The End of Big Advertising

If anyone is going to hurt from the democratization of content, it’s the big ad agencies.

The writing has been on the wall for these companies for a long time. I saw this firsthand. I worked at Young & Rubicam shortly after I graduated college, and I learned how to be an adult there. I also learned a bit about how big advertising works, but I mostly learned how it doesn't work. Very early on, I had a private theory that big advertising is going to collapse. And between the internet, social media, and now COVID, ad agencies of old are crumbling into the ocean.

Almost every ad agency people have heard of are owned by four holding companies. The agency I worked for had 6,000 employees — that is just one holding for a major conglomerate, which is now colliding these companies into each other through consolidation. They’re laying people off, and trying to slam agencies together that have redundant offerings, all in an effort to lower their head count. Clients are walking out the front door, both because they realize the model for these big agencies is broken, and because they can find what they need for much cheaper elsewhere.

Because these big agencies are expensive. They charge their clients by the hour, and they determine their rate in reverse. If they pay employees hourly, they then charge about five times that hourly rate to clients. That means a client might be paying for a team of nine people, even though it’s unclear if all of those people are needed for content that moves so quickly and is made so dynamically. 

There is no other way to say this: Agencies are slow. They are heavy-footed, overpriced, and bureaucratic — and that weighs down the brands that need to move faster in this dynamic ecosystem. E-commerce accounts for 27 percent of retail right now, and the need for ever-changing content is increasingly the case. Brands are trying to be reactive to that, and their agencies are too slow and not reactive enough. They’re losing all of their clients, and their market price is folding in half.

If you’re an up-and-coming company, you don’t need to worry. Even if your company is getting quite large, it’s likely you’re still nowhere near the size that would be required to hire a traditional agency. These big fancy agencies existed primarily for big, traditional media campaigns. A boardroom of people would sit around and come up with a big idea that would drip out through TV ads over the course of several months. These agencies excel at telling a brand story very carefully, very prudently, and very slowly, and in such a fashion that the same story is told in the same way for three months. 

Now, people learn about brands online, and almost entirely on their own. They read reviews and they look at tweets — in other words, a brand is built by the customers. It's not built by a boardroom coming up with the Marlboro man and convincing you that smoking is cool. 

If you're an up-and-coming brand, I would encourage you to try to harness the power of the people’s reviews. Up until COVID, I would say we were in the age of brand and now we're in the age of product. What that means, there's so much chatter that your brand story and ethos will be built by what people are saying about your product. Your reputation is built tweet by tweet, review by review, comment by comment, and Instagram post by Instagram post. It's not built from one boardroom coming up with a beautiful story. Tap into the ever-changing, high-frequency storytelling happening from your consumer base. 

If you don't focus on making your product good and building relationships with your customer base, you will die as a company. You cannot trust that the story you want to tell your customer is the one that will hold. We live in a world of truths and antitrusts where half the country can think one thing and the other half can think that idea is absolutely preposterous. You could say almost anything, and a double-digit percentage of people would believe it while the remaining wouldn’t.

So in a world that constantly questions what is reality, what is true, and what are people really to believe — you need to harness your own discussion. There is so much chatter and so many opinions coming in from both sides that cracking a Coke and just enjoying a cold beverage isn't as simple as it used to be. You cannot wait for brainstorms and approvals from these massive companies anymore — you need to react instantly, every single time. So what will you do? Are you going to let those companies hold you back, or are you going to join the conversation yourself?