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Marketers Could Face A New Set Of Challenges Even After the Covid-19 Crisis
By: Forbes
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Advertising agencies will be forced to shed more than 50,000 jobs through 2021 as a result of the Covid-19 pandemic, according to new research from Forrester. And that’s a loss that could change the way CMOs work with their various external partners.


Agencies will see two years of negative growth—including a decline of 30% for 2020 and 20% for 2021—with U.S. agencies losing 35,167 jobs this year and another 16,758 next year, the report projects. And while they have initiated a “good amount” of business transformation through consolidation, new technology and new data, says Forester analyst and report author Jay Pattisall, agencies’ media and creative operations are still not as integrated as they should be. For example, digital marketing feels like a “bolt-on” for some agencies with an economic model that is “woefully out of date,” Pattisall says. As a result, the industry overall has failed to keep up with last year’s “blockbuster” performance on Wall Street.


“That’s the end game for restructuring,” he adds. “This forecast is dismal. It is not encouraging for the advertising industry, the agency industry. It is not encouraging for their CMO clients because it’s going to present some challenges for how they’ll grow.”


Small and large agencies alike have endured cuts of varying size since the crisis began. In the past few months, WPP, McCann, VaynerMedia, R/GA, Omnicom Group, MullenLowe, Giant Spoon and others have reportedly either laid off or furloughed employees. Advertising agencies accounted for more than half of all reported layoffs as of May, according to Forrester, while digital and media agencies were less affected—partially thanks to their accelerated focus on digital media. Overall, Forrest projects overall media spend will decline by 23% through through 2020.


With smaller agencies and fewer agencies, technology could fill some gaps. For example, the changes could accelerate marketing automation as it plays a more prominent role for both agencies and corporate marketing teams. That move is already happening within some of the larger agencies to improve tools for audience segmentation, channel selection and measurement. M1, Dentsu’s data platform, was cited by the Japanese agency for helping propel organic growth of 2.2% in the U.S during the first quarter although it endured falling revenue elsewhere. Others have their own versions of “people-based” marketing platforms: Omnicom built Omni, IPG gained the Acxiom Marketing Solutions when it acquired Acxiom in 2018, and Publicis Groupe gained the PeopleCloud when it acquired Epsilon for $4 billion last year. 

 

Agency headcount might not return to pre-pandemic levels, according to Forrester. And with an overall decline of 13.5%, it could hinder CMOs as they try to navigate increasingly complex marketing challenges. To address the changes, Pattisall says CMOs should start thinking about how to compensate agencies in a way that’s based not just on people but also the fees for tech. He says the evolution also will help CMOs to restructure resources inside of agencies.

“Imagine being a CMO and you’re seeing the (agency) team is not what is what was because of what we’re living through,” he says. “And what we will live through over the next year-plus, it’s a bit of a threat for the company to come back and meet the pent-up demand of consumers (are expected to) unleash when Covid starts to abate.”

Even before the Covid-19 crisis, brand marketers were increasingly looking to bring some marketing functions internally. According to a report published back in February by WARC and MediaLink, around 30% of marketers surveyed last fall said they manage ad-tech and programmatic buying in-house while 38% reported still using media agencies and 17% had a hybrid model. However, 34% said they planned on bringing more in-house this year while 53% said they had no plans to change and 13% expected to outsource more. 


According to a separate WARC report released last month, global ad investment 2020 is expected to decline by 8.1%. That’s a stark contrast to the 7.1% increase predicted pre-outbreak. However, the firm still expects this year’s downturn will still be “softer” than in 2009 when ad industry fell by 12.7%.


As companies have looked to cut back or pause expenses, some agencies have been told their payments will be delayed by as much as 90 or 120 days—putting an already weak industry in a situation that could exacerbate the situation.


“This is an opportunity for CMOs, CFOs and agency executives to restructure resources and the economic model for services,” Pattisall says. “CMOs need to take on compensation as part of the broader transformation initiative to drive growth.”



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This article originally appeared on Forbes.com. You'll find a link to the original after the post. www.forbes.com
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