The Real Reason Ad Agencies Are Struggling

All marketing is about information creation and management. And this is why agencies are fading away.
Agencies Used to Manage The Talent
Designers, copywriters, ad buyers, art directors, creative directors and so on…they were all under one “roof” for decades. It was the agency management that could corral and manage them and the projects. This business model made sense, at the time. Producing creative was time-consuming and resource intensive.
Along Came Digital
Agencies first started to see fragmentation in the late 90’s as the Internet became popular, as momentum grew and analog channels became less influential, agencies struggled to maintain their model.
Then computing changed. PC’s became more accessible to people. Very little skill was needed to participate by the consumer as software improved. Then came social media, followed by smartphones and tablets. Disintermediation was running rampant. Things got even messier for agencies.
As broadband reached critical mass, so WiFi hit the world. Laptops became ever more powerful and creative software better and cheaper. This impacted all industries. Publications like Fast Company were touting the “Free Agent Nation” and they were right, but that was the early 00’s and we weren’t quite there. Now, we are and this is what is destroying the agency model.
The Rise of The Gig Economy
Around 2012, we started to see the rise of what is being called the Gig Economy, in other words, freelancers, to a degree we hadn’t seen before. The creative/agency sector has witnessed this perhaps more than any other sector.
A Shifting in Marketing Management
Companies were quick to note this as well. While there are still the majority of major brands that use agencies, even that model has shifted. Every year, less and less use AOR arrangements and more hire boutique agencies and increasingly, individuals.
Companies know that when they hire agencies, they are paying for overhead and access to talent. An often frustrating aspect of this relationship for companies is that the senior talent they want is often quickly dropped and a junior slotted in place instead…the agency version of bait and switch.
This bait and switch issue and increased ease of finding strong talent that is freelancing, is the major reason agencies are suffering.
Smaller agencies are thriving because they have project management talent, can work swiftly and bring in senior talent as needed or work well with a freelancer the client company tells them to work with.
Within companies, they are shifting their marketing team roles to more project management and analytics based. This enables a company to more easily manage freelancers and multiple small agencies. They deploy tools like Slack or Trello and can leverage Office365 and GoogleDocs and now Dropbox’s Paper applications.
Most marketing and creative is about information creation and management. This largely negates the management architecture of large agencies.
Companies know how to find and leverage services like 99Designs, The Well, and many others. Talent can be anywhere. Agencies can’t control that anymore.

One thought on “The Real Reason Ad Agencies Are Struggling

  1. The same holds for most businesses – building a good, profitable and meaningful business is becoming more and more of an art, the artisans crafting them relying more and more on the power of digital tools to outcompete- or craft niches within the status quo – perhaps we’re headed toward a new era where more and more businesseses will comprise of smaller teams, focusing on more localised tasks… using only a handful of tools maintained by international corporations – that may well shrink to be equally small compared to today. Or perhaps a proportion of the population will never embrace technology and the big corporations will always be those that act as a service layer between technology and people… time will tell.


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