Independent Agencies: Challenges & Opportunities

NEWS

Written by:

Chris Dobson

CEO, The Exchange Lab

Independent Agencies: Challenges & Opportunities

Don Draper falling from his Madison Avenue skyscraper in the opening titles of Mad Men could well describe the anxieties facing the agency world today; rapidly changing consumer behaviour, pace of technology, a fight for talent and tightening budgets. With the networks struggling to respond as quickly as they might need to survive, the conditions might just be perfect for an alternative to the holding company model.

The Drum and The Exchange Lab sat down with leaders from some of the fastest growing independent agencies in the UK to shine a light on some of the biggest opportunities and whether independent agencies are up to the challenge ahead.

David & Goliath

In the year that Amazon unveiled a unified ad platform to compete with Facebook and Google’s duopoly, independent agencies don’t just face competition for talent and client spend from the holding companies, but from some of the most powerful organisations on the planet.

But according to Rania Robinson, ECD at Quiet Storm, it should be holding companies and not independents, losing sleep. The kind of person or client that shifts from a network to a big corporation like Google isn’t necessarily the type of client or person that would work well with an independent. You’re not as close to the creative product or free to help lead the business. I personally feel my business is less threatened by losing talent or clients to those corporations than the holding companies.

Demand for diversification also means that specialist independent agencies are in a stronger position than ever. Richard Exon, Founder of Joint London, believes that’s the case; 15 years ago, your independent agencies were private versions of the publicly owned or holding company owned agencies. Today, all our businesses are different in type, specialism and expertise. Huge diversification means we can compete with holding companies for different clients on different briefs.

On the flipside, with client teams getting leaner and budgets under attack, managing one agency retainer compared to five specialist retainers could be seen as appealing. When operating at their best, holding companies still own the strongest client relationships in the market, are highly functional and bring in rafts of awards. But outside of that top %, there are growing opportunities for independent agencies to rise.

Chris Dobson at Exchange Lab has the ability to look at it from both sides. The trend we see, as a specialist with one foot in a network, is that holding companies are creating a menu of specialists and talent focussed on clients. It’s an interesting defence mechanism, mainly because most of them have access to more expertise than they realised but have not been as effective as they would have liked in putting them in front of a client in a coherent way. But they are getting better and that is an aspect that independents need to watch.

According to Paul Hammersley, Founder of Harbour Collective, the networks are only going to get better at that. There is a whole load of talent in those organisations and if they find a better way of bringing different parts of their offering to clients, it will definitely be more of a threat.

And what about Facebook stealing briefs from both the independents and the holding companies? Technology has the power to reach and personalise in a new way, but the expertise, creativity and insight of an agency is still valuable. As Neil Henderson from St Luke’s states: personalised shit is still shit, isn’t it?

The C-Word: Consultancies

Last year at Cannes Lions consultancies made a big entrance, and next week some are sure to walk away with a Lion or two. With the likes of Accenture Interactive and Deloitte Digital showing off their creative chops, how worried are the independent creative shops?

For Richard Exon, all disruption to the holding company dominated creative sector is good news for independents. There is some value we can add to our client’s business beyond the likes of Facebook and Accenture, and we can also effectively work in partnership with them. From the creative side of things, indies are better placed than hold companies to collaborate constructively and usefully with the new players in the market.

But there is a darker side to the consultancies entering the market. It is potentially a problem, says Neil Henderson. The few times we’ve had consultancies involved, we get called in too far down the line to clarify the creative proposition. If the consultancies are able to eventually take control of the creative bit, it’ll be taking food directly off our table “ and the holding company’s table too.

Making Peace with Procurement

With holding companies in a race to the bottom in terms of outpricing and a move from a retainer-model to project-based model preferred by clients, the benefits to independents are clear.

For Jack Williams at Atomic London, the change in media landscape is the root cause of the rise of independents. Big networks on retainer might have a whole team sitting there, getting paid, and doing nothing and as a client you’re ultimately paying for that. When it’s a project model you don’t have the budget to pay for people sitting on their arses. This is where we come into our own.

But even if clients are shifting to more projects vs retained business, there is still a procurement-shaped hurdle for independents to overcome. Some client briefs can demand that a contract not be 20% more than the agencies total revenue which can cut out a large number of interesting players in the independent creative market.

The business aspects of surviving as a small business and the realities of cash flow is hardly ever recognised adds Dobson. Procurement is a problem because they commoditise everything, cut it down into visible layers, and that makes it very hard to put talent into the equation. True value is rarely discussed and therefore you’re in danger of not doing your best work because you’re working down to a forced low level from day one.

There is a question of value over volume, according to Richard Morris, and seeing the value in working with a small business over the reach of a global network.

The more distance between marketing and procurement, the more impossible it gets added Henderson. When I’ve dealt with procurement people who are very tight with marketing, they can really help, they hold the company to the rules and make people accountable. But as soon as they drift apart, there are all sorts of problems.

A Question of Trust

There is a famous saying that no one got fired for hiring IBM, and the same has been said about working with holding companies. There is a growing confidence in indie agencies from a senior level says Andrew Roberts, founder of Gravity Thinking, those who, rather than seeing smaller agencies as a risk, see them as the opposite of that. They see the potential to a business, the benefit of more agility and access to senior expertise.

For Robinson, it all comes down to confidence. It’s not just confidence to work with an agency that isn’t famous or networked, it’s about trusting your agency to do the right thing. I think clients that trust their agencies are the ones that benefit from the best work, which is a positive thing for the industry.

Holding companies are facing a trust issue of their own, particularly in the media space. Lack of trust in holding companies is absolutely driving clients to independent media agencies, says Henderson. Even in creative, we’re finding that because we can adapt ourselves around client needs, we’ve got people who stay longer, we can get deeper inside their business and so they trust us with all kinds of problems that we’re not necessarily retained to do. The shape of the agency is changing based on what the clients need, and trust is at the very heart of that.

The Flex Appeal

The rate of change in technology and consumer behaviour means that those that are able to shape-shift as Henderson says, and bring in new partners and skill sets, are those that will thrive in this new world. There is an agility within independent agencies, where they can respond to change in the market in a way the big networks can’t says Richard Morris from Whistle Jacket London. This opens up a whole load of conversations between big brands and smaller agencies.

Clients are more open than ever to alternatives to the marketing mix, points out Robinson. We recently received an open brief and the people around the table were a real mixed bag – digital, social, advertising, PR and media. The client could end up picking one of us, or all of us. The answer can come from one place, or multiple places, which is why fluidity and agility is so important.

Not knowing the brief can be a drawback as well. I spend a lot of time ripping up briefs because people don’t know what they want, said Geoff Griffith, Founder at Built Visible. There is a risk from big networks of being able to do it all and trying to sell it all rather than thinking strategically about what the client needs. In comparison, we are getting more and more specialised every day. I know what sort of business I want to work on, what sector and the nature of the work. Going through the process of saying no, can sometimes open up other opportunities.

Holding companies have the opportunity to change themselves, said Williams. But I hope they don’t! The reality is, the landscape for independent agencies is perfect right now. Tightened purse strings, clients looking for adaptability, the need for quick turnaround all of these things work in our favour. Change is happening we are seeing briefs and getting on to pitch lists we wouldn’t have even dreamt of just a couple of years ago.

We need to thrive over the next five years because it will become a much more level playing field after that. The gloves are off.

Written by:

Chris Dobson

CEO, The Exchange Lab

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