Big Ad Agencies Tip. Over.

In 1991, I was a young copywriter at one of the top ten creative agencies in the country and I had to pay for my own Mac because the agency functioned on PCs. We also wore coats and ties -- it doesn't seem that long ago, but it was.

Approximately fifteen years ago, I moved from a traditional agency into the new world of smaller more nimble ad agencies, staffed with freelancers armed with technology and yes, Macs. This is the world that shifted to online first and I remember when we used to get 6% click through rates on our early banner ads on AOL because people didn't know what they were.

Throughout this process, many big and bloated agencies survived thanks to the asset bubble and the massive spending from clients like car companies and soft drinks. Every so often, I would wade back into this world, as part of a team on a project or even just to visit a friend.

My colleagues and I in the new world would simply be shocked at the waste, the inefficiencies, the fees, well, we were a little jealous of the fees, realizing that junior account people were billing at the same rate our most senior people were. But then again, we don't have the expenses.

My current company handles some very large clients, and I hope they would agree, does some very good work for them. We are passionate and involved. We charge fair fees and pay our people fair salaries. However, our total office rent (for three spaces in three cities mind you) is under $2,000. We offer top health insurance (no employee co-pay) dental coverage (again no co-pay) and paid vacation etc.

So now, as the asset bubble collapses, so too are the remnants of the large agency structure. The layoffs we are seeing in the sector, massive really and growing, will only serve to further hasten the fall of the big shops.

The tens of thousands of people being cast on the street this month won't go back to work at large agencies, ever. Instead, they will start up a thousand small shops like mine. These will be good places with solid people with solid backgrounds, armed with laptops, and cell phones and free conference call numbers, not to mention free video conferencing and gmail accounts.

At the same time, there are tens of thousands of marketing directors whose budgets are going down 10, 20, 30% or more. Their goals are the same, maybe even higher. Inevitably, the advertising fees will have to be cut, and for smart marketing directors, this is an opportunity to get the same work, maybe better, quicker faster and far more efficient from the small and the smart, versus the large and expensive.

This has been the future for quite some time, but now is the tipping point. Combine the economic factors with society factors (plummeting newspaper readership, the shift to online for news and entertainment) with the economic factors and by the end of this year, you'll see the small shops explode as the larger ones implode.

Some may be lamenting the passing of these shops, and of old style TV advertising and brand campaigns. But here's something to consider. Great brands are still being created every day, not by launching a great campaign, but by being great companies. The opinions of tens of millions of online consumers quickly defines your brand.

Did Google ever run a TV spot about what they were and what they stood for?

Have you seen the campaign explaining how important it is you YouTube?

Of course not. Even consumer brands who do have traditional marketing programs, Apple, JetBlue, are perhaps more defined by what happens online with real people (great new products, about that tarmac delay) than they are by their traditional campaigns.

This also means one more trick the big agencies used to play doesn't work so well anymore (see Detroit automakers.) If you spent enough money, you could sell a pretty crappy product. That one's dead to now I'll wager.

Comments

[dcsw]

Well said, James. This is the year of the sm/md sized agency winning new business from the larger shops.

David Wiggs
Hitch
www.marketinghitch.com

[NYCPub]

I understand YouTube is valued at about 1.5billion, but what is their income model? And I've never clicked on a sponsored link from Google. So these two examples you provide have, in all their illustrious lives, never received a cent from myself or at least half of America. On the other hand, I have paid Amazon.com (and they advertise) and Proctor and Gamble's TIDE (ditto). Were there no other examples you could use? And what is YouTube's "brand"? Is that the gnuma-gnuma site, or the waterskiing squirel site? I think some more thought is needed.

[Brokenduck]

Having worked in advertising, I have to say that people are quick to blame ad agencies and their clients for all the ills of the world, and yet these same people do not know the first thing about being a good consumer: DO YOUR HOMEWORK.

[tomas0808]

I have a serious question: Long ago I figured out that ads were, for lack of a more precise term, lies. Essentially that's what they were. They claim that we need these products and services when really we don't. They make associations that are complete falsehoods.

My question is why would anyone go into advertising when you know all it really does is create disappointment in people and encourage them to spend money on garbage?

[hey0there]

i think the shift is going to be towards expanded marketing departments in side our companies, with just the printing/mailing aspects outsourced.

[KillTheMessenger]

Good luck ad guys! If you couldn't make it in the big world, you can surely make it in the little one. Just don't count on much budget when you make ads for the local grocery store.

[ImmanuelGoldstein]

UH, if they don't have the money to spend at the big agencies, where is the money to come from to spend at the new little ones.
And by the way thanks for thinking of new ways to bombard me with advertisements. Because it a major concern that we, as Americans, don't look at enough ads...

[anachoret]

"This also means one more trick the big agencies used to play doesn't work so well anymore (see Detroit automakers.) If you spent enough money, you could sell a pretty crappy product. That one's dead to now I'll wager."

I hope you're right.
Particularly if that includes the personality and cultural advertising that seems to avoid talking about the product to sell cultish "coolness."

I don't know if I'd bet on it... But I'll certainly hope for it.