What small agencies can teach big agencies about economic survival

Scientists have been studying quantum physics for over a century in hopes of discovering how our universe actually works. It turns out that understanding little things makes it possible to accomplish really big things that can change the world. Quantum theory brought us lasers, solar panels, supercomputers and missions to Mars, not to mention electrons, photons, gravitons, neutrinos and quarks—subatomic powerhouses that hold the keys to our future. Seems like an apt metaphor for the power of small agencies to save us. Think of the marketing industry as a giant particle accelerator, inside of which agencies and clients are circling each other at ludicrous speeds, constantly changing direction and sometimes colliding with unimaginable force. A big enough collision means a client might break away from an agency, at which point talent spins off into the ether, only to reappear somewhere else. Ad Age Small Agency Awards See all of the 2022 winners Click here Agency models are inherently unstable, and clients are as jumpy as electrons in a lightning storm, so this happens all the time. Some talent gets tired of the industry spin-cycle and goes freelance or, if there’s a strong enough bond with an ambitious client, starts their own agency. In distilling the business down to three fundamental forces—talent, brands and ideas—small agencies hold the keys to unlocking the true power of creativity. That’s why ginormous clients are trusting their brands to agencies barely bigger than a breadbox. Many of the best small agencies have far fewer than two hundred employees, and some have less than 10. Let’s split the difference and use 100 as our average, then consider that WPP has more than 100,000 employees across its network of agencies. So how can firms with less than one-tenth of 1% of the resources of their larger competitors win assignments from Burger King, Chevrolet, Miller Beer or American Express? By focusing on one thing—the only thing that matters: creativity. In the battle of David versus Goliath, a contest of strength ends badly, but in a battle of wits, Goliath gets knocked on his ass every time. Which is somewhat sad, because many incredibly talented people work at big agencies, and even the biggest of the bunch could be nimble, quick and daring if they would only get out of their own way. Despite appearances, it’s not really a question of talent, it’s a problem of priorities. The marketing industry has bifurcated. Some agencies—typically bigger ones with a full range of services including media and data—offer clients an operating model, a marketing machine that determines where and how a client should deploy their dollars. As CMOs get pressured more on short-term performance than long-term growth, the appeal is obvious. These agencies show creative work as part of their pitch, but the campaign ideas tend to feel safe and familiar because the underlying conceit is that data and targeting are more important than distraction and entertainment. The other side of the coin is predicated on the belief that nobody can outspend the internet or life’s daily distractions, which means even the best marketing plan isn’t worth the paper it’s printed on, unless your brand is more interesting, entertaining and engaging than the content that surrounds it. The breakthrough power of an original idea and the sheer shareability of something delightful overcomes the challenge of a small budget or a jaded consumer. Margins in the ad industry have gotten thinner than a matzoh on a gluten-free diet. If you’re big and bulky, you either shed services or double down on marketing-as-a-science. If you’re small and scrappy, your only path to profitability is to be provocative. Own your IP, play hard to get and make sure you get paid. See Ad Age Datacenter Agency Report 2022 The agency business rebounded with a surge in revenue and hiring. But caution signs are ahead. Click here Turning the telescope the other way around reveals new possibilities for agencies of all sizes, much like the study of subatomic particles sheds light on the cosmos. Time is different in the quantum realm, and so at small agencies hours are counted differently. Small agencies know that thinking about a client’s problem over lunch or at night while walking the dog costs them nothing. Instead of getting paid for more bodies working through a linear process taking weeks or months, small agencies are paid on a project basis, which means more ideas delivered faster, saving both time and money. If you want to make money in marketing, it’s time to get out of the client-service business and back into the business of selling ideas. One is labor-intensive and requires massive overhead; the other is driven by passion and requires commitment. An operating model is a commodity service promising efficiency at scale—a high-volume and low-margin business. By contrast, breakthrough creative ideas are, by their very nature, one-of-a-kind solutions that should command a premium price as brands grow more desperate to get our attention. If big agencies start thinking (and counting) like small agencies, clients can have their cake and eat it too—and anyone who’s been to a focus group knows how much clients like sweets. Another lesson from our Lilliputian colleagues sits at the heart of the agency business—the realization that creativity comes from constant collaboration. When you only have a handful of people, it’s all-hands-on-deck every day, with lines blurred between account, creative, strategy and production. No committees, just a series of beautiful collisions that lead to better thinking. Big agencies do this in new business, but after they land the client they revert to the hierarchical and siloed structure of a procurement plan. A big consequence of not thinking small. You may have a better chance of finding Schrödinger’s cat than a holding company willing to change its business model, even though all of them are wondering how much water it takes to fill a leaky bucket. Until the entire industry stands up to procurement and penny-pinchers everywhere, senior talent will continue to get squeezed out of big agencies because they cost too much, which means we’re likely to see more small agencies appearing on the marketing landscape as top talent goes their own way. And if the quantum world keeps growing, maybe the entire industry will think a little bigger. Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here

What small agencies can teach big agencies about economic survival

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