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The Death of the Ad Agency

By David Berry: Something big is happening in the ad agency world. That thing? Agencies are going away. They are dying.

A 2016 Wall Street Journal article summarized it well: "Many big marketers are [sic] moving away from “agency of record” deals—retainer-based relationships in which a single agency was responsible for most of a client’s projects that in some cases lasted decades."

The agency of record model has been around since, well, forever. It's the model Don Draper used.

  Hey, it's me, Don Draper. I used the agency of record model. And I might be out of a job if I was still working in 2017. But damn, I'm handsome.

Hey, it's me, Don Draper. I used the agency of record model. And I might be out of a job if I was still working in 2017. But damn, I'm handsome.

As advertising has shifted away from traditional media - radio, TV, print - and into a more scattered digital space, things have changed. Brands need more content, more often. They need strategic thinkers and they need consultants with expertise in video campaigns, display media, SEO/SEM and so on. Each varying need requires a unique skill set, and many of those skills don't exist in great depth at the agency level.

So, outside consultants - particularly in the digital space - have come in to bridge the gap. The role of the consultant has grown, because of their narrow expertise and agility, while the strength of the agency has declined because their expertise is less defined. They've become less agile too.

So what does that mean? Brands are putting agencies to the test. They know that the ball is in their court. They're challenging agency partners to work on leaner budgets, and sometimes to receive compensation only on a performance upside. Accenture, Deloitte, EY and KPMG (the 'big four' of the consulting world) are scooping up the specialty work that the big agencies haven't mastered and - in the instance of Accenture - are actually buying up ad agencies to bolster the creative side of their own businesses.

The net-net is this - you, as a business owner or lead marketer, do NOT need a big ad agency to solve your problems, though they'll likely try to sell you the benefits of having it all 'under one roof.' The reality is that they're likely skilled in a couple of areas, and doing patchwork to make up for the rest of it.

What you actually need is a goal. You need a handful of experts working to get you there. And in most cases, that's it. 

And if you're an agency, the key to your success going forward will be in specialization. Agencies like DDB have already made great strides in doing this, or have at least worked to make their teams more agile and mobile to better serve client needs. Agencies that can pull that off will be just fine. But those who are still using the model of 10 years ago? They won't be here in 10 years. In fact, they'll be gone sooner than that.

- DB