Originally published and posted on Ad Age, February 7, 2019
By Brian Braiker, Editor, Ad Age
In a time where there is no shortage of gloom and doom in the agency landscape, the job falls to Marla Kaplowitz to be its biggest booster. Kaplowitz, the president and CEO of industry trade body the 4A’s, joins this episode of the Ad Lib podcast to field questions about the myriad challenges facing the agency landscape — and what the 4A’s is doing about it, to the extent it can.
From the agency talent crunch and brands bringing advertising capabilities in-house to an FBI investigation into agency media-buying practices launched last fall, we dig into the agency state of play as 2019 gets under way.
On that little FBI probe
No news isn’t always good news. In the case of the agency world, a lack of clarity on the issue around media agency misdeeds has resulted in some paranoia and stagnation.
“We need to understand what really happened. I worry that it’s going to continue to cast a negative cloud for everyone until” the FBI comes out with its findings, says Kaplowitz.
Some background: In October, the Association of National Advertisers sent a letter to its member marketers announcing that the FBI wanted its assistance with its investigation into U.S. media-buying practices. The investigation came two years after the ANA launched a voluminous report from K2 Intelligence to quantify how big rebates are in the industry. The report was remarkable for its candor — and its lack of specifics. The ANA granted anonymity to the industry in order to get a handle on the scope of the issue.
It’s that very anonymity that Kaplowitz faults for casting a pall over the entire industry.
“Granting anonymity for candor paints guilt across everyone. Every industry has bad actors,” she says. In the intervening years, clients have scrutinized contracts more carefully and there have been “dozens and dozens” of audits that haven’t gone far. Holding company stocks took a hit.
“In many ways we need it to come out so we can move on and finally address the core issue, which is how do we get back to growth?” says Kaplowitz. “If you treat your agency like a commoditized vendor, that’s what you get.”
Marketers have always brought some agency capabilities in-house, says Kaplowitz — it’s not new, despite a noticeable uptick in recent years. The skyrocketing growth of internal agencies (78 percent of marketers now have some form of in-house team, up from 58 percent five years ago, according to an ANA report released in October) has been a dominant theme in conversations about the state of the industry since the fall.
“We’re at a point where costs have really been stripped out of agencies as much as possible. Marketers still need to try and drive efficiencies. The problem there is short-term versus long-term. Most of these companies are public and they’ve got to answer to Wall Street. So where are they looking next? Well, maybe, if we bring the work in-house you can actually drive greater efficiencies.”
As something of a concession to the trend, Kaplowitz says agencies are more open to embedding their people at brands. “It’s keeps a connection to the other work that’s happening at the agency,” she says. “I want to make sure it’s being done for the right reasons and it’s not about the lowest costs. It’s about how do you drive the right work?”
If the ultimate goal is to bring down prices, she says, then the clients are simply not valuing the work.
Things really went south, she said during the last recession. The focus shifted from cost to brand.
“Many of the agencies are on a straight cost, [full-time equivalent] model,” says Kaplowitz. “You need to shift to, ‘How do you drive to the business outcomes that you’re impacting?’ This doesn’t seem to be an issue for many other industries that are client service-oriented, whether you’re talking about lawyers, accountants, bankers. They’re in a very different dynamic. Part of the shift happened years ago when agencies went off the commission and they went to this new model. No one really thought about the long-term ramifications.”
On the talent crunch
The fight for talent is real. “Years ago, when I got into the business, there were fewer options” in comparable fields,” says Kaplowitz. For an industry that’s all about selling things, advertising hasn’t historically been good at marketing itself. That’s gotten even harder when digital companies have appeared to offer more stability and more creative outlets — for more money. Still, says Kaplowitz, she recently poached someone from Facebook.
“Today, younger people don’t want to stay places,” she says. They want experiences and to feel challenged and motivated. Agencies have been slow to adapt and diversify.