Reinventing The Agency Production Model

www.5Crowd.com

“The industry is facing its Kodak moment. The challenge for the advertising industry is to work out how you reinvent yourself.”

David Jones

Former CEO, Havas Worldwide

In this eBook, we’ve curated some thoughts, quotes, and stats to explore how a shifting media landscape is squeezing Marketers to produce more content with less resources.

We’ll look into why advertising agencies have struggled to keep up and delve into the economics of their production model to understand why industry leaders are encouraging innovation and reinvention.

Finally, we’ll look into how three intersecting and emerging trends are enabling a more flexible and scalable production model!

The Agency Production Model Needs to Change

• Consumer media habits have changed a lot over the past 50 years.

• Marketers are under pressure to create more content than ever before to keep up.

• The ad agency model is too slow and expensive to meet the growing demand for content from Marketing teams.

“The pace at which advertising and marketing needs to happen has accelerated dramatically”

Ann Lewnes

Senior VP and CMO, Adobe

Things used to be much simpler for Marketers. After all, traditional mass

media only had 4 channels.

But the digital revolution has brought unprecedented changes to Marketing

Marketers need to keep up with morecontent being created and consumed

across more channels more often

Over 300 hours of video is uploaded to YouTube each

minute 2

80% of companies plan to increase their digital

marketing budgets 3

78% of CMOs think that custom content is the future

of Marketing 4

27 million pieces of online content are shared each day 1

1. AOL in partnership with Nielsen2. YouTube statistics3. AdAge reporting on a study by Mondo4. Hanley-Wood Business Media

“The single biggest challenge that marketers will need to solve is how to scale content in an economic way.”

Avi Dan

CEO, Avidan Strategies

Scaling content is hard and it’s getting harder

Content Channels Segments

Budgets Timelines Teams

Marketers must create more content to win the omni-channel consumer

Meanwhile, there are less resources available to them

Marketers are getting squeezed

“The volume of creative output at agencies is increasing with no end in sight. More content being conceived and produced should result in more remuneration, but the opposite trend has taken hold.”

Jean-Marie Dru

Chairman, TWBA Agency Network

The squeeze on Marketers is driving increased client-agency tension

“Publicis CEO Maurice Levy Says Ad Agency Reviews Driven by Clients trying to

reduce costs”

“Marketers Feeling the Squeeze, WPP CEO Martin

Sorrell says ”

“Big companies put the Squeeze on Ad

Agencies”

“Analyst advises investors in ad

agencies to ‘move to the sidelines’ or ‘exit

the sector altogether’”

“Rethinking the Agency-Of-Record model”

“Advertising agencies under the gun from major contract

reviews”

“Marketers under Greater Pressure to Control Costs”

“Is it time for the ad agency model to be

canned?”

"There is the lowest amount of trust that I have ever seen between clients and agencies right now”

Michael Kassan

Founder & CEO, MediaLink

The ad agency model needs to evolve to better support Marketers

March 1962

The End of Traditional Ad AgenciesJohn Winsor for Harvard Business Review

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While consumers have come a long way since the 1960’s, the business model of Mad Men advertising agencies hasn’t changed much.

The fancy downtown offices, multi-layered account teams, and full-time in-house production resources have led to huge overhead in traditional agencies.

Marketers are left with an antiquated approach to producing content that’s unable to deliver more on tighter budgets.

So what’s with all the

tension?

The answer is in the economics of a traditional advertising agency!

Let’s start by plotting a sample curve showing demand for content over time as a green line.

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While demand fluctuates, labour supply is more or less fixed

Next, let’s add labour supply to the graph! The full-time employees at an agency are represented in the grey squares above. Agencies hire and fire

staff in these increments to respond to changes in client demand.

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It’s the gaps between supply and demand that cause inefficiencies

When demand is higher than labour supply, the

agency is swamped. Folks stay late, work is delayed, or quality is compromised.

When demand is lower than labour supply, the

agency has excess capacity. Less time is billed to clients which

hurts profitability.

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The old advertising agency production model is too slow and expensive to create content in a cost effective way.

Marketers looking to win the omni-channel consumer of tomorrow need to look for a new solution to scaling content in an economic way.

“The big agencies know they have to change; the old agency model is dead.”

Chip Bergh

President & CEO, Levi Strauss & Co

“Change, Change, or Change: Options for the Agency of the future.”

Maurice Levy

CEO, Publicis

The Industry Needs A More Flexible Production Model

• Marketers need a more agile production model that can produce scalable content in an economic way.

• A new production model is finally possible because of the freelancer revolution, major improvements in technology, and the rise of the sharing economy.

