Industry Update Volume 31

Executive Summary – Monthly Recap:

Holding companies are on the defensive. They’ve experienced poor stock performance as a result of disappointing revenue and negative organic growth, which in turn results from intense competition (the rise of in-house agencies, the push by management consulting, growing independent firms, etc.). There is greater financial pressure from clients experimenting with ZBB to right-size marketing budgets and industry trends like GRDP which caused spend to soften. A new report by Forrester, “Agency Holding Companies Need A Brave New Business Model,” says, “Agencies need a new business model that puts the client at the center, elevates new services, and blends creative entrepreneurialism with new executional prowess.” Agency holding companies must embrace a new operating model to address the CMO’s growth agenda, which continues to pose a threat to their business. After all, in-house agencies continue to gain momentum. Advertisers with in-house agencies increased to 64% from 42% a decade ago, according to a recent study. Are consulting firms still crashing the advertising party? They sure are. The marketplace is also increasingly welcoming of smaller, nimbler agencies, as some brands are moving away from large retained “agency of record” relationships in favor of more fluid agency rosters and more accountable practices like deliverables-first models. It’s a brave new world indeed.
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Newsworthy reports and recent developments:

At AMS, we approach the agency management discipline as four distinct but complementary practice areas – Talent, Work, Financials, and Performance and Value— which is how we categorize the following developments:

TALENT: securing the right talent and resources

Restructuring and consolidation are behind many new recent announcements, impacting talent still too scarce to meet the requirements of an industry in dire need of new, better ways to mature. Yet, it remains a highly dynamic industry with big names leading the pack. Alex Bogusky is back to CP+B, Antonio Lucio leaves HP and goes on to save Facebook as its new CMO, and Sr. Martin Sorrell is still making headlines rebuilding his empire brick by brick.

  • Publicis Groupe’s Publicis Communications hub restructured the production departments at three of its New York-based creative agencies in an effort to streamline its efforts, reduce operating costs, and drive efficiencies to better serve clients like P&G. The group recently formed a dedicated unit called PG One dedicated to P&G. Clients like P&G are looking to agency partnerships to embrace more efficient ways to produce work and reduce waste.
  • Chinese technology and ecommerce giant Alibaba Group formed a global partnership agreement with Bollore Group to join forces in cloud services, digital transformation, mobility, AI, and content delivery, among other areas.
  • MDC Partners laid off several corporate executives as the agency holding company undergoes a reorganization as a result of disappointing first quarter results.
  • Per the In-House Agency Forum and Forrester, the penetration of in-house agencies has increased by 52% in the past decade and the size of in-house agency teams is growing as well, yet they are struggling to adequately staff to meet growing business demands. Brand and business acumen now rank as the top benefits, followed by cost efficiencies and time savings.
  • S4 Capital (Mr. Sorrell’s new firm) acquired MediaMonks, a marketing firm offering new media solutions combining data, content, and technology for $352 million. Clients include Amazon, Johnson & Johnson and Netflix.
  • HP Chief Marketing Officer Antonio Lucio is leaving HP to become Facebook’s CMO. Antonio’s reputation and efforts to push diversity and brand emotional connections will be assets to his new employer. Brand reputation and crisis management have been areas of focus for Facebook in recent months.

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