Opinion: Will the traditional ad agency die like the dinosaurs?

By - CTL
January 5, 2017

In this piece by Charles Lutwidge Dodgson, our writer ponders the future of the ‘traditional’ Advertising Agency in a modern age.


(Advertising agencies only have themselves to blame)

In 1980 a seminal paper proposing that an extraterrestrial cause was responsible for the Cretaceous Tertiary Extinctions, (the fate of the Dinosaurs) was published by a team of scientists including Professor Luis Alvarez (American experimental physicist, inventor and Nobel Laureate) and his son Walter Alvarez. It detailed their discovery of the element Iridium in layers of limestone above and below the Cretaceous – Paleogene Boundary in the walls of a gorge in Patagonia. Previously the only known substantial sources of Iridium to be found, was in Space. The position of the Iridium within the layers indicated it was deposited at the same time dinosaurs died out. This discovery supported the theory that a comet, asteroid or meteor had crashed to Earth in that period changing its entire environment and composition and leaded to the destruction of the food supply and environment dinosaurs needed to survive.

What you might ask has this to do with advertising agencies today?

The answer is quite apparent if you stop and think about it for more than a moment. The Dinosaurs didn’t see it coming. That is, the cause of their extinction, so at least they had an excuse for their demise. By the way, there was nothing they could do about it any way.

The Advertising Industry is sitting in the path of its own metaphorical comet but is either too blinded by its own perceived cleverness to see it coming or too stupid to appreciate they won’t survive the impact if they don’t prepare for it.

This year the advertising glitterati again gathered in Cannes for their annual awards fest and backslapping competition. (A number years ago it was suggested by a small number of attendees that as The South Of France was soooo expensive and that since the competition was after all about the ads, not the environment, the whole shebang could move somewhere cheaper …..mmmm, like Manchester. Not surprisingly that idea never even made it to the terminal let alone off the ground.)

They eulogize and glad handle each other in recognition of their collective creative genius; but what actually are they celebrating? The stuff they claim to be honoring as they wander from hotel bar to hotel bar, up and down the Boulevard des Anglais i.e. the work, is in the main, provided to their clients for free. The very thing Advertising Agencies say they hold most precious has no real monetary value because they have no idea how to charge for it.

Perhaps Cannes and the hundreds of other award shows held around the globe annually should be reclassified as wakes. How does the inscription on the bottom of Crickets Ashes Urn go?
“English cricket has died, and the body will be cremated and the ashes taken to Australia”.

Should advertising awards be cremated and the ashes inserted in an empty bottle of Cristal (or three) and shipped to the “Calivigny Island Resort” in the heart of the sun-drenched Caribbean as a fitting tribute to such foolishness. Perhaps the plaque on the bottle could read:


Charles Darwin wrote, “It’s not the smartest nor strongest of the species that will survive, it is the one most adapted to change”.

Today’s agencies show no interest at all in altering their “modus operandi”. They foolishly and desperately cling to their own modern version of the Titanic, that “unsinkable ship”.

Until advertising agencies change and recognize what business they are in, and charge accordingly for the actual products they produce, they can look forward to suffering the same fate as the Dinosaurs.

You might say, “what the fuxx is this guy rambling on about? We know what we’re doing, how dare you question our business and indeed judgment.”

But since their creation advertising agencies received media commissions for placing their clients advertisements with various media outlets. During these heady days, right up to and including and the late 1980s, it was unnecessary for them to charge for their creative work. When this system fell foul to a legal challenge in 1980s and the 10% media commission became a thing of the past, agencies scrambled for new ways to make up the shortfall. They did a pretty piss poor job of it.

The most dishonest and ineffective way to bill creativity is by the hour.

Why? A good idea that answers the brief can come in 5 minutes or indeed it might take 5 weeks. Depends on how clever or not your copywriters and art directors are. But if it takes 5 weeks, is that the client’s fault? On the flip side, if the idea took 5 minutes and that’s all the time you charge for, the CFO is going to shit himself. (You could of course falsify the time sheets, but who in all good conscious could condone that?)

Over the years I have on occasion become aware that some employees, using their own initiative, inflated the number of hours they dedicated to a project. I have even suspected that at times management encouraged them to do so. One agency would lock their staff out of their emails until the accounts department had received up-to-date time sheets. Talk about madness! To counter this initiative one of the more creative filled in one time sheet and photocopied it 48 times, (and another 4 for holidays). No one every question him; indeed he became the poster boy of the agency.

A very prominent creative director once told me he had said to a group account director on a major FMCG brand, “I want you to take me to lunch”. The group account director replied, “No I’m far too busy.” Our canny creative retorted, “If you don’t I’ll personally work on your business solidly for the next 6 weeks”. Needless to say they enjoyed a delightful nosh up at the CD’s favourite watering hole!

My first hand experiences of this insane process of timesheets were a TV project for a major brand in the health and beauty category, with a budget set at $225,000. I was presented with an agency bill for creative development, account service management, creative management, and production supervision of $146,250 or 65% of the total funds available. There wasn’t enough left to actually shoot the commercial.

When I challenged the Account Director to justify these ludicrous charges, he simply said: “That’s what’s on the timesheets and it’s according to the agreed hourly rate card fees”. I countered with, “How could a writer and an art director take 60 hours to write a 30 second television commercial – was it one word every half-hour?” His response was predictable. “It’s on the timesheets”.

It is patently obvious the system is totally flawed.

It is little wonder clients mistrust their Agencies and turn to independent production consultants and cost controllers for advice and support? Agencies must take responsibility for this deterioration in their relationships and set about rebuilding the trust they once enjoyed.

So what is the solution? Strangely enough it is incredibly simple. Charge a fair price for the work in accordance with the available budget. I believe that a percentage fee, agreed upon up front is the easiest and quickest solution to this unholy situation; somewhere between 15% to 20% would seem reasonable depending upon the volume of work.

Globalization has unhappily been the driving force of this sad, sad situation and has forced agency margins down to such a low level that given the current agency structures it is virtually impossible to properly resource businesses. The unfortunate consequence is unhappy clients and agencies that believe they are being badly done by.

The real truth is that they’re not losing money. Their staff costs are fixed, and overheads are fixed. Business 101 should tell them if they cover these costs and make another 1/3 then they have made a decent profit. But this probably won’t be enough for their international masters.

Where will it end? Given the current circumstances I believe the multinationals, like the dinosaurs, will fade into extinction. Clients will hire smaller boutique houses where costs and overheads don’t require such onerous charges. Production consultancies will grow, as the downward pressure on budgets continues to grow. Freelance teams will be hired as and when needed, and leaner more cost-effective businesses will emerge.

Remember what Charles Darwin wrote and take note should you not wish to be consigned to history interned between layