Marketer, Ad Agencies Beware!
In recent years, there has been an increase in the number of consulting companies acquiring creative agencies to expand their digital, design and marketing capabilities.
According to a recent report by Consultancy UK, in 2017 alone, 48% (nearly half) of all the companies that acquired “marketing services businesses” were corporations from non-traditional communications backgrounds, with consulting firms like Deloitte, Accenture, and PWC leading the pack. In addition to battling alternative services to obtain new clients, marketing and advertising agencies around the world now also compete against these giant consulting firms who combine a wealth of experience with their deep pockets.
For example, global consulting and technology company, Accenture now has more than 15,000 digital and creative professionals offering creative services that advertising and marketing agencies offered clients in the past. These consultancies are fast gaining ground within what used to be a conventional marketing space, as they harness their expertise, vast amounts of data and in-depth knowledge of strategy to woo CMOs into retaining them to solve their big business problems.
In its 2017 Agency report AdAge ranked Accenture Interactive, PwC Digital Services, IBM iX and Deloitte Digital amongst the world’s biggest agency companies, raking in a combined revenue of $13.2 billion. These consultancies now sit just below the top agencies including WPP, Omnicom, Publicis Groupe, Dentsu and Interpublic in advertising revenues.
Accenture’s Foray into Creative Services
Accenture was one of the first global corporations to make its intentions clear: in 2013, it acquired London based design firm Fjord, to help deliver innovative experiences that bridge marketing, commerce, and conventional services. As marketing continues its rapid evolution and consumer interaction becomes more important in our increasingly digital world, the firm needed to dramatically expand its service offerings in response to its clients need for deeper connections with their consumers.
In other words, “technology” was no longer the sole enabler of business growth, nor did it offer a sustainable competitive advantage any longer. The company needed to augment its offerings by helping its clients orchestrate meaningful creative experiences that change behavior and drive growth.
The company proceeded to acquire Chicago-based e-commerce specialty group, Acquity Group in a $316m deal that same year.
Between 2013 and 2019, Accenture Interactive has since expanded its repertoire of agencies by acquiring over 25 companies from across the globe, including Hong Kong-based PacificLink Group, Brightstep from Sweden, Japanese IMJ, Brazil’s Ad.DIaleto, Australia’s Reactive Media and Germany’s Kolle Rebbe. Perhaps its most significant and instructive piece of business so far is the acquisition of New York-based advertising behemoth, Droga5.
According to Fast Company, Accenture’s acquisition is “the most significant creative buy by any consultancy over the last decade. None of the consultancies have managed to buy a creative shop with the pedigree of Droga5,”.
With this new asset, Accenture has added creative capabilities that very few traditional consulting firms can boast. It has placed its bets on the creative industry and signaled its intentions to participate actively in the battle for billions of dollars in marketing and advertising spend over the next few decades.
The result of its bold pivot is evidenced by Accenture Interactive’s 30% revenue increase to $8.5bn for the year that ended August 31, representing a fifth of Accenture’s overall revenue. Many other traditional consulting companies are keenly observing Accenture’s moves, paying attention and making bold acquisitions of their own to remain competitive across the consulting, marketing and design landscape.
What does this new trend portend for agencies? Have they reached their end, and will consultancies replace the ad agency model anytime soon?
The Model is Changing
While we certainly do not think that this new trend is the death of advertising Agencies, it’s imperative for these agencies to realize that the conventional agency model has changed significantly. Clients now require much more than just advise and creative services. They will need their agency to combine creativity with analytical rigor and implementation across channels to help their businesses grow. It’s no longer enough to just create fascinating ads or buy media.
How agencies adapt to their models to implement creative solutions in a way that’s measurable will determine whether or not they can survive these interesting times.
Integration of Advertising & Consulting
Today’s consumer is so fundamentally different from who s/he was just five years ago. In acclimatizing to the digital landscape, this digital customer expects an enhanced degree of personalization and stories across all marketing channels.
To match these expectations, agencies need to evolve their models and adapt. It’s not enough to provide compelling creatives or clever copy- agencies must enhance their capabilities to implement end-to-end solutions, combining elements of user-experience design, data, and analysis.
In achieving this later target, it might be important for them to partner with, or at the very minimum, collaborate across industries to offer clients the connected services they require.
The most valuable asset for any agency is its workforce. Traditionally, ad agencies tend to tilt towards creatively-oriented individuals, hiring the most creative planners, designers and accounts executives.
To become more competitive, agencies might need to reach across the aisle to hire more analytically-minded prospects. The “geek-economy” is in full bloom and it’s never been more important to have people in-house to collate, analyze and make sense of tons of data.
Marrying scientific rigor with creative capabilities would allow agencies to weaponize their creativity in a way that derives more value from the same client.
As clients continue to demand more value for their money, agencies might need to restructure their businesses internally to provide clients a more diverse offering within the same space. This entails re-thinking traditional agency functions and creating cross-departmental collaborations to build real business solutions for clients.
Acquire, Don’t Wait to Be Acquired
Rather than wait to be acquired, ambitious agencies are beginning to respond by going down the same route as global consultancies. A growing number of traditional agencies are expanding their scope and beginning to offer ancillary consulting services.
According to Jay Pattisal of Forrester, “Agencies are…not taking the threat from global consulting companies lying down”. Some agencies are in fact purchasing smaller consulting companies to multiply the breadth of services they can offer.
For example, in 2015, Publicis acquired Sapient in a deal valued at $3.7billion, while global advertising group, Omnicom announced its acquisition of Cedera, a Dallas-based consulting firm. Grey also launched a new global enterprise practice called “Grey Consulting”.
Opportunities abound for partnerships that would offer clients enhanced services that complement what the agencies traditionally offer. These collaborations will allow agencies work seamlessly to connect data & analytics with their creative offerings in new and exciting ways for the benefit of their customers.
In A Nutshell
To implement marketing programs that grow brands and businesses in a complex ecosystem that has gone digital and harnesses a ton of data, brands will appreciate an approach that leans towards concrete problem-solving, rather than a just a creative approach.
The agencies of the future must continue to be creative but should balance this creativity with simple solutions that are influenced by superior knowledge of today’s customer, and effective methods of how best to reach them.