I’m grateful to one of adland’s genuine luminaries for this
column.
He called to lament the failure of agencies big and small to see the
long-term trouble the business is in, and how no-one has the balls to
stand up to clients and fight adland’s cause. Of course, he couldn’t say
any of this himself - well, maybe when he retires. People don’t like you
pointing out the spot on the end of their nose.
The argument is familiar: margins are being squeezed ever tighter by a
generation of MBA-toting clients who don’t really value advertising and
who insist on testing their judgment against that of the so-called
experts through research. The work, therefore, becomes sanitised and
doesn’t have the desired effect, contributing to a vicious circle that
includes discouraging the brightest talent from joining the industry
because the idea of being kicked around by clients for little job
satisfaction does not stack up against, say, management consultancy.
That argument has raged on for nearly as long as the above sentence.
It’s curious when viewed against our recent Agency Performance League,
which revealed how well many are performing. Can business really be so
bad when most agencies are turning in increased turnover and
profits?
This, of course, ignores the long-term malaise in favour of the
short-term quick fix.
I can’t remember who it was that said long-term profits are just a
succession of short-term profits strung together, but they’re only half
right.
In the short to mid term, agencies will continue to grow and produce
more profits. Ironically, the downturn that began the client squeeze,
and the accompanying suspicion that agencies had been milking clients,
have forced agencies to become almost unrecognisably better-run
businesses than they were. As another chief executive told me recently
about the 80s: none of us had a clue about profit and loss
responsibilities per client back then, we just knew that whatever we
spent we earned a good deal more, which was our profit. Instead, the
real worry is the income that is being lost to advertising as a global
business; money that is finding its way into the pockets of anyone from
direct marketing companies to sports marketing agencies to new-media
shops and management consultancies.
We have yet to experience the full extent of the trickle-down from such
developments. What’s certain is that lone agencies or even groups cannot
resist the trend alone. What needs to happen soon - and it’s as radical
a suggestion in practice as it is common sense on paper - is for Phil
Geier, Martin Sorrell, John Wren and the other heads of the five
families to get together and present a united front to multinational
advertisers over margins and remuneration issues. Running your 20-man
shop in Soho, it might be hard to see how this affects you but, in the
end, we’re all in this together.
