by: Idris Mootee
Ad agencies are cutting people across the board responding to budgets cut from clients. WPP does not expect to see any significant economic recovery before 2010 which is likely be the case. In additional to cost cutting and recruitment freeze across much of the group, they are also announcing plans to relocate the company's tax base to Dublin, a move which the company expects to provide significant tax savings.
With 37 acquisitions made over the past 12 months alone, there a lot of companies to integrate. Outside of the pool of smaller companies that they own, their blue chip holdings Ogilvy, Y&R (including Wundermann) and JWT (largest in the US) are becoming more and more irrelevant, these elephants need a lot of attention. On another note, there's a 51% chance that WPP will buy Razorfish from Microsoft, Microsoft wants to get rid of the digital agency but hard to justify a write down. The financial market is not in any shape to support an independent Razorfish, WPP is the only option. Expect an a deal closed in June.
There are questions about whether these old school ad giants can evolve fast enough. Their thinking is 3-4 years behind and clients see that. And the interactive agencies, most of them are 10+ years old and have their own legacies. They now share the challenges that the ad agencies have and becoming part of the (banner ad and out-bound email) ad factory.
The lines between interactive agencies and direct marketing firms are blurred. Are more so the lines between interactive and traditional ad agencies are also blurring. Today Agency-of-Record Status can go to anyone. Global alignment of agencies is out. So what will the future hold for advertising agencies? Well, we’re beginning to see some of the trends unfold. I wrote about this ten months ago (we produced a report on the future of agencies and the evolution of marketing services).
Marketers seriously question the current and future relevance of traditional media & advertising shops. Will large agencies be able to evolve to meet the requirements of new technology? The answer is simply “No”. Can traditional adv agencies develop strategies that drive “customer engagement”? Definitely not. Their definition of engagement is watching your 30Sec TVC without changing channels. Our definition of engagement is “High involvement interactions between a customer and brand that strengthen the emotional, psychological or physical investment a customer has in that brand and act as advocacy for the brand”.
Perhaps the biggest hindrance of evolution for traditional agencies are organization structure and limitation of talents. The org structure was at least 50 years old if not more, it was not designed for cross-disciplinary collaboration. On the talent side, these agencies used to attract the smartest and the brightest 20 years ago, today those who work there are mainly mediocre (a few bright ones, very rare) people who doesn’t want serious (thinking) work. Their media and account management expertise does not necessarily translate well when faced with demand for technologically-based marketing solutions. Separating media and creative was a smart decision from a cost point of view, but seriously undermine the collaboration of creative media applications.
Traditional shops are slow to react, expensive, don’t get the Web 2.0 culture, and most often, “shooting blanks” and acting in defensive manner. Digital agencies (that go beyond digital) are not only being invited to pitch brands as agencies of record -- increasingly, they're winning. Clients just love the thinking and speed in execution.
More clients showing interest in digital agencies to serve as the “lead” on integrated communications efforts. The uptick is particularly visible among marketers in sectors such as entertainment, electronics, retail and some personal financial services. In short, clients are becoming less and less fixated on the type of agency handling their ad accounts and more on the “strategic capability” and “speed of execution.” In short, BRIGHT and FAST. That makes perfect sense. Clients just come to the realization that their company's plans were going to be heavily focused on digital anyway plus the fact that it can only go so far talking about your brands through paid media (communications), it is much better if you can get your customers to tell your brand stories in their own way.
Some wanted to know what's our office building looks like. It is declare as a historical building. Here's a picture below.