2021 Agencies Outlook

Where We Were When 2020 started, several problems were bubbling under the surface for agencies: bloated organizations, brands moving away from the agency-of-record model, in-housing, consultancies, consolidation of publishing and a lack of diversity. Agencies sensed their relevance was dwindling, and they started to make changes—not necessarily very quickly, but there were signs of forward motion. Then the rest of 2020 happened. When the pandemic hit in the spring, the mission for agencies became survival. Many people lost their jobs—Forrester predicts the number will top 50,000 people by the end of this year—and slight revenue declines became major victories. Week after week, we at Adweek had the depressingly unenviable (and quite frankly, difficult) task of telling those stories. Then, the senseless killings of George Floyd, Breonna Taylor and so many other Black Americans laid bare deep-seated problems in the country and the industry. 600 & Rising, for example, charted a way forward for diversity, equity and inclusion. Then, The Richards Group scandal—when founder Stan Richards called a Motel 6 concept "too Black," setting off a client exodus—took it many steps back. Where We Are Now Now, as we charge into 2021, there isn’t a sense of what one would call “calm,” but agencies have a better handle on where they need to go. Shops figured out how to get lean. They have a renewed sense of purpose. And new opportunities, especially in ecommerce, present green shoots amid the ashes. “The people who are adapting are winning,” says Michael Kassan, founder, chairman and CEO of MediaLink. “Agencies have not historically been very good at adapting, but they have no choice. This is the proverbial necessity being the mother of invention.” Some may take umbrage at Kassan's comment—especially smaller, more nimble agencies. But it points to the fact that agencies have to regain relevance to brands. And this is where the clock is ticking. Agencies have a lot on their plates as it is, but 2021 looks like a year of tweaking, prioritizing and regaining the plot wherein they are such a valuable resource for brands and their success. The good news is that some of the agency world's most potent skills, especially around creativity and strategy, can help set a course forward. And rethinking talent and prioritizing DEI, something shops sometimes struggle with, may unlock greater opportunities for agencies. Where We're Going While 2021 represents a reset of sorts, agencies still need to manage the detritus of 2020 and address priorities quickly. Adweek presented nine priorities to consultants who work in the agency space every day, and asked them to rank them in order of importance. Creativity, strategy, "talent, leadership and culture" and DEI were in the top four. These are lifebloods of the industry and point to a prediction: With good strategy and creative output, driven by strong talent in a robust culture, agencies can thrive. Agency consultant Peter Levitan says the agency world “has lost sight of the fact that [creativity] is its most important benefit.” “Something most clients can’t do in-house is the development and delivery of big, market-moving creative ideas,” he says. Like Levitan, Greg Paull, principal at R3, believes getting back to strong creative output, agencies' bread and butter, is critical. “With 500 million people blocking ads, creativity has become more important than ever,” he says. “No one is waiting for another Nike message, but when it comes from Colin Kaepernick, it resonates and cuts through. Big thinking matters now more than ever.” Nancy Hill, founder and CEO of Media Sherpas, was among those who put talent, leadership and culture at the top of the list. The implication is that agencies with the right mix of talent, wrapped in a culture that retains and grows them, can succeed. But with the dual issues of working remotely and talent watching how their employers address diversity, agencies need to uphold their 2020 commitments to improve. With good strategy and creative output, driven by strong talent in a robust culture, agencies can thrive. “If you don’t get your culture right, even in the virtual world we find ourselves in now, the rest of it won’t matter," says Hill. "This is true now more than ever before." In November, we asked marketers how their agencies performed during the pandemic and how they see their agency relationships. Citing uneven performance and a lack of solutions for their businesses, 40% of brand marketers said they may seek new agencies. “As we went into the pandemic, clients were desperate,” says Kassan. “Clients didn’t know what to do or where to go. They were looking to their agencies to step up. … Brands are taking a serious look at who they want [as agency partners] as we move through the transitional normal to the post-pandemic normal. Agencies need to reestablish their value proposition.” Tuning into brands Predictions about what comes next vary, but there are some common threads that have long been discussed in the agency industry. At its core, an agency's raison d'etre is simple: to help brands solve their business problems. The difference now is that the white-hot light of delivering results burns even brighter than before. Agencies need to be more intimately involved in brands' businesses, even as they navigate the bugbears of reining in costs and extended payment terms from clients. “Ecommerce consulting and activation is less than 3% of agency holding company revenue,” says Paull. “It needs to become 30% in the next three years.” “Being more outcomes-oriented [is critical],” adds Kassan. Hill says agencies will “start saying 'no' more often to bad client pitch demands, extended payment terms and unnecessary conflict restrictions.” Agencies are finally getting cost structures under control, and that’s a positive foundation for the future. Travel has ground to a halt, and some companies are abandoning pricey real estate. (Kassan notes IPG’s decreasing footprint, and MDC left its tony midtown Manhattan digs.) Meanwhile, a growing and highly experienced freelance pool will help create more flexible cost options. "World-class talent is possible if your agency has a clear location and workplace strategy,” says Elizabeth Zea, partner at Juel. Perhaps one of the more significant trends we'll see in 2021 is similar to that of another golden era for the industry: the founding of scrappy, hungry, talented independent agencies. But unlike the indie era of the early 2000s, Hill believes these startups will have more diverse founders. She warns, however, that these shops and the industry at large need to look ahead and not fall back on their old ways. “I hope we don’t just go back to how we behaved prior to Covid-19,” she says. “We must remember all the lessons that we have purported to have learned from 2020 about diversity, inclusion, equity and making room for everyone.” In 2021, successful agencies will evolve their models, become more involved in their clients' businesses, develop creative ideas beyond advertising and be highly compensated based on results—with ecommerce the key to unlocking potential. Check out all of our 2021 Outlook coverage here.

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