Between what a lot of clients think they want from an agency (a vendor of services) and what they really need (a provider of ideas) is the middle—where most agencies are today. And the middle of the road is a dangerous place to be.
WPP head Martin Sorrel recently reported that more than half of the agency holding company's revenues are from non-advertising activities, and he predicted that soon this figure will climb closer to two-thirds.
Large advertisers are dissolving their longstanding relationships with agencies of record and turning to branding specialists, media specialists and CRM specialists to increase the effectiveness of their marketing dollars.
Instead of seeing this as a mega trend, a lot of agencies somehow see it as an aberration. Ironically, instead of being on the leading edge of change, many agencies are on the trailing edge, lagging behind much more conservative institutions, such as banks, hospitals and even accounting firms.
The traditional advertising agency is now facing competition on all fronts. Upstream are the marketing consultancies, brand consultancies and research firms—all claiming to provide the strategic planning offered by agencies. Downstream are media firms and production houses, some of which are now getting into the business of concept development.
It's no wonder fewer and fewer clients think that they need an "advertising agency."
A Changing Business Model
No matter what the industry, business leaders do their best to avoid the idea that their business model may be changing. But the incontrovertible truth is that over time business strategies in a given industry converge.