The advertising agency is dead – long live the advertising agency.

I’ve had trouble with advertising agencies for as long as I can remember. Be it as a client or in web projects where I worked as a consultant or project manager on the internet agency side. There was always something wrong. For example, designs were delivered that included a whole range of new, fun features that had never been discussed with the client. Or designs that were simply a print design in a Safari screen layout frame. Or 2 Indesign files with 4 views, in which nothing matched, but which were sent by email to the “technical service provider” with the charming comment: “Please implement the rest of the website in the same style, we will then do a review”. We don’t need a briefing, “you can deduce everything”.

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Rant

Or the self-appointed art directors who acted like Steve Jobs and didn’t understand that his biggest weakness was precisely this kind of bad behavior. If their “stuff” had only been rudimentarily really good, you could probably even have got over it.

And always open-mouthed, someone from the creative agency always knew how customers think, where they click, what they do and what they don’t do. Even if Google Analytics and dozens of studies told a completely different story. The role of the “technical implementer” was frustrating, because on the one hand these people controlled the customer relationship, on the other hand they understood much less about the web than we did. So if you wanted work, you had to swallow the toad for better or worse.

Financial crisis FTW

However, the whole environment changed abruptly in 2008 with the financial crisis. Clients’ budgets suddenly came under pressure and they were shifted from offline to online. And many an Internet agency suddenly became the customer’s first point of contact. More new inquiries came in directly. The whole thing relaxed and many of the great advertising and creative agencies had a hard time. And even if I don’t believe in gloating: Yes, we all had a little bit.

Before the few laudable exceptions feel that they have stepped on the toes. Yes, you did exist. The fair, experienced, differentiated advertising agencies. Unfortunately, they have also suffered from the devaluation of the classic advertising agency.

From creative management consultant to “hourly service provider”

Three years ago, Hannes Müller from the BSSM agency in Basel (Switzerland) gave me a little history lesson as part of a discussion about the future of the agency scene:

In the past (i.e. in the 80s and 90s), most larger advertising agencies managed clearly quantified advertising budgets. A fixed percentage of these budgets (in Switzerland the legendary 17.8%) went to the agency as a consultancy fee, the rest was spent on media. In addition to the fee, the advertisers charged for their services in designing and implementing the measures. A good and rather easy business. And it was ideal for everyone as long as the advertising agencies were able to create substantial value through their advice. Be it with tangible advertising effects, which has always been more of an estimate offline, or as a creative management consultant.

This was understood to mean an advertiser who not only organized advertisements and campaigns, but also provided advice and assistance to the GL of a company in many different situations (from helping with product development to recruiting).

Easy Money

And as is always the case when easy money rains down on an industry, the advertising industry also became careless. This went well until clients noticed and reacted. As a result, many such budgets were no longer awarded as a whole, but split into individual pieces of work. And the majority of the advertising industry concentrated on graphic design and started selling hours. Although this was an obvious decision, it was not ideal in the long term. The business became more and more laborious. And then there was the internet.

Transformed advertising agencies

Interestingly, there are now more and more advertising agencies that are undergoing or have already undergone a digital transformation. Some (the majority) are doing this relatively clumsily by simply offering many digital products and services and still delivering good work. The bottom line, however, is that they have more or less become web/digital agencies.

New business model

The much smaller but, in my view, more innovative part is beginning to change its business model and is trying to be precisely this creative management consultant for its customers again. Just as in the past, the primary aim is not to carry out work itself, but to generate actual added value by advising the customer and maintaining the customer relationship.

Instead of producing in-house, these advertising agencies try to realize as much production work as possible with partners. In terms of production, they tend to be brokers.

This requires a change in the business model and is not easy. On the one hand, a good network of suppliers/partners must be established in order to be able to deliver the range of services for specific implementation projects. Secondly, the revenues from the former production must be replaced by new revenue streams. Like many a business model restructuring, this is an open-heart restructuring, so to speak. If this is successful, the customer benefits in many dimensions:

1. He receives independent advice that is not primarily aimed at selling graphics and other advertising work.
2. He benefits from a great deal of specialized, broad-based expertise.
3. For large projects, he can receive overall project management from a single source.
4. He can work with a consultant and sparring partner on a long-term basis (which often makes sense) and still take changing suppliers into account when it comes to production (which often makes sense…).
5. There is a more intensive examination of marketing and advertising topics.

Thanks to the network model, the advertising agency also remains very agile and can react much more optimally to changes.

Long live the advertising agency

In this way, various small advertising agencies are setting out to accompany customers over a longer period of time with a new business model. Some of them are doing this very successfully and I think we will be hearing a lot about these agencies in the medium term. Because they simply serve customers better. And at the end of the day, that’s what matters.