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Tuesday, October 26, 2010

Mid-Sized Malaise--Part Four

This is the final post in a series about the current issues facing mid-sized Advertising Agencies.


Bucking the Trend

So far, we have focused on the problems that struggling mid-sized Agencies have been facing. In my sample, two executives at mid-sized firms told me that they were doing very well, thank you, but they were sensitive to the challenges that others were facing. I know both of these gentlemen quite well. One I knew as young man. He was extremely well organized, interested in every aspect of the business, and highly ethical. The other is a creative dynamo who works well across all media types and digital platforms. We correspond regularly.

Why are they and their firms doing so well? Both firms have not forgotten that excellent creative has to be the very soul of any advertising agency. High standards are maintained. My creative director friend does not segregate digital from the rest of his creative team. They work in squads with a conventional writer and art director paired with a digital player. This cuts turf issues and they can play off one another in development of the message. Also, he makes an important point to those who speak somewhat breathlessly about Facebook. “Most people do not want to be marketed to, especially in social media. We do Facebook and other digital work as part of a campaign for visibility. Games are developed with pretty good participation but no hard selling. The goal is for creative buzz, not to sell. We make this clear to clients upfront.” The leaky barrel due to marketing director turnover could affect them at some point but in the last year they have picked up significant new business.

My other upbeat contributor says his company was fortunate to have entered the digital arena years ago due to key client acquisition. They developed the necessary skills early on and, in my opinion, probably before some of the mega-shops. Social media is still a challenge as it is for everyone but they are working on it.

I also had wonderful sessions with two old friends who have downsized their companies in recent years and are thriving and happy. Their modesty was refreshing as well.

One ran a fairly good sized shop some years back but now has a very well thought of boutique in a large U.S. city. He says that “our market has been backsliding as an advertising center for years. Right now, we are viewed as a big player in town and we are nothing”. How many chiefs would say that? “Management has shifted frequently at some of our clients but so far we have been able to hang on to the business. Our approach is starkly different than others out there. We have no huge overhead. When we have a project, we gather in senior people that we trust. They only work when we have an assignment. There is “no twelve people to screw in a light bulb” nonsense that you see even at mid-sized shops. Every time you put a layer of people on a job it costs you money. We never do that.”

Another friend downsized before the 2008 crunch and is based in a small Northeast city. Now he works mostly on a project basis. His approach is similar to my old colleague a few thousand miles away. “I have people that I can go to for TV or radio production on a short fuse. We have worked together for years.” Also, he says that the turnover is great with some clients. “Sometimes, I feel as if I am doing a new business pitch for every assignment that we want.”

I told them both that their approach is analogous to what Clint Eastwood has done at Warner Brothers for decades. He has a “boutique” studio within Warners and for film after film he pulls in the same cameramen, lighting specialists, set designers, and often actors among other disciplines. The result is films shot both on time and under budget. It has been described as a family that is very functional. Both loved being compared to the great Eastwood but said the analogy is dead on. One added “I try to explain this concept to prospects. Sometimes I am halfway through it and if I see their eyes glaze, I know that my team is toast and the prospect wants to go the conventional route.” He also is a big believer that larger shops could do well if they approached certain smaller clients with this boutique approach. The issue would be whether the team in the mid-sized or large shop could turn on a dime as he does.

My friend in the Northeast says he never worries about getting assignments. “If you are smart, good and are willing to work very hard, you can always find work even in a tough environment such as this”.

These are two great people who never whine and can teach us all something.

Conclusions

Are mid-sized shops finished or will they come roaring back when the economy someday rebounds smartly? I would say neither. There are always going to be agencies such as the two mid-sized profiled above who keep turning out first class work and keep their teams fresh and motivated. Someone will break out and become the next Crispin Porter, I am certain. But the success stories will be less frequent.

Everyone admits that we are going through a revolution as we move to the digital world. Yet some exhibit remarkable selectivity about how it will affect their firm or their jobs. To me, what is going on at mid-sized shops in simply one more case of Creative Destruction. This is a concept popularized by Joseph Schumpeter of Harvard back in the 1940’s. (For a more detailed explanation see “Schumpeter Lives in 2009 Media, Media Realism, January 30, 2009.)

Creative Destruction in a nutshell states that a new idea enters the marketplace and makes existing capital relatively worthless. The new idea tends to be innovative and radically so. Radical innovators (read digital and media fragmentation) cause some real hardship to those involved with the existing status quo companies. Layoffs rise in the obsolete companies and many suffer in the short term. Others suffer long term as they are unable or unwilling to be retrained in the new emerging world.

The mid-sized players with no niche but promised service are not long for this world. Those who have embraced the change and developed skills consistent with the new reality may outlive us all. I wish them the very best.

Finally, I wish to thank the dozens of people who gave me countless hours of often precious time to put this series together. Your honesty and passion for your business is inspiring.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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