The Day the Agency Model Died

There I was in Paris, only minutes away from the announcement that Eric Schmidt and Maurice Levy had a newly found friendship. I think I may have overheard the conversation and it started something like this: "Hello Satan. Nice to meet you...finally. It appears the Angel of Death is coming by shortly, but I'm glad you and I could spend some time getting to know each other."

The Paris meeting and subsequent industry press frenzy occurred last week and I'm still wondering if the possibilities are, in fact, endless. Creative? Site sound and motion? All media initiatives united? Are we there yet? Probably not so much, but the bell has tolled for agencies as we know them today.

Lately, there have been quite a few baffling news briefs and odd quotes emerging from the marketing world. Two IT guys, Publicis CEO Maurice Levy and Eric Schmidt are combining efforts and trading staff. WPP Chief Martin Sorrell fired back on the announcement and the hits just keep coming.

Endless possibilities might not be the best way to label the latest round of partnership redefining. It will end, just maybe not how the agencies would like.

Game Changer

No one is allowed to use the phrase "game changer" ever again. I'm serious. Please stop it. If your product/service/poisonous gas offering is in fact a "game changer," I promise you won't have to label it as such.

The game didn't change yesterday, last week, or even last year; it changed when the auction model started to take off, we just didn't know it.

I've witnessed first-hand the fascination clients have with Google. A few years ago, marketing staffers everywhere invited Google in for a chat with or without the agency of record. It almost didn't matter what Google had to say, as long as they brought some really neat charts and graphs along with plenty of free snacks and lava lamps.

Google could afford to bring in a staff of 12 to the meetings. A vertical specialist, several account people, product developers, and engineers. There I was, sitting there with my staff of three.

Forget the Agency

Perhaps this lunacy will correct itself and everyone will come to their senses. Google has repeatedly stated it's not in the agency business. Yet the phrase, "working with clients to provide strategic consultative services" seems to be programmed into each sales rep's (oops, I mean account executive's) brain.

What is it exactly, Google, that you think an agency does?

Last night I sat through product descriptions of Google's latest round of print, radio, and TV offerings. Only days after the Publicis announcement, agency reps at Google stand ready to "help the agencies redefine their business." At least they do, in their own minds. Another favorite quote, "Partnering with agencies to make them smarter."

The tiny little angry Kevin voice way down deep inside says, "You dumb agencies; we'll teach you how to make money and thank you by eliminating the need for you."

Another question: if your client thinks you have no idea how to structure your agency, how much confidence is said client supposed to have in you? The media sales agents have the same titles, same job descriptions, and same mantras.

At some point, the clients have to wonder why they're paying an agency.

We Hope We Can Do It, We Think We Can

Many people believe a self-correction is occurring right now. Remember the days of charging 8 to 10 hours of creative fees for developing two 468x60 banner ads? It didn't take long for clients to figure out that it took 30 minutes to create those ads and the shelf life of said creatives might be less than the time it took to create them.

Traditional advertising still suffers from exceptionally high production and media placement costs. That is, it is not unusual for a client to pay for a six-hour final cut reel while only using a :30 spot.

With Google radio, an advertiser can reach 100 markets and execute the initiative in 24 hours with only $500 per spot in production costs. The CPM could be $12, but advertisers only pay $8 because that's the second highest bid. As of today, Google says they only have 200 or so advertisers participating in the television advertising program, comprised of advertisers big and small.

Search marketing focused agencies and smaller advertisers are the early adopters of Google's platform, which is reminiscent of the early days of search advertising. Small companies adopted search advertising and later big budget advertisers jumped in.

With last week's announcement, I'd bet that large advertisers will be jumping into the fray very quickly, thereby meeting Google's goal of diversifying its revenue base.

Biased Unbias

Twenty-five years ago, an agency chief could not have made the following announcement without a massive client exodus. "We have chosen to partner with ABC, since we don't know how to scale our agency to really sell television advertising efficiently."

"Agency" and "scalable" usually aren't used in the same sentence since the professional services agency model isn't scalable in the traditional scalable enterprise definition.

Clients expected the agency to buy media and create compelling ads without bias and in the best interest of the client. The self-correcting auction model has removed the need for unbiased third parties.

In theory, representatives from the media sales side (e.g. Google) can make buying recommendations. The audience will decide if the creative works by clicking or viewing the adverts and helping to set prices.

In practice, the media sales agents are still selling media and acting in their own interests. The difference today: the line between buyer and seller is disappearing, yet no one seems to care.

Join us for SES London February 19-21 and for training classes on February 22.