Hedge funds are betting against the world's top advertisers, and WPP shares have dropped 10% this year. It's no secret that advertising agencies are in a tough spot, as they have had to work hard to keep up with the changing demands of the digital age. With so much information available on how to advertise, it's easy for small businesses to create their own marketing campaigns without having to hire an agency. Agencies can't survive simply by adding more services or trying different things; they need to figure out what people really want from them if they're going to last another generation of businesses. So, what is happening in the marketing industry? The marketing business is going through a period of innovation, as it leaves workers and tries to retain customers. Last week, Wieden & Kennedy agency laid off 11 percent of its workforce, citing “a dead end with the pandemic.” Smaller independent advertising agencies are struggling to compete against the big holding companies that dominate the market, which means that many talented people will find themselves out of work if this trend continues.
Agencies need to be smarter on the buying side of advertising, not just the brand, which could be developing proprietary advertising technology to sell subscriptions, launch continuous work programs based on CRM, or something else entirely that can provide a steady stream of revenue. Many of us in the fields of marketing and communication disciplines grew up in agencies with beautiful and creative offices, collaborative spaces, beautiful views, elegant conference rooms, professional development sessions, happy hours and softball teams. Along with its unique P&L model, most agencies within its network are inherently digital and data-centric, which Sorrell relentlessly touts as a competitive point of difference from traditional holding companies. Live sports, a magnet for publicity, may be on its way back, with the National Basketball Association season set to restart on July 30 and the National Hockey League returning in August. The pandemic has exacerbated trends that have hit late housing agencies by clients, the move away from registration agencies to projects, the incursion of consultancies and the demand for client experience work among them, exposing the weaknesses of the creative agency. I work for one of the great creative agencies and I can say that I see that the roles of client, media, consulting and creative are fading more and more. These headwinds have made the environment especially challenging for large legacy agencies and, from what I've seen so far, they don't seem to rise to the challenge. One of the benefits Upwork is creating is that it eliminates friction on both sides of the market, both for businesses and small agencies, and that eliminates the cost of bureaucracy.
The number of digital marketing agencies, experts and consultants has grown dramatically over the past four years. Small boutiques of specialized agencies are appearing and small and medium-sized accounts of large agencies are being withdrawn. This is not to say that traditional agency teams are not hardworking or skilled; they could simply be locked in a structure that no longer serves clients' needs better. Traditional agency models are often bogged down with overheads, talent costs, and time-based compensation models, so much so that a holding company executive confessed that some of its stores barely break even.