What separates WPP from the dodo? One is an extinct animal – but could the ad agency holding group also about to become one, too?
In recent months, many agency holding groups have reported revenue trending down and share prices have fallen, after challenges including the rise of brands buying direct from online platforms.
And the CEO of the world’s largest holding group resigned amid claims regarding use of company money, triggering a further stock slide.
Suddenly, everyone is asking whether the traditional ad agency holding group model – amassing many agencies in to a network to benefit from economies of scale – really works in an age when buyers can buy direct.
“It’s an important moment,” says MediaLink CEO Michael Kassan. “I don’t know that it’s truly a tipping point. But I think everybody’s re-imagining how the large holding companies are able to continue to thrive. They’ll survive, but (it’s about) how they’re able to continue to thrive.
“2018 is very much like 1859. In 1859, Charles Dickens wrote A Tale of Two Cities – clearly, for some, the best of times; for others, the worst of times.
U.S. agency revenue grew a sluggish 1.8 percent in 2017, according to Ad Age Datacenter – the slowest growth since the ad market emerged from recession in 2010.
And Kassan says the model is at a point of change – it just remains to be seen whether it is a moment of evolution.
“Interestingly enough, in 1859 another Charles, Charles Darwin, wrote On The Origin Of Species, which talked very clearly about the adaptability and the need to adapt to survive, and the survival of the fittest.
“I think that’s where we are today. I think if the agency holding companies can identify where the market is going and adapt to that, and loosen the yolk of infrastructure that’s around their neck, I think they will thrive. If they don’t, I think they’ll survive – but it could end up being a long drawn out, sort of melting ice cube if they don’t adapt.”
We spoke with him Monday at the MediaLink NewFronts breakfast hosted by YouTube.
This video is part of Beet.TV’s coverage of the Digital Content NewFronts 2018. The series a co-presentation of Beet.TV and the IAB. Please see additional videos from the series on this page.
