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This Time, It's Different

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I've managed a company for 32 years and seen my share of economic downturns. Each one was a painful experience that ultimately forced change, which in turn allowed for new growth and opportunities. But this recession feels different to me (and many others). I believe we're in the middle of the perfect storm for the agency business and the landscape won't look remotely the same on the other side.

The velocity of change in our business has been picking up pace for the past three years. But more has changed in the past six months than in the prior six years. When iconic brands disappear from the landscape (from Washington Mutual and Circuit City to, perhaps, Pontiac), there's no doubt that the storm is indeed very powerful.

Agencies are just slightly downstream from the center of the storm. When an agency loses a major brand because it ceases to exist (or when a major marketer drastically cuts the advertising budget), the first step is layoffs, like those we are seeing in droves. These rounds of layoffs reflect how agencies have always dealt with prior economic downturns. The staff comes roaring back, according to conventional wisdom, when the economy does. And that's how it's always been, right?

This time, I don't think so. The convergence of the downturn and the rapid changes in consumers' lives will have a drastic effect on the agency landscape. We're beyond the point where agencies can "cut" their way back to profitability.

Similar to what is happening on the brand side, some agencies will not survive. Just as venerable agency brands like Bates and DMB&B did not survive the prior "dot-bomb" downturn, we're equally likely to see further consolidation in agencies this time around. It's slowly happening as we speak, like the announcement of the merger of Proximity and Atmosphere.

So what's an agency to do in order to survive this perfect storm? The best advice I can give is to quickly align with consumers. This is really what the agency business is about. Somewhere along the way, agencies forgot that simple fact and instead became specialists in the craft of making ads. The annual Super Bowl advertising extravaganza highlights the very problem: it's a veritable orgy of self-indulgent spots costing millions of dollars to create and millions more to run -- and then only once. A couple of weeks later, few consumers will even remember a single one. And no one can even remotely measure their effectiveness at driving business.

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