The Rundown: Cannes highlights agency woes

The Cannes Lions festival is designed as a celebration of agencies and their work. But increasingly it’s serving as a stark reminder of their mounting challenges.

Much of the chatter this week around the festival’s bars, restaurants, yachts and event spaces revolved around a common theme: If and how agencies are going to stay in business.

That conversation isn’t a new one, of course. Agencies have been struggling to fight disintermediation and maintain relevant for years. But there was a distinct feeling at this year’s festival that the situation is reaching a tipping point. Clients are taking more of their marketing functions in-house, large platforms are making media agencies less necessary and publishers and consultancies are eagerly stepping in to fill the gaps.

Concerns have been mounting for years, but the threats to their business models now seem to be coming thicker and faster than ever before.

“I don’t know what we’re going to do,” one agency executive told me in Cannes this week. “Hopefully by this time next year we’ll have figured out another way to make money.”

Though the challenges are numerous, the consensus remains that consultancies may pose the largest threat agencies’ futures. And that’s a view held by many agency staffers in addition to just those with interests in agencies’ decline.

Smelling blood, reps from consultancies including Accenture, Deloitte and IBM iX flocked to Cannes this year in greater numbers than they have previously, and of course borrowed some agency tricks to get marketers’ attention, including parties on boats and dinners in the hills.

And despite what consultancies may say publicly about avoiding media buying and similar services because of potential conflicts of interest, in reality it’s only a matter of time before they attempt to bite into that pie too, offering technology and tools of their own, if not services.

The in-house trend is causing major headaches for agencies too, and in some potentially unexpected ways. Even if clients decide not to go in-house, many have at least considered it. That’s leading them to push their agencies harder to achieve the type of efficiencies they believe they could in-house, even if they haven’t tried.

Meanwhile, the rise of brand-safety and transparency concerns is leading marketers to probe their agencies and scrutinize them more than ever which, ultimately, eats away at their margins too.

Agencies won’t disappear anytime soon. And of course many are pivoting to offer more consultancy-like services in attempt to stay useful. But it’ll be interesting to see if, by this time next year, they have any new ideas. Or if agency execs will continue venting the exact same frustrations over glasses of rosé at next year’s Cannes Lions festival, if they attend at all.

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