This piece from Forbes makes for sombre reading. While it's not suggesting agencies are dying, Alexei Orlov, global CEO of Rapp, says there's an element of fear within agencies, meaning they don't have the right conversations with clients. It ends up with clients talking at agencies, rather than with them. He's got some tips though as a reward for making it to the end of the article.
The shift to analytics-driven marketing and technology-enabled business growth has changed the nature of advertising agencies.
The era of “Mad Men,” where advertisers primarily focused on TV, radio, and print advertising is gone. In its place are specialists who focus on social media, digital media, and traditional media. And, there are behemoths who attempt to pull all disciplines into a single house.
On top of it, the traditional agency model was built on a revenue generation approach that included media placement; while there were different models, the most common one was based on a percentage of the media placed (e.g., 15% of the value of media placed). That model is being disrupted as programmatic media buying takes hold and clients push for changes in the agency compensation model.
With expectations of agency performance increasing (i.e., linking agency performance to client in-market performance), the agency compensation model being disrupted, and new, leaner competitors cropping up, one could argue that the golden years of agencies are over. To better understand this shift, I recently talked with Alexei Orlov, Global CEO of Rapp. What makes Orlov’s perspective interesting is that, having spent most of his career on the client side (was the CMO of Volkswagon, China prior to Rapp), he provides unique insight on the future of agencies, what agencies need to do to better meet client expectations, and how clients can get more out of their agencies.