Understaffed media agencies are turning to Google and other tech firms for help—inside the 'terrible mess'

As agencies remain woefully understaffed, some tech platforms including Google, Criteo and Pacvue are stepping up to fill holes to help the industry prepare for an anticipated rebound in ad spend by early 2024. “A lot of clients are telling their agencies to plan for a second half rebound,” industry staffing firm WorkReduce CEO and Founder Brian Dolan said. The general consensus is ad spending will start to come back, “and that’s caused anxiety in agencies because they can’t ramp up that quickly. It’s going to be tough to get people in place,” he said. Ad Age spoke with 10 executives, including agency CEOs, consultants and industry headhunters, who said ad agencies are working with very lean teams due to either their own layoffs or The Great Resignation of 2021, when people fled the industry. And agencies are unable to staff up because a lot of marketing spend, especially from tech advertisers, is still on hold due to the shaky economy, according to these executives, and there is the continued claim that it’s a struggle to find talent. Related: 5 strategies for recruiting and retaining talent Some executives added that agencies have made their own bed by underbidding to win business and then not being able to staff up due to the low fees they’re promising, but not being able to deliver upon. Some agencies are also promising senior talent in pitches and then staffing accounts with junior employees, executives said. Whatever the cause, tech platforms are increasingly stepping up to help tackle the problem and keep campaigns running amid the staffing shortages. “Companies have been making [employee] cuts and also not replacing them, so places that had six people are now having three people do the same work,” explained one industry recruiter, who spoke on condition of anonymity. See all of Ad Age's 2023 Agency A-List winners here Three executives familiar with the matter said they’ve heard Google, Pacvue and Criteo are loaning out resources, including developers, to understaffed media agencies for analytics work just to keep campaigns moving; in some cases, these platforms are also subsidizing headcount for agencies by funding hires. “Some platforms are stepping up to say, ‘What if we help? What if we give you some funding to help you in the short term? Obviously the trade off is, you’ll use our platform,’” one of the three executives familiar with the matter said. “Everyone is trying to figure out how to keep the work going.” A second executive said agencies are concerned about these partnerships becoming public knowledge because in some cases clients don’t know about them, and others don’t want competitors to find out. It appears these deals are happening more “informally as a one-off,” this executive said, so it’s not laddering up to formal programs. The hires are being cited as a “statement of work” or insertion order, or an agreement between the publisher and advertiser to run an ad campaign, the second executive said. Pacvue did not return a request for comment. A Google spokeswoman told Ad Age she could not “confirm” that information. “We have a handful of strategic agreements with agencies where we’ve helped develop their data and analytic capabilities, for example, through product or engineering support, to improve integrations with the Criteo platform,” a spokesperson for Criteo said, adding it does not provide any funds to support agencies’ headcount needs. Understaffing issues causing ‘a terrible mess’ A former executive for a holding company agency, who left to go client-side last year, said he started with a team of 20 people in 2021 and all of those employees either quit or were moved to other teams. The executive, overwhelmed by the work, quit. “I had no team and I physically couldn’t do anything,” the former executive said. “It makes me so angry because agencies are devaluing the work” by not staffing the account with the proper team to do what’s required. A search consultant who spoke on condition of anonymity said the problem has been accumulating since 2020, when agencies started undergoing layoffs due to COVID. “Agencies are certainly struggling for talent,” the search consultant said. “They always over-correct to the market and people don’t want to work for the big agencies anymore. There’s not a talent shortage. Agencies cut back way too aggressively in 2020, claimed there was a talent crisis in 2021, as if it was not their fault, and then started cutting back again in [the second half of] 2022. It’s a terrible mess.” Read more: US ad employment fell by 1,000 jobs in February Many ad professionals fled to the tech industry in 2021 because companies, including Google and Meta, were offering salaries twice the amount of ad agencies. Now tech companies have had to overcorrect amid rising inflation, resulting in mass layoffs. Still, even tech workers who have been laid off are not taking jobs at agencies that pay half the salaries they were making at the big platforms, according to several insiders. “The agency has to somehow find a profit margin to supply more expensive talent to the client for the same fee,” the search consultant said. “So they end up under-servicing the client or trying to continually upsell the client on new services in order to make back the profit they’ve lost.” Matt Seiler, managing director of industry talent firm Raines International, and ex-CEO of IPG Mediabrands, said there are two main problems. First, he said, agencies are promising in pitches that they can do everything cheaper than the incumbent and then “they have to pay that back because they can’t honor their price commitment.” Second, agencies are making “staffing commitments they can’t afford to fulfill because the fees they’ve taken don’t allow them to put the headcount on it,” Seiler said. He said agencies might promise a client a 15-person team in a pitch and then service them with a 10-person team, leaving five roles open as long as they can to save money. “Clients will look for reconciliation on a quarterly basis and they’ll say, ‘How are you doing on all those bodies you promised me?’” Seiler said. “And the agencies will bullshit their way through it as long as they can, by saying ‘really tight job market, etc.’” Agencies also have been promising senior talent in pitches and then servicing accounts with junior employees, Seiler said. Eventually what happens is either the client is satisfied with the work and lets it go or they move the business to another agency, he said. Also read: Behind one agency's potential staffing solution How agencies fix the problem Seiler has long been a proponent of pay-for-performance compensation models and believes it’s the only way to fix the problem. He was CEO of IPG Mediabrands in 2012 when UM, one of its media agencies, hired consulting giant McKinsey to analyze how other industries are compensated and come up with a system that more closely aligned agencies’ goals with those of clients. But 11 years later, pay-for-performance is still not the standard payment for agencies. “It absolutely blows my mind that there has not been more progress on this front,” Seiler said. “If your agency compensation is tied to how well your client is doing, you’re in a great place. They’re not trying to figure out whether you’re screwing them based on numbers of bodies or commission rates. You get paid based on the product you deliver.” He said there are a lot of people in the industry making excuses for why a pay-for-performance model can’t work, including on the marketer side, with clients saying the model makes compensation too unpredictable. Check out the latest Ad Age events and award programs “I had a pretty good track record of selling [pay-for-performance models],” Seiler said, noting UM’s Chrysler win in 2009 was solely based on their promise of a pay-for-performance model. “Most of the organizations we’re talking about are public, so it’s easy to track what their results have been and what their forecasts are, and the deviation isn’t all that extreme. It’s relatively predictable. If you go to a client and say, ‘Here’s what I’m willing to stake in terms of my fee based on what your projected outcome is,’ it’s not a hard conversation. But it takes courage and it’s hard for people to go from what they have been doing to something new.” Regardless of whether compensation models can be changed, the search consultant said it’s imperative for holding companies to fix their staffing issues. “Their stocks are riding high and results look good on the surface mainly due to ad spend not as negative as previously feared,” the consultant said. “But longer-term, they simply will not be able to grow without a strong talent pool and that’s gone missing.”

Understaffed media agencies are turning to Google and other tech firms for help—inside the 'terrible mess'

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