Is this the end of the industry?

28 September 2017

Chris Jaques, CEO of The Reputation Partnership, speaks to us about the realities of marketing today and examines the crisis of confidence in the industry. Plus what it means for the future of marketing….

What do marketers feel about agencies these days? 

Media agencies have been stealing their clients’ money forever, so it’s a miracle they weren’t caught before last year’s Association of National Advertisers (ANA) report. The bulk of their profits have basically been coming from secret bribes for years: cash backs, inventory credits and bogus service agreements given to them by media owners in exchange for spending their clients’ money on specific channels, publications or sites. In short, media agencies have been using their clients’ money for their own financial rewards without telling their clients anything about it. It’s a creative combination of robbery and corruption. Creative agencies haven’t been much better. For 20 years their money-grabbing masters in New York, London or Paris have been squeezing profits out of their offices by forcing local management to cut costs and remove expensive talent. As a result, clients are increasingly serviced by inexperienced juniors – or they are given fleeting attention from seniors who are stretched across so many accounts and responsibilities that they have little to offer except lunch.

It all seems so dark Chris…

The agency business is dead. It’s over. The Internet is eating the world, and it just consumed the communications industry for lunch. The evidence is relentless, but I’ll just mention four important points: 

1. Agency fees are in freefall: A recent analysis by Farmer & Co found that agency workloads are increasing by around 2-3% a year, while agency fees are declining by 2-3%. The implications are terrifying. As Farmer concluded: “It only takes 15 years for an agency’s compensation to be cut in half for an equivalent amount of work”. 

2. Agency budgets are disintegrating: Unilever is cutting its agency fees by a massive 17% this year. P&G is cutting its marketing budget by US$2 billion in the next 5 years. And everyone from Danone to Nestlé to Mondelez have announced plans to cut marketing budgets in order to boost profits.

3. The Media are becoming Agencies: Clients are increasingly working directly with the Media for both media and creative. Google, Facebook, Snapchat, Tencent as well as traditional media are all happy to provide media and creative solutions to clients direct, sidestepping their agencies completely. They have the inventory to sell, they have a deeper knowledge of their audiences, and they know more about their technologies than any agency will. 

4. Clients are becoming Agencies: The latest SoDA Report from Forrester found that 34% of global clients were already handling all of their digital media planning and buying inhouse - and a further 29% were planning to take their media inhouse within the next 18 months. On the creative side, 35% were handling their own campaign development and execution inhouse, and 22% were planning to take it all inhouse within the next 18 months. 

What is your comment to this statement by Marc Pritchard, P&G’s Global Chief Brand Officer: “We’ve been given a pass to the new media in the spirit of learning, but we’ve come to our senses. We realise there is no sustainable advantage in a complicated, non- transparent, inefficient and fraudulent media supply chain”…

Adtech is the Wild West, a supply chain filled with fraudsters who are hypnotising the industry with technology, trickery and complexity. Every single programmatic buy your company makes can be exposed to Adfraud via spam-sites or sourced traffic. As a result, only 40% of a marketer’s digital dollar currently reaches the consumer, according to the ANA. So 60% of every single dollar you spend on programmatic disappears into someone else’s pocket. This all adds up to a massive US$16.4 billion of global advertising revenue that will be wasted on fraudulent traffic in 2017, according to a recent study commissioned by WPP. 

There is no bigger issue facing the marketing industry today. 

Having led Bates Asia; BBDO Asia-Pacific; Lintas Europe; Y&R and Wunderman Asia-Pacific, Y&R North America and M&C Saatchi Asia, Chris has earned himself a reputation as one of Asia’s most experienced and awarded regional CEOs in the communications industry.

Chris will be speaking the 6th Malaysian CMO Conference on October 16: www.marketingmagazine.com.my/cmo2017

 

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