Winter is coming. The old families are preparing their troops and poring over strategies in a race to secure their territory before it is invaded by new and unfamiliar forces. The best option might be to bundle up (again) and forge alliances between disciplines, but with internal politics and prevailing trends, that might be hard to pull off in a timely fashion -- and impossible to do without sacrificing entire regiments or even divisions.
"Game of Thrones" is an apt metaphor for how agencies are gearing up for an ad future when clients go to market in new ways and seek radically different support from agency groups. At the same time, those agencies are defending against a never-ending march of marketing services providers aiming to advance on their turf.
Historically, the business was straightforward. Marketers hired agencies to create 30-second spots, place them on TV and in magazines and create and send direct mail to addresses stored in massive databases. But clients' needs have changed.
They must manage marketing across devices and serve customized ads to specific audiences based on real-time analysis of constantly changing data. That data must inform creative, CRM and media buying strategies tied to new commerce and brand experiences. At the nexus of this confusing and continually evolving mashup of business operations and marketing are clients, who need a partner to help them stave off their own impending winter.
The question is, who will be that partner? Will it be the holding companies as we know them today, like WPP, Omnicom and Publicis Groupe? Will it be a consultant like Accenture or a media owner or e-tail giant? A marketing services specialist that does not exist today or even a mobile carrier?
Ad Age sought opinions from dozens of people on the subject, including Marc Pritchard, CMO of Procter & Gamble, who said that whatever form agencies take in the next five to 10 years, they must be client-centric.
The great rebundling?
"We're looking for a higher degree of consolidation to make integration and interdependence more effective," said Mr. Pritchard. "How it manifests itself across the holding companies—I don't know."
What he does know is that more agencies will rebundle capabilities such as "creative and media, influencers and digital and production and shopper [marketing]" for individual brand needs. There will be dedicated client teams and a greater degree of open-sourcing of talent and capability.
That said, the challenge for agencies amid this leveled playing field is bringing something new to the client. Agencies' traditional differentiator, their creative output, is now something that can be sourced from anywhere, said Mr. Pritchard.
As a result, agencies need to step it up, he said. "We're at the stage where we're raising the [creative] bar," he said. "We want the best creative across all consumer touchpoints. Agencies need to make their complexity invisible."
"Agencies will be built around clients and consumers, not brands or channels like TV or digital," said Mark Read, CEO of WPP's Wunderman and of WPP Digital. "There won't be a lead agency but disciplines sitting as equal partners in a much more fluid structure. In many ways, we're all aiming for the same place from different starting points."
And agencies will need to have similar ending points. "We're going to need to be much more accountable to our clients for results, by which I mean sales," said Mr. Read. "Part of this means we need to use technology and data to track our work to sales. It also gives us the opportunity to build new capabilities and expand our offer into e-commerce."
For Brad Jakeman, president of the global beverage group at PepsiCo, the most effective creative will come from the integration of content creation and distribution, and greater in-house content publishing resources.
"As content and distribution platforms become more interdependent on each other, the concept of a media agency [and] a creative agency will once again merge," he said. "For a brand like Pepsi, it was once sufficient for us to produce four pieces of content a year -- mainly TV -- and we could spend about six to eight months developing that one piece of content and spend $1 million on each piece of film. Now, that four pieces has turned into 4,000; eight months has changed to eight days and eight hours; and budgets have not gone up. Maybe [we have to publish] so quickly and efficiently that it needs to be more of a content-publishing group that sits inside the company and augments the work done through [agencies]."
"The agency of the future will need to enthusiastically pull in creative and collaborate from the worlds of Hollywood, Silicon Valley and other distribution platforms, whether they own them or not," he added. "It would operate much more like the Hollywood studio model."
O'Keefe Reinhard and Paul, which built its business on bringing in outside partners to support accounts -- "like when Hollywood broke down the old studio system," according to its website -- is betting on that model. And it's among the startups and disintermediators like crowdsourcing platform Tongal that could thrive over time and take some of the traditional agency share.
Chan Suh, senior partner and chief digital officer at consultancy Prophet, and the former founder of Agency.com expects that the agencies that will be successful in the future will be those that start from scratch today. Among the companies that are "future-forward work" are Collectively, a content shop that connects brands with freelancers; Local Projects, a media design firm for museums and public spaces; and Made by Many, a production and product development agency, he said.
He's also not underestimating the massive consultants. "Already the CMOs are dipping into tech dollars," said Mr. Suh. "That's the reason why Accenture and other tech companies are getting into the marketing business."
Maurice Levy, CEO of Publicis Groupe, is banking on budgets that exceed what CMOs have access to today as they continue to merge responsibility with chief information officers. "We know that tech spend with the CMOs will be growing three to four times bigger and faster than with the CIOs," he said.
