This is a question that keeps surfacing. Advertisers ask it. Managers of small- to mid-sized agencies ask it. And our industry press asks it.
The only people who sound as if they're sure of the answer are the managers of the very large agencies and their holding company parents. Of course they believe their model is the future. Personally, I think they are walking examples of what that great futurist, Dan Quisenberry (former big league pitcher) once opined: "I have seen the future—and it looks a lot like the present."
This is not to say that change is imminent. In fact, if the model changes, it will not happen overnight. Market trends evolve. The one thing I am sure of however is that there will be change, and even the "experts" (who are they anyway?) find a way of being wrong.
Let me share with you a couple of examples from the sports world.
About 10-11 years ago I was lucky enough to have a consulting assignment from the people who design and manage golf courses under the Arnold Palmer name. This engagement included an opportunity to have dinner with a few of the key execs at the great man's home in Pennsylvania. After dinner I spent a few minutes chatting with this living legend, and one of the questions I asked him was whether there was anyone in the game or even on the horizon who could possibly do what he had done.
He paused, and said he couldn't answer that, and that it might not even be a fair question. In any case, no names were mentioned. This was 1992—four years before Tiger Woods turned pro. Today in 2003 it is widely believed that Woods will not only top Arnold Palmer's incredible accomplishments, he may break most existing professional golf records.
My second example grows out of a quote from a major college athletic director after England's Roger Bannister ran the first four-minute mile. He said this feat might stand in the record books for years. He was wrong; the record fell in a matter of months!
The lesson here, if there is one, is that even the top people in their field aren't infallible when it comes to predicting the future. Times change, people change, markets change. I think we can bet on the idea that there will always be a human force able to establish a new paradigm, or certainly a new configuration of an old one. The tough part is predicting when change will occur or exactly what form it will take. But we can be sure above all that there will be change!
Today's advertising industry "super model" is the holding company/agency brand configuration. Agency-watchers in the press report that some 80% of U.S. advertising volume is done by just a small handful of holding companies. That means there are an awful lot of agencies out there scrapping for the remaining 20%.
My answer to the question at the top of this essay is, "Yes, if you don't pin me down on the timing of any significant moves away from the current paradigm." I am not trying to take sides on big vs. small agencies. There will be room for both, I'm sure, but my belief is that when change occurs it is not going to be a case of the big getting bigger.
To understand this point, let's take a quick inventory of what we see in the holding company model.
- Some of the best creative talent the industry has to offer.
- A range of style offerings via their various brands and disciplines.
- A cross-migration of "best practices" arrived at through mergers/acquisitions (M&A) and changes at the senior executive levels.
- Generally comparable costs for comparable services.
- They are public companies subject to shareholder pressures.
In many respects, they are very much alike! And that may be their greatest vulnerability.
Now, take a look at what might change. Ask yourself whether you are more willing to bet on a future dedicated to the current model or to a different one.
- Do you believe double-digit growth (what shareholders want) is possible in this industry for the current six players?
- Do you think advertisers would sanction mergers between some of these giants? (If not, where will the advertising be handled? Clue: it won't go away, and it may not be conflict-free in the other giants.)
- How long can M&A continue to fuel the growth needs of the giants?
- Large organizations have a predictable habit of consolidating their gains, protecting what they have and avoiding risk. Is that a good formula for success in the advertising business?
If you agree that the holding company brands look an awful lot like each other, and if these companies can't distinguish themselves on price, where will the advertiser look for his/her on-going communications needs?
Any number of major league advertisers in the last few years have looked outside their "traditional" agency relationships for new thinking. (Think "Coke", McDonald's and the recent Challenge from GM's top ad executive.) This suggests to me that while there is some comfort for many advertisers in being associated with large organizations ("well-rounded, diverse companies", etc.) that provide a sort of corporate security blanket, the issue of talent is individual.
The best existing talent of this very talented industry will not be content to wrap themselves in security blankets. They'll tire of hewing to the corporate line, of playing it safe. They'll become disenchanted with watching shareholders needs trump their own rewards.
And they'll be joined by new "players" whose first ambition is to showcase their own talents. Arnold Palmer's Tiger Woods and the next generation of great golfers are out there, and they'll definitely be heard from.