A Camel Passing Through the Eye of the Needle

Is advertising truly an endangered species? Can somebody genuinely answer in the negative, that is, convince readers beyond reasonable doubt that the profession is not only alive and kicking but that it’s a profession with good prospect for investors and practitioners? Advertising, a profession known for its glitz and glamour, until very recently used to be the central warehouse of ideas upon which brands were built and nurtured from concept to finish.
From quick observations, the downward slide in agency fortunes in recent times goes beyond the global economic meltdown as the players would want us to believe. The truth as has been said over and over in this column’s, that the present agency structure and business model cannot continue to support the system.
The slide did not start today. About 15 years ago, the first exodus of media business from the full service agency structure was instructive but many players chose to ignore the wake up call. The reality stares everyone in the face today. Contrary to the previous norm where an agency handled full advertising responsibility for brands, clients now consider this an anathema to brand building. Very few clients now have their creative and media businesses residing in the same agency. Even indigenous low budget clients have rightly or wrongly joined the fray.
This globally accepted standard has continued to chisel out fat muscles from the hitherto enviable full service agency billing and subsequently, its profitability and sustainability have become threatened. In recent times, this is biting deeper and harder into the very lives of creative agencies. Recently, a top rated agency relieved about 23 of its staff of their respective functions within the agency. While discussing this with some friends, one wondered if the company lost a major business giving rise to the sack. But another friend who was part of the conversation quickly proffered that “with the economic meltdown which has occasioned an unprecedented reduction in budgets, agencies do not need to lose an account(s) before shelving or rationalizing staff.” And everyone seemed to agree.
The point is that asides the fact that the earning power of agencies is being eroded by other specialized ancillary service providers, the role of the creative agency as an anchor is also quickly being demystified. It is no news that clients now give briefs to creative, media, events, and PR agencies separately. Hitherto, these all passed through an anchor agency and of course agency fees and commissions, among others, increased the buoyancy, cash flow and ultimately, profitability, of the agency.
A few years ago when marketing guru, Al Ries, and his daughter cum partner, Laura Ries, released their book, The Fall of Advertising and the Rise of PR, it highlighted some of the predicaments facing the advertising profession.
Why some parts of the book are questionable, I did raise some questions about the subject with the managing director of a medium sized agency. His take was that it was all about making a mountain out of a mole hill. About two years down the line, many erstwhile advertising friendly companies now, more than ever before, rely on PR and activations to drive their brands and corporate business instead of big bang advertising thus drastically reducing the advertising share of the marketing budget. Today’s major brands are born with publicity, not advertising, Ries will want practitioners to believe. Indeed, a close look at the history of the most successful modern brands shows this to be true. In fact, an astonishing number of brands including Palm, Starbucks, the Body Shop, Wal-Mart and Red Bull have been built with virtually no advertising.
Locally, how much of advertising are former big spenders like Unilever, Cadbury and Procter & Gamble currently carrying out? In the same vein, check out what is happening to their creative agencies such as Lintas, Rosabel and Sunrise D’Arcy respectively, at least on the particular brands. Imagine how many people who have been asked to go home based on the lull occasioned by the increasing ebbing of advertising budgets. Don’t blame the agency that discharged some staff; it is not an isolated case but rather a common phenomenon in the industry today. And the message is: the business model has to be reviewed; the industry’s current economic reality may not continue to support the present agency structure.
But wait a minute! The loss of advertising agencies seems not to be the gain of PR and activations alone, media agencies are feeding fat on this also. While creative agencies are becoming shadows of their old selves, media agencies are fostering and spinning out companies to handle competing brands or businesses. A similar scenario happened in advertising in the late 80′s to early 90′s when any agency worth its salt must have a spin-off shop.
Today, the tide has turned in favour of specialist media agencies who themselves are off-shoots of full service agencies. The Troyka Group blazed the trail to establish two media companies Mediacom and Media Perspectives. Rosabel also has Starcom Media and Momentum. STB Universal McCann silently introduced a second line Media Independent Company called Media Brands. In the same vein, mediaReachOMD is currently berthing PHB Media. In spite of the unfavourable business environment as claimed by full service agencies, the media agencies are proving otherwise.
Asides professionalism, one thing working for the media buying shops is that they are a lot leaner in terms of staff strength despite the huge financial returns. A lesson for homogenous structured full service agencies faced with the challenge of passing through the eye of the needle.