It's one reason that Publicis bought technology consultancy and agency services network Sapient a few years ago. A second part of its strategy was to reorganize into four networks that house various disciplines and name client chiefs overseeing accounts across the networks. This is part of Mr. Levy's vision of the new model as "modular instead of being siloed" with fewer of the same types of agencies, such as creative, media and PR, as well as a reduction in overhead.
Or maybe there will be no holding company at all. Maurice Watkins, a partner at consultancy Results International, worked on a deal with one acquisitive agency buyer that was trying to build what he called the "anti-holding structure." The company's plan was to absorb every type of agency bought into one brand that could handle cross-discipline work. Mr. Watkins, who also worked on the deal in which Asian holding company BlueFocus bought U.K. shop We Are Social, expects more similar cross-border deals. And among those adhering to a holding-company structure, there will be a rebundling, he said.
So what will that mean for staffing? Nick Brien, CEO of Hearst Corp.-owned digital agency iCrossing, is predicting a 25% reduction in head count for holding companies in the next five to 10 years as a result of the "power of automation" in content creation and distribution and the impact of artificial intelligence on administrative roles.
"There's a natural trend toward less head count," said Luke Taylor, global CEO of Publicis' DigitasLBi, which is betting its future on CRM, commerce and digital media. "I imagine creative agencies will get smaller. The big idea doesn't benefit from size. It's flourishing in small cultures." What doesn't get much smaller, beyond the roles that can be automated in time, is the data and analytics business that drives personalization, he said.
"There's going to be a bifurcation between the folks who create amazing original content and big ideas … and the more nerdy specialists that do all that personalization," he said. "People who understand data and omnichannel ultimately become the most responsible custodians of a company's money and how to spend it. That is a shift."
Both big and small
So then who serves as the lead agency if the more creatively oriented agencies can pull in "nerdy specialists" and the nerdy specialists can pull in creative shops? "The world will accommodate different types of lead-agency constructs," said Mr. Taylor. Not everyone has to be a generalist in the future, he said. "The future in part will be driven by what culture supports the best type of thinking."
"We might end up having flatter organizations, and I foresee having more communities of leadership rather than big, massive hierarchies," said Kelly Mooney, CEO of Resource/Ammirati, which IBM recently bought. Today, client teams can get as big as 20 to 30 people, she said. With fewer silos between disciplines and more "t-shaped" creative talent that can use technology, that team in the future could be as small as five people.
For some clients, that might mean a more creatively oriented lead agency that brings in integrated shops more focused on CRM and media. Colleen DeCourcy, global executive creative director at Wieden & Kennedy, said she expects to see "smaller independent creative agencies with less infrastructure" in the future. Within that construct, talent can spend more time connecting with "creators," with freedom to come up with ideas, versus being tied to holding companies' main objective of generating revenue, she said.
But smaller size should not limit or diminish agencies, Ms. DeCourcy added. "Why didn't Kodak invent Instagram? Kodak was 300,000 people and Instagram was 12. So that's not a progressive growth of an aging industry. It's the progressive growth of photography." The same will be true for the ad business, she said.
Mr. Jakeman believes integrated agencies will be led by a "creative technology content partner." On that account team will be a technologist, distribution expert and storyteller, he said.
"There's the age-old axiom that out of better, faster, cheaper, you can only have two," said Wendy Clark, CEO of Omnicom's DDB. "Those days are over. The new model, in the next few years, will be to create great work at the speed of the marketplace at an efficient cost." To do so, creative agencies will adopt more technology, communications planning and media services. At the same time, media agencies will move to more content development, she said.
At a holding company like Publicis, the future core account team will be run by "multispecialists" drawn from within the network, said Mr. Levy. At Digitas, Mr. Taylor envisions cross-discipline accounts run by an "omnichannel data specialist." And Ms. DeCourcy predicted that the future account person at a creative-oriented shop will be a "brand showrunner."
She likened the role to a traditional showrunner who oversees operations and production on a TV series, except this will be a creative strategist responsible for staying close to every facet of the brand. It's too early to tell if that role replaces the account executive or creative lead, she said.
"I see the roles changing versus reduction in overall staff," said Scott Hagedorn, CEO of Omnicom's new media agency Hearts & Science. "That includes the rise of the marketing technologist as being a fundamental person on the team."
As clients demand newly bundled support across commerce, digital content and media distribution, agencies are morphing to meet the challenge, investing in media, consulting and tech capabilities. At the same time, opportunistic non-agency players are inching their way into the marketing-services arena. The threat of new competition media owners, publishers and consultancies -- along with potential rivals tipped to enter the market, such as phone carriers -- has adland pondering how a market-share shakeup could pan out.
Nick Brien of iCrossing sees a diverse group of businesses on the list of the biggest marketing services networks topped today by WPP, Omnicom, Publicis and Interpublic. "No longer is advertising necessarily the best manifestation of creativity," he said. "Now, [marketers] are looking toward the lens of innovation and effectiveness in terms of brand-experience creation, and these new entrants who are becoming very formidable very swiftly."
