The last decade has brought widespread changes to agencies. Some may point to COVID-19 as the driving force for these changes, but this shift has been happening for much longer. FPA co-founders Terry Dry and Greg Boles saw this firsthand during their time at Fanscape, one of the first social media marketing agencies (co-founded by Terry), and even after its acquisition by Omnicom. In this brief Q&A, Terry and Greg provide insight on what the agency of the future will look like based on their collective experience.
Let’s get right to it – what does the agency of the future look like?
Terry: First off, the agency of the future won’t look like anything we have today. What the large holding companies have built is looking cumbersome and outdated. It’s really hard to disrupt yourself when you’re this big monstrous company that’s a collection of agencies, built on making money off of people’s time, and the future of revenue is built on value delivered. The struggle is when they want to try to take one step back and innovate to take two steps forward, shareholders may not support it, and that puts the holding companies in a tough spot as they still have to please their shareholders while also needing to evolve. A good example of where I see this going is what the music industry just went through. They had to figure out how to reinvent themselves and their business model to make things work. The biggest companies in music right now, like Spotify, TikTok, and YouTube, didn’t even exist 20-years ago. The same thing is happening in the agency world right now. The agency of the future is a network of partnerships. It’s less about having full-time employees and instead about knowing the best people to do each job. It’s a smaller, more nimble, agile, strategic, and creative force that leverages the best and brightest from that network. It will be built more on value than time, on outcomes and results versus deliverables and “stuff.” Over time, there will be fewer giant agencies, and more niche and specialized agencies.
Greg: Building on that, agencies are now expected to be good business people as part of their specialty. This is why you’re seeing a lot of management consulting firms getting into the agency space, and why agencies are trying to be management consultants. Consultants are migrating towards offering agency services to execute their plans. While at the same time agencies are migrating towards consultative services so that they can better direct the services that they are tasked with executing. So, all these companies and services are converging. The agency of the future will have a whole different set of services and tools to support this need, and there’s a whole new set of clients to manage with this shift.
What are new service offerings agencies should be thinking about?
Greg: Services dedicated to innovation, building communities, managing data, fostering corporate citizenship are where I’m seeing the most development, but an agency focused on the future is one that can conceive of services that haven’t been built or productized yet. We are at the tipping point now where agencies have enough data to help make better business decisions and clients are going to come to expect that. Developing new services around innovation and being much more prescriptive and deliberative about it is one area. This service would create and test new concepts, as well as conduct traditional customer insight research to determine the best way to brand and market a new product. It’s a way to productize product development and innovation, allowing your agency to do it at a speed and level that isn’t possible within a larger company. And of course, at the root of all this comes data. There’s too much data; most businesses have a hard time trying to figure out how to filter and organize their data so that they can gather consumer insights, brand insights, competitive insights, and ultimately sales attribution. All of that requires a much deeper and hands-on acumen with data and modeling. Agencies need to learn how to harness all of this data to glean essential insights in order to advance the business.
Terry: Agencies don’t have to be the creator of all these tools and data services though. They can partner to get further faster. You can hire data scientists and people who are the best at what they do with insights to help make the data actionable. The old way of thinking is you have to build everything from the ground up, but with the right partners, you can unlock insights faster.
With data as a service and specialization as mandatory to succeed, is the idea of a “full-service” agency dead?
Terry: It’s hard to make that claim because it depends on what tier you’re dealing with. With a small company, there might be an argument to be made for full service. Overall, I think things are just going to look different. The traditional advertising agency is not a reality moving forward because advertising is no longer the be-all, end-all. It can still be effective when done right, but also can’t be the ONLY thing you are doing. Those days are over and we are seeing that evolution now. It is more about marketing than advertising and will continue to be even more so. Instead, it’s about how you market and brand yourself, how you treat your customers, etc. All the advertising you can or will do is essentially programmed and commoditized, so it just becomes targeted and optimized noise. Therefore, it becomes more about the messaging, the marketing, the brand, the purpose, etc. As Greg said, the agency of the future needs to be a business partner, not a vendor. They’ll help create physical products and things, not just bill against their services. Clients should be wanting to engage this brain trust that, in theory, knows so much about their customer and brand, that by offering traditional services they are only getting 50% of the value. Instead of leaning on an agency to only do your advertising, they should also be used as an R&D lab, leaning on them to determine what product or service you should be creating and having them help create it.
Greg: Winning a large, full-service retainer for a big brand on an existing product and expecting that to be the cash cow and source of growth for the agency is not the reality. Instead, these types of wins are going to be a shrinking revenue pie. There will still be a need for some of those services, but it will be far less lucrative. In many cases, these large retainers will no longer exist. It’s not that full-service is dead, but a redefinition of a full-service. Traditionally, full-service was the creative idea, strategy, content, and execution of it on a given channel. In that regard, full-service will still be in place because those high-level elements will be the same. But what they’re doing will be different. We discussed how the creative aspects will be tied to new product development and innovation, and new ways of connecting with audiences and creating engagement. It’s a different type of creative. The strategy will be more data and business-driven, as Terry said, and that will then lead to more outcomes and value-based pricing. It won’t be just about making commercials as it is much wider than that now but it might be determining the best way to segment your current audience to market a new product or service. In that regard, it will still be full-service, but what’s done will be different and add more value. The future full-service agency will be the one that services the C-suite and the key stakeholders in the C-suite.
Tapping into corporate citizenship and responsibility, there has been a practice of agencies taking on any client and doing their bidding or doing whatever promotional work asked of them. Recently we’ve seen some pushback. Do you think agencies of the future will be more judicious or reserved on whom they choose to work with and how?
Terry: Yes, absolutely. Agencies know how hard it is to attract and hire good people. It’s going to be important for them to have a client roster that attracts the kind of talent they want. It does speak back to the partnership aspect of this. It’s the bigger picture of the world we live in today, largely due to social media. It keeps you honest and unable to hide. Everyone can easily find who’s tied to what, and that’s the biggest shift.
Greg: Transparency is a bright light, which is ultimately good. It means that companies have to be good across the board to all their stakeholders. I don’t think there’s going to be some wholesale transfer of risk from the brand to the agency. Agencies will still need to be focused on the data, the content, and get closer to their customers for one-to-one marketing and transactions, as opposed to one-to-many. But I think that brands are still going to be the ones responsible.
Is there any particular trend you are starting to see?
Terry: Yes, you are starting to see more specialized, smaller agencies and holding companies emerge. Groups that are focused on a specific vertical or service that only contain 5-10 agencies. This model is starting to play out in a way that looks to be effective and complementary.
Is that where you see contractors and partnerships playing a major role going forward?
Terry: Exactly. That’s where it’s headed, which is why bigger companies struggle. If you’re an agency that wants to be bought, the deals that are being offered by the big holding companies are not often the strongest offers anymore versus a private equity firm or big brand. Sometimes it is the least strategic and the least lucrative. There are just so many different other players out there that it’s a level playing field. Instead of 10 big players, there are a thousand smaller players. Own your niche. Keep improving your specific vertical. Look for who’s disrupting you and bring them in. Own your segment.
What’s the future of agency planning? How can agencies better structure for scaling in a world where multiple partnerships and bespoke offerings are the future? Read part two here.
Have questions for Terry or Greg? Email firstname.lastname@example.org to get in touch!