took from the panels.
James Murphy (exiting adam&eve founder) spoke of the ‘quality of client base [as being] threadbare’ - in the context of marketers who are more focused on short term marketing tactics than long-term brand building. My personal view is that marketing seems to have moved ‘downstream’ in many organisations over the years, with cmos not on company boards, having little influence over product development, and new ‘business development teams (ie, sales departments) moving upstream. Both sales and marketing are equally important functions of course but in an experience economy where the brand is the product perhaps this issue will remedy itself.
James’ fellow founding partner David Golding added that a ‘me too’ industry with little to differentiate itself spends far too much time talking to itself about business models when the focus should be more on the product and what clients will need in 2023, not today.
Wonderhood Studios’ David Abraham described an ‘interim industry’ which was interesting. His model is centred on bringing more skills from TV (an industry where the UK is world-class - the former Channel4 boss has form here) into advertising. His argument was that the technology giants have such a command on data and analytics, the idea of competing is a ‘fallacy’.
Saatchi and Saatchi’s Magnus Djaba spoke of the importance of culture in agencies; particularly important when the product is ideas and the differentiation comes through people. He spoke of the need for a positive outlook and for the client to experience ‘wonder and delight’ at every interaction. I have a personal experience of this. In the mid 2000’s the record industry was considering a marketing campaign to deter people from downloading music illegally. Eventually the industry avoided another ‘home taping is killiing music’ catastrophe by convincing the internet service providers that they had a social responsibility to discourage their own customers not to break the law, whilst credible piracy alternatives like Spotify and YouTube emerged, but before that a marketing campaign was on the cards.
We turned to two creative agencies with big reputations for advice. The first agency called us in, but instead of offering ideas it smugly told us we were idiots to try and advertise our way out of a failing CD-sales model, before telling us they weren’t interested. Fallon’s team, on the other hand (led by Djaba), thoughtfully engaged with the business problem (which was not actually about selling CDs) and offered positive, constructive, creative ideas beyond traditional advertising. He seems to be doing alright for himself these days.
TSB’s Pete Markey spoke of a brand looking to make a comeback after last year’s IT crisis. His marketing team is co-located in a WeWork with a team from Oliver - who are branded as an ‘inhouse’ agency - though it seems their role is mainly digital content production. Speaking of the need to retain external agency support, but there will presumably be a need for a media agency and possibly a new brand brief to help the band step out of crisis mode, differentiate itself, and get back on the front foot.
Sarah Threadgould at Which? said that high awareness of the brand, and a mass audience of ‘anyone who wants to make an informed buying decision’, the company does not enough subscribers. Describing brand advertising as wasteful ‘pouring champagne through a sieve’ most work is done in-house through a large marketing team. Newly in post, she’s a fan of PR as a channel, though it struck me if that problem lies in ‘consideration’ Which? may benefit from investing more in brand advertising (and a decent media planner) to help audiences understand what the brand does, or targeting the large number of people who are not reviews obsessives (and will never subscribe) with a different product.
Hearst’s James Wildman was, as always, in an upbeat positive mood - reminding the audience that yes, selling more magazines was going to be important in 2019, but so too is building new revenue models around its core asset of trusted media titles and the experts associated with them. More direct brand partnerships (above and beyond being a vendor in a media agency’s ‘print’ media plan - my words not his), and brand extensions - such as the partnership with Shearings Leisure Group that led to Country Living Hotels.
More generally 2018’s ‘techlash’ was a major media talking point, even if it’s yet to impact people’s behaviour in a real way. People may dislike Facebook a little more, but this hasn’t massively impacted its usage or advertisers from spending even more money with them. Wildman’s Hearst and other publisher brands will hopefully see more advertisers going back to properly valuing context, quality and impact above digital reach.