Agency business models are being put through the ringer. In the latest installment of Digiday’s Confessions series, where we trade anonymity for honesty, we spoke to an exec who spent years as CEO for various holding company agencies about why having centralized control has strangled leadership at the individual shops.
Here are excerpts, lightly edited.
What prompted you to leave agency groups?
Part of it was recognizing where the communications industry is heading. There is less need for the intermediary when technology and brands can communicate with consumers directly.
And the other part?
The big frustration is the mediocrity in most agency leadership and CEOs. I’ve never been somebody who’s happy to sit back and not make significant change to drive a business forward. But they want people who will take instruction. They don’t want leaders, they want operators.
You’d say that of all the holding groups?
Yes, and increasingly that’s the case as they sit with multiple businesses within portfolios, and when they have an issue with managing cost and driving margin going forward. They won’t invest or make the changes needed because it’s too expensive. So they want people to go in and take accountability for an unsolvable, unchangeable situation. All the power, independence and control has been centralized.
Has it always been like that?
There’s a greater degree of mediocrity now. People who are just sitting pretty, wanting to protect their position. Before, you could buy talent, but those people are now going into different industries. The Googles and Facebooks — they are hiring the talent. And clients are taking more skill sets in-house.
How does that affect the agencies’ output?
A lot of communications businesses are truly lacking in innovation. It’s just all about driving margin and shareholder value.
What should agency business models look like if built today?
You would probably do it around customer experience planning, media technology, data and analytics, and creative innovation.
Is concern regarding management consultants encroaching on agency turf justified?
They’re acquiring the businesses that marketing services companies traditionally would have acquired, but at greater multiples. They’re acquiring the skills, and because their model is consultative as opposed to executional, they can command greater fees. They haven’t been disrupted by the business model of salary, overhead, margin, which is what screwed the advertising industry.
What’s the biggest market lie?
The media game. A lot of significance has been put on the media model, because margins are eroding in other areas. This investigation into [questionable media-buying practices] is potentially disruptive to the whole industry. My concern is that some of the barter-type behaviors of traditional media planning and buying have been applied to the programmatic world, and when the industry had the opportunity to learn the error of its ways, it didn’t.
That’s to do with legacy, and the fact that lots of traditional media buyers still exist within businesses that like to portray themselves as cutting-edge, technology-strategic businesses, which they fundamentally aren’t. There’s possibly more bullshit being spouted than ever.
So what needs to be done?
The industry continues to do itself incredible damage. People need to be brave, man up and show how the industry is to move on, that its former days are done. But it needs to happen fast, because the sucking-out and transition of people with the skills and capabilities has already happened. That’s why you’re left wondering: Where has the magic gone?