The Advertising Agencies
(The Sky is Falling... Part Five)

When the first advertising agency holding companies were formed, they created silos. They unbundled the media departments to create media-buying giants, and they created monster silos. Then the holding companies thought they needed smaller giants for smaller and non-global accounts and created mini-monster buying agencies.

Then these holding companies went on a buying spree. They bought promotion agencies, direct agencies, brand consultancies, and PR firms in every corner of the globe. In 2002 alone, Omnicom bought 108 companies! Many of them have since gone out of business because of problems with the Internet business.

Unfortunately for them, what they bought was also different cultures, different expectations, different P&L motives, and competing/clashing groups. Disaster would not be too far off. It took them over two years to realize the mess they had created.

• Resources were not shared, resulting in either lack of information/knowledge or duplication of efforts and costs. The left hand seldom knew what the right hand was doing.
• Media planning became an island. Some of the media agencies started looking at communications platforms for their clients (and this practice is growing at an alarming rate) competing with their siblings.
• Some clients started expressing misgivings about dealing with so many relationships and the total lack of communications between these "silos."
• As an example, McDonald's at times finds it impossible to deal with Leo Burnett and ARC (or DDB and Tribal) on specific projects. In addition to failure within the entities, they are most displeased with the very high rates charged for duplication of efforts.
• The biggest complaint from such marketers is the lack of a joint strategy between creative and media.

In 2005, Omnicom and DDB undertook a project to see how best they could integrate various entities (DDB DDB Tribal, OMD and others) for five of their global clients, including McDonald's and Home Depot. The new agency model is expected to be ready in early 2007. Will it be too late for someone?

"The Age of Disruption" has also created a flat world. Above-the-line is merging into below-the-line and vice versa. Soon the line will not exist. There are at least two major problems this creates for traditional agencies. What comes first, the creative or the media? Traditionally, creatives in the major agencies like to work on television commercials. Their "reel" is what they cherish the most along with all the awards they can garner. In our opinion, the traditional below-the-line agency will have the edge over a the traditional above-the-line in the future.

Another complaint often voiced today by advertisers is the lack of experience in the advertising world their agency day-to-day contact person brings to the relationship. They would like to see more knowledge and experience brought to the table. Will they pay for it? Many say, "yes" if it is the right person.

Marketers are also exerting pressure to reduce agency compensation, resulting in a rapid decline of several "think" departments in many agency networks. This is something agencies have to address in the very near future.

Agencies are also becoming averse to developing proactive recommendations, before they are requested, as they cannot justify the investment of time (dollars) on such activities. Meanwhile, another agency, that wants this marketer as a client is more than willing to make this investment -- at least till they acquire this piece of new business. A vicious circle!