In 2011, the only traditional consultancy jockeying to be on Ad Age's list of top digital agency networks was IBM. The 2016 Agency Report, which lists the top digital networks in 2015, ranks Accenture Interactive, IBM Interactive Experience, Deloitte Digital and PwC Digital Services among the world's 10 largest digital networks. All four rank among the top 15 of the world's largest agency companies.
And they're not slowing down. Among the many deals in recent years by consultants were IBM's acquisition of commerce and digital creative shop Resource/Ammirati and Deloitte's acquisition of Heat. "We will see Accenture, IBM with its interactive division, Deloitte, Ernst & Young and maybe Price [waterhouseCoopers] continue to invest and probably getting more in our world," said Mr. Levy. "And we will see our classic competitors -- at least, WPP, Omnicom and Dentsu -- transforming the way they are operating. It will be a broader set of competitors, and a more open field than it is today."
But there may be fewer of those holding companies. Speaking on a call with analysts last week, WPP CEO Martin Sorrell predicted that in time, "six will become four" as the top communications groups --WPP, Omnicom, DentsuAegis Network, Publicis Groupe, Interpublic and Havas -- consolidate further.
The media is coming
Media companies are also investing in content-creation services for brands that buy ads on their own media platforms, as well as on other sites. Many publishing houses have also been building out capabilities that mirror those of the traditional services shops. In addition to Hearst owning iCrossing, Meredith Corp. operates digital content shop Meredith Xcelerated Marketing, Advance Publications owns Seattle-based digital agency Pop, and Time Inc. last year acquired experiential marketing shop inVNT.
"I think Bollore will fold Havas into Vivendi," speculated Mr. Brien. "Within two years that'll be there." Bollore Group is the name of the holding company and family that owns French ad services holding company Havas, as well as media network Vivendi, which houses Universal Music, as well as French TV network Canal+, among assets and shares in other industries. Havas did not respond to a request for comment.
Media owners that reach niche audiences are also in a good position to compete for share of a small part of the marketing budget. This past week, Russell Simmons' digital content hub ADD launched an in-house agency called ADHD and hired an R/GA exec to run it.
"I don't think any ad agency in the world can do better speaking to my audience than me," said Mr. Simmons, whose ADD content features poets, celebrities and comedians targeting an urban millennial audience. "Brands get in and speak the language of what I consider to be the best brand-building community in the world. If [my influencers] say Coke is cool, Coke is cool."
Bloomberg also has plans to boost its agency services business for b-to-b clients, said Bloomberg chief operating officer and media agency vet Jacki Kelley. The company's existing content studio is already generating business and awareness among CMOs, said Ms. Kelley, who added that as the company grows its in-house services business, it must keep the group separate from the publishing sales team and be transparent with clients about when and why it's creating and placing content on the Bloomberg media platform.
Marketing tech companies that help marketers manage data, loyalty and CRM programs already support the business plans that come before marketing, so it's a natural upsell to clients and another threat
More than one holding company boss has referred to digital media and tech platforms Facebook and Google as "frenemies."
"They have the wherewithal" to compete with agencies, said Prophet's Mr. Suh. "It's surprising they haven't done it better. Much of it is because agencies control the money; they don't want to piss off agencies."
"We have no desire to become or build an in-house agency," said Patrick Harris, director of global agency development at Facebook. "What you've seen us do, and our competitors do, is also make some key hires that come out of the agency, be it media or creative. We also need to have institutional knowledge about the needs of their businesses."
But Mr. Hagedorn is more focused on another tech titan: commerce and now content giant Amazon. "Amazon to me is the dark horse in all of this," he said. "It controls the entire programmatic funnel." The company "also owns content and e-commerce, is a recommendation engine to e-commerce and transactions and delivery and has persistent consumer identity. That's who I'm betting on."
The convergence of content and delivery systems raises another potential threat to agencies. "Verizon's acquisition of AOL does change the landscape in a significant way, and it has the potential to redefine what the competitor landscape looks like," said Wenda Millard, chief operating officer and president of industry consultancy Medialink (and a former Yahoo executive). "If they were to buy Yahoo, all the more so."
Mr. Brien warns adland not to ignore Sprint parent company Softbank, whose chief operating officer and president, Nikesh Arora, spent nearly a decade at Google. He understands technology, search and content, and now he's at a major telco, said Mr. Brien.
But even with all the threats to agencies, Pepsico's Mr. Jakeman said not to count them out. "It could quite possibly be that the holding companies of the future are the holding companies we have today, but it will all depend on their willingness to embrace change," said Mr. Jakeman. "Kodak was holding patents for digital photography, but somehow they weren't leaders in digital photography. ... It's about the choice you make as an organization."