Supplying labour on-demand drives huge efficiencies

If labour could be supplied on-demand, we could be more agile. With a lower cost structure, we could

provide clients with a more cost effective and scalable production capability.

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The on-demand production model generates increased economic efficiencies by better utilizing resources.

The savings produced by this model make it possible for clients to do more with less.

“If I were starting an agency today, it would be like a club. We’d have a core group of 20 and then 100-200 freelancers.”

Sir John Hegarty

Founder, Bartle Bogle Hegarty (BBH)

3 intersecting trends are enabling the on-demand production model

The Freelance RevolutionToday, 54 million Americans work as freelancers and that number is growing fast. Millennials and baby boomers alike are turning to freelance as a way to working on their own terms.

Digital TechnologyThe digital age has liberated production, as anyone can now afford to have the best tools –formerly trapped inside big agencies.The proliferation of cloud collaboration tools, such as Slack and Google Drive, have made remote work possible in a way never seen before.

The Sharing EconomyThe connected world has enabled a new sharing economy, typified by companies like Airbnb, Uber and Alibaba. Rather than owning expensive assets or means of production, these companies use sophisticated technology to connect unused capacity with unmet demand on a just-in-time basis.

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“If you own a 200 person office in New York, you are paying for them to drink coffee, eat free food, and make money to go to concerts. It’s tough to be in that business when there is a guy in Costa Rica doing it.”

Saneel Radia

Founder & President, Finch15

The freelance revolution is here

By 2020, 50% of the workforce will be

freelancing

Over 70% of Millennials reject traditional work environments and would rather work independently

Freelancers contribute an estimated $715 billion

in earnings to the US economy annually

77% of freelancers say the best days are yet ahead for

freelancing

80% of non-freelancers say they would be willing to

do work outside their primary job to make

more money

The Problem with ProductionSaneel Radia for Miami Ad School

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“Abundance is replacing scarcity. There’s an abundance of media —everything from YouTube to Facebook and Twitter. An abundance of talent; anyone with a computer and a WiFi connection can participate, can be in the game.”

John Winsor

CEO, Victor and Spoils

Powerful cloud collaboration tools are changing the way we work

Any work you do at a computer can now be done online. The portability of laptops, tablets, and smartphones combined with ubiquitous high-speed wireless connectivity has liberated professionals to leave the office without sacrificing productivity. With the cost of hardware and software coming down and the quality of digital collaboration going up, freelancers are able to do more with less.

“Creativity and ability once trapped in the agency space has been set free.”

Brian Fling

President, pinch/zoom

The Sharing Economy is shifting the paradigm on how we collaborate

While sharing goods and services is nothing new, the rise of websites that facilitate these transactions is revolutionary. These sites have brought increased scale and liquidity to markets.

Companies playing in the sharing economy are highly disruptive because they have a fundamentally different business model that is better suited for the fast-changing, highly-connected world we live in.

A growing list of innovative companies are enabling society to do more sharing and less owning

“A lot of agencies are still like a Model-T. They’ve tried to update by putting on better tires and wheels and all of those things, but it’s still an old model.”

Frank Palmer

Chairman and CEO, DDB Worldwide

Reinventing The Agency Production Model: Summary

• Consumer media habits have changed a lot over the past 50 years.

• Marketers are under pressure to create more content than ever before to keep up.

• The traditional ad agency model is too slow and expensive to meet the growing demand for content from Marketing teams.

• Marketers need a more agile production model that can produce scalable content in an economic way.

• A new production model is finally possible because of the freelancer revolution, major improvements in technology, and the rise of the sharing economy.

So, what can you do if you’re a Marketer these days?

YOU COULD CALL THE AGENCY

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YOU COULD HIRE AN EMPLOYEE

2

…but they can be slow and expensive for simple, tactical projects.

DON’T DOTHE PROJECT

4

…but without innovating, you’ll fall behind to the

competition.

...but they are fixed capacity in one skillset that can't scale

quickly with the fluctuations of project demand.

GO DIRECT TO FREELANCERS

3

…but you don’t always know what you’re going to get and it can be

a lot to manage.

There is a 5th option

www.5Crowd.com

We found a way to scale production in a flexible and economic way.

5Crowd is a technology-enabled production agency.

We charge a lot less than other agencies because all of our production is sourced on-demand from our curated crowd of the world’s top freelancers.

Trusted by industry leaders You might know us from

Hey there, thanks for reading!

If you’d like to chat more about the industry or learn more about 5Crowd, give us a shout and let’s grab a coffee.

5crowd.com/contact

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