Another Reason The Traditional Agency Model is Under Seige

The Classic Adman's Cheese Has Moved

The Classic Adman's Cheese Has Moved.

 

Sure, convergence casts a long shadow over traditional agencies.  The proliferation of new media and its attendant audience dispersal create serious headaches for everyone searching for smart, responsible channel planning.

And every traditional agency must grapple with the need to not merely embrace but to master digital creative.  Yet, call me an optimist, but that doesn’t particularly worry me.

What worries me is that traditional agencies have spent decades ruining the market for what today’s clients demand over anything else: ideas.  Because since the middle of the last century, agencies have basically given away creative.  Which makes it particularly hard to start charging for it now.

Think about it: back in the glory days of television, a healthy percentage on a TV media buy paid for a whole lot of overhead.  The numbers were large and simple–agencies could afford to give away the ideas.  And so they did.

With the rise of cable and the first early signs of a splintering television audience, agencies could no longer count on percentages to cover their costs and margins.  So they moved to fees and contracted hours.  And still, they could afford to give away the ideas.  And so they did.

But today, we can’t afford to give away those ideas; the margins simply aren’t there anymore, due to both the rise of procurement drones and ever-shrinking budgets.  Today, clients turn to agencies for ideas and ideas alone.  Sure, some may want insights and media planning but if they didn’t get that from their agency, hundreds of other companies can provide that thinking.  All of which means that suddenly, the product agencies have long given away stands as their most valuable asset in a changing marketplace.  So we better figure out a way to charge for those ideas, and reimbue them with the value they deserve.

Agencies like to say they are in the idea business, and they are.  Unfortunately, most agencies have been in the Idea Management business.  Today’s agencies must be in the Idea Production business.  Emphasize anything else, and you’re not serving the clients, you’re serving an increasingly irrelevant business model.

By Dennis Ryan, CCO, Element 79