Why the Traditional Agency Model Is Struggling to Keep Up With Demand

A response to WPP's stock drop

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When Martin Sorrell made headlines earlier this month for blaming technology and zero-based budgeting for WPP’s worst stock drop since 1999, many marketers were surprised by his failure to communicate what many of us deem the real reasons behind their less than stellar year. Sorrell went so far as to state that his traditional agency model isn’t antiquated, a statement that has ignited heated debates within the marketing industry around the future of the agency model.

Here’s our breakdown of how Sir Martin might be missing the mark and a perspective of what the real future agency landscape might hold.

In short, the traditional agency is antiquated because traditional advertising is antiquated.

Traditional agencies and holding companies like WPP are built around solidified structure and a foundation of the siloed legacy model. They are designed for long term client partnerships and marketing plans that often stretch over years. The steady stream of income this provides is essential to their operation.

However, we’d contest that the agency of the future will thrive by being quick and nimble, which results from a flatter organization and a process that allows for pivoting quickly.

Whereas marketers used to hire agencies to develop 30-second spots for TV and print planned months in advance, now they’re managing customized marketing across diverse platforms and devices to targeted audiences, all in real time, with need for integration across all touch points. Coupled with automation, this new playing field means that smaller, nimble agencies with less infrastructure and fewer silos are better equipped to develop great creative at a faster speed. It’s the agencies that can react quickly and keep their brands on the forefront of culture that will thrive.

When Sorrell blames zero-based budgeting (ZBB) as part of the problem, he fails to see the opportunity that this type of budgeting program presents to a nimbler agency. Rather than receiving giant retainers at the beginning of the year, short-term, project-based work can often move forward more swiftly, without being tethered down by accountants and procurement teams yet with the same level of intensity and scrutiny. Agencies receive projects that are commissioned around the value that they bring to their clients, and the conversation focuses on results rather than cost.

The traditional agency is antiquated because traditional advertising is antiquated.

While it’s still too early to define the true impact that ZZB will have on agency relationships with clients, it is clear that the traditional retainer model is falling by the wayside. It can be argued that without an unwieldy retainer, the agency and brand client are focused on the real value of a specific project and away from ongoing pricing structures for long-term plans, which are out of date soon after the ink is dry.

Contrary to Sir Martin’s statement, the traditional agency is also being threatened by companies like Google and Facebook, for while mobile and digital advertising continue to soar, 90 percent of this growth is going to these two companies alone. Agencies who are able to remain at the forefront of creativity and technology can be open to collaboration and partnership with technology companies and are flexible and agile enough to keep up with them. The truth is that collaboration with tech companies will actually be vital to an agency’s future success.

The shift away from traditional marketing models leads to significant opportunities for fast-moving agencies rooted in digital, contrary to Sir Martin’s outlook. The key for agencies that want to withstand the test of time will be to find ways to deliver at the highest levels for core brand needs—conceptualizing, producing and promoting powerful creative—under one roof. The smartly integrated agencies that can manage digital and creative end to end, while remaining open to collaboration, will come out on top.

It’s consumers and culture that are driving the macro changes affecting our industry. As culture moves faster and faster and consumers grow ever more empowered and demanding, brands know they need to keep up. And perhaps the traditional agency model just can’t.