The Agency of the Future

Agencies and our trade press have been busy opining on what it all means for this or that sector, whilst, one hopes, diligently planning for their own futures. Agencies are due to hit the reset button, but just before they agree to 'restore factory settings' it might be an idea to ask whether the old model is any longer fit for purpose.

Most objective observers would agree that it hasn't been (fit for purpose) for years, but then changing voluntarily whilst flying happily along at 30,000 feet is unlikely to be popular, and thus rarely happens. Upgrading the meal service doesn't count, by the way.

Changing the engine at 30,000 feet is a lot harder, but if the option is crashing and burning a way will usually be found.

What will the agency of the future look like?

It was fashionable a few years ago to speak of media agencies transitioning to become communication agencies. Media planners became comms planners; the very word 'media' was seen as being old fashioned and tied to the old world of print, broadcast television and the rest.

The media agency would become a true comms hub, as comfortable around PR and experiential channels as they once were with network television. A brave new world beckoned, with these agencies at the centre of the wheel, with spokes connecting them as strategic visionaries to the specialist executors who dealt with the necessary detail and delivered to the plan.

It sort-of happened; there are beacons around who do deliver within a comms universe, but if you're in a holding company media agency, alongside sister companies specialising in other disciplines, like research, PR, events and sponsorships, all trying to move upstream into planning, the difficulties are as much political as practical.

Who leads? Who drives the comms strategy? These are the sort of questions that drive clients crazy, being all to do with inward looking arguments over internal fee divisions and zip to do with getting the job done.

Of course change has been coming for years – look at the automation of buying, the increasing number of partnerships with media vendors, and the disintermediation of the agency business, whether that's creative through media owners' in-house creative units, or media via the giant platforms.

What will sharpen the mind over the coming 12 months is shortage of money within the agency sector. That will, sadly mean fewer people.

The hub-and-spoke system will emerge as the standard, with planners at the centre, informed by bought-in research and data services, and sub-contracting execution, including creative out to specialists.

Planners won't all be cut from the same cloth. Some will come from an ad background, others from related business strands. But all will understand that their key task is as chef-patrons – to decide on the recipe, to source the best quality ingredients, and to keep the customers happy and coming back for more.

Remuneration will be fee based, with fees determined by the scope of work required. This will mean a more disciplined approach, from accurate estimating of time-to-be-spent, through to monitoring and regular assessments of every element of an account's profitability (or otherwise).

Agencies historically have been terrible at this, partly because the commission system shielded them from the need to justify costs except on an aggregated basis against largely predictable revenue. When ad budgets fell, agencies had a problem given their fixed costs and their lack of internal financial disciplines – but the reality was that ad budgets didn't fall.

Until now.

All remuneration will be transparent and from the client. Agencies will have no source of revenue beyond clients.

We all know the history – agencies bid low, won business, made money on the side, charged clients unreasonably low commissions balanced by second (third, fourth) sources of revenue, and so the wheel kept turning.

The last four years have created a perfect storm comprising transparency (the ANA and Jon Mandel); an over-inflated and over-complicated online supply chain; increased advertiser scrutiny (most recently the ISBA / PwC case); non-client revenues hitting the buffers; trust collapsing and adspends falling.

Agencies generally, and media agencies in particular need to create a virtuous circle.

The smart ones (will) do this by focussing on what clients need and are prepared to pay for, rigorously demonstrating the value they bring by doing what they're good at, which in turn is defined by what clients need.

Fewer people, client focussed, outsourced services (including buying and technology), charged for via a fully transparent system based around the work required, within which the agency defines and delivers to the client's needs, with a demonstrable end value.

Higher margins. Happy days.

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The opinions expressed here are the author's views and do not necessarily represent the views of MediaVillage.com/MyersBizNet.