Ad agencies have lived a long and glorious life with plentiful profits and very high margins for years from big-name client accounts promising guaranteed annual revenues. During recent years as clients have become wise to the fraudulent ways of the ad Agency world and started developing their own internal MarTech capabilities the landscape has shifted from outsourcing everything to an Ad Agency to hiring them for project-based work.
One of the most well known agencies, 72andSunny has gone through their second round of layoffs in twelve months as a result of shift in client demands and behavior. Like many ad agencies, they have found themselves in a place where the Customer Data, Customer Experience and other Marketing and Media strategy and operational execution activities, are being brought back in-house with a focus to use Ad Agencies for their areas of strength - creativity and ideation. Clients are looking to be more effective, efficient an cost conscious but use the agencies for campaign ideas and creative development.
What does this mean for the agency world? If agencies want to survive, they need to realize that the days of 'skimming off the top,' fraud and other non-value add activities are gone. Clients have learned the game and if they want to continue working with an agency, the agency needs to be honest and transparent about their cost structure, fees and where the client's money is going as well as improving their own internal operations to keep pace with an agile business world. They need to improve their internal capabilities and build up strength in areas clients will demand from them - creative design and campaign strategy. If they do not evolve and adapt to the new ways of working, they will eventually fade away into the business history books as another example of industries past like coal and steel in the US.
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