Ad and media agencies are in danger of eating each other's lunch
A view from Jeremy Lee

Ad and media agencies are in danger of eating each other's lunch

Carat's Rick Hirst highlighted the changing tension between media and advertising agencies.

Whether or not Rick Hirst, the chief executive of Carat, was being mischievously and deliberately provocative or carelessly loose-lipped when he announced in Campaign recently that "I’ve come from a creative business where the financial model is fundamentally broken", I’m not sure. 

Either way his stark assertion provided a lively topic for discussion when several of his counterparts from advertising agencies – including Jason Gonsalves, his successor as chief executive of Carat’s sister Dentsu Aegis Network agency Mcgarrybowen – gathered last week to discuss the future ad agency model (and yes, this is a puff for the feature, out next month). 

Hirst, a plain-speaking (slightly cocky, some might say) Northerner, shoots from the hip and, given most people in his position usually feel constrained by the strictures of a corporate muzzle, his contribution is a welcome one to add to the debate. Having worked on both sides of the agency divide, at WCRS and Bartle Bogle Hegarty before Mcgarrybowen, maybe Hirst also offers an insight that others do not have.

But it should be remembered that media agencies in general are having to endure some uncomfortable forensic examination by advertisers over transparency, particularly when it comes to digital media buying, so questions over how "healthy" their business models really are show no sign of going away. Moreover, Kingston Smith figures from last year show that both media and creative agencies are struggling to hit the 15-20% operating profit margin target the company suggests.

"He’s completely wrong" and "It’s a gross generalisation" were just two of the exasperated reactions Hirst’s claim elicited. If anything, they countered, the advertising agency model isn’t broken enough to truly reinvent itself for the modern age. 

Advertising agencies also, arguably, show a dynamism that is lacking in their media siblings. Despite advertisers’ moves towards bundled solutions that Maisie McCabe wrote about recently, the fact that the sector still manages to inspire so many start-ups shows a vigour and vim that is a little lacking in the process-driven and highly automated media agency sector.

Some of these, of course, are more successful than others, and while the number of independents remains slowly growing and relatively healthy, those shops that break through the psychologically important 40-plus staff mark remain few and far between. It was a shame then to see one of the founders of Creature of London, Ed Warren, depart this year following a series of account losses, while the impact of the loss of the UKTV business on Joint should become apparent in Campaign’s School Reports. 

In any case, Hirst – either by design or not – did highlight the changing tension between media and advertising agencies, particularly when it comes to the use of client data, and how they increasingly see each other as part of the same competitive set, in danger of eating each other’s lunch.