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Confused about the advertising industry? Who isn’t?

5 0 0
13.06.2018

Holding company shares are falling. Their ad agencies are shrinking, with low morale, low salaries and hiring freezes. Accenture and Deloitte are the new, growing competitors. Advertisers are cutting spend but investing in-house. Chief creative officers are disappearing, not entirely due to sexual harassment charges.

Confused by some or all of this? Read on!

1) What’s going on with the holding companies?

Holding companies are entering the third phase of their strategic development.

Phase one (“squeeze the fat”)lasted from 1980 to 2005. Overstaffed agencies — holdovers from the commission era — were bought and then encouraged to raise their profit margins, from 5% to 10% to 15%, through tough annual budgets. The agencies downsized, and they could certainly afford to do so. Downsizings were appropriate.

Phase two (“maintain/grow under fee pressures”).This phase began after 2005. Holding companies continued to set ambitious targets, but their agencies downsized instead of managing price and fees upwards in line with growing workloads.

Agencies cut staff and juniorised, eliminating much of their senior talent and leaving too few people to handle growing (and undocumented) scopes of work. Quality suffered, along with relationships and fees. The focus on downsizing rather than on price management turned out to be a major strategic blunder.

Phase three (“centralise and downgrade the silos”) is the recent holding company development.........

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