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Part 2: The Current Climate of Marketing & Advertising in 2020

In Part 1 of the Where Do We Go From Here? Series we started from the beginning and explore the history of the agency model.  Next, we will explore the current climate of the marketing and advertising industry and what trends to pay attention to.

Marketing & Advertising Trends During Crisis

The Great Recession of 2008 is the closest thing to the current climate we can draw learnings from.

Since we are still in the midst of the pandemic, we do not tons of measurable data but here are the 2 main trends I am observing given the lessons of 2008.

The In-House Agency

In 2018 a study published by The Association of National Advertisers (ANA) reported the following trends within the marketing and advertising industry:

  • In-house agency penetration is rising and workloads are increasing.
    • 78% of ANA members have an in-house agency in 2018, versus 58% in 2013 and 42 percent in 2008.
    • For 90%t of respondents, the workload of their in-house agency has increased in the past year, including 65 percent for whom the workload has increased “a lot.”
  • For 44% of respondents, their in-house agency was established within the past five years, contributing to the recent rise in overall penetration of in-house agencies.
  • In-house agencies provide a range of services, including strategy, creative for traditional media, creative for digital media, and media planning/buying. Service that has grown significantly over the past five years are: Content marketing, creative strategy, data/marketing analytics, media strategy, programmatic media, social media (both creative and media)
  • The top benefits of in-house agencies are:
    • Cost efficiencies
    • Better knowledge of brands
    • Institutional knowledge
    • Dedicated staff
    • Speed, nimbleness
  • When asked to identify a single primary benefit of having an in-house agency, cost efficiencies were top-ranked by a wide margin.
  • Overall satisfaction with in-house agencies is high — 79% are satisfied, including 20% “completely satisfied.”
  • Ninety percent of respondents also work with an external agency(ies). For those respondents, an average of 58% of all the work for their company is done in-house.

The data above illustrates that given the economic hardship of 2008, the in-house model has proven to be cost-effective.

In 2020, all eyes are on overhead costs. Will in-house agencies continue to grow their market share, or will companies outsource marketing in order to cut overhead?

My guess is that coming out of the pandemic, “more for less” will be everyone’s mantra.

Depending on the brand, I see them going in one of two ways:

  1. Leveraging small to mid-size agencies that can deliver high-quality work for reasonable prices.
  2. Investing in deeper independent contractor rosters to help their in-house team plus up when needed.

Agency Infrastructure

According to the Bellwether Report in April 2020, just after most countries had imposed a lockdown marketing budgets saw the biggest drop since 2009.

This resulted in mass devastation to marketing and advertising agencies. Layoffs and furloughs were exponentially more significant than in 2008. In June of 2020, Pew Research reported, “The rise in the number of unemployed workers due to COVID-19 is substantially greater than the increase due to the Great Recession.”

AdAge has reported on several layoffs but the data they have not published is from the privately-held agencies. Experiential agencies, especially those whose business relies on large-scale tradeshows seem to be hit the hardest.

After the Great Recession, many agencies re-built in a mirror of 2005.

In my experience, agency owners who evolved their business after the Great Recession by leveraging more fractional talent, abiding by a level of transparency, and optimized their internal processes to be nimbler were poised and ready for the unforeseeable pandemic. The number of layoffs and furloughs they have needed during this time is minuscule in comparison.

The agencies who held on to the old “we have everyone in-house, we do everything under the sun” model has suffered the most economic hardship, and in many ways, the pandemic has forced their hand.

The pandemic and economic peril of 2020 has put agency leadership in a situation where they face choices while they rebuild their infrastructure.  The question now is – do you rebuild in a mirror or use this time to re-imagine the model and build a foundation that meets the needs of a global, project-based industry?

Here is what I am paying close attention to:

  • How will they leverage the learnings of the work from home experiment?
  • Is each role being reevaluated for FTE (full-time employment) or freelance?
  • Will their commitment to diversity be supported by action?
  • Will they reimagine their office spaces to foster productivity and invite collaboration?
  • How will they create a more sustainable workplace that supports the environment?
  • What will they take a stand for?
  • How did they use their downtime?

Part 3: Rebuilding with Freelancers

In Part 3 we will take a deeper look at how agencies are planning to leverage freelancers moving forward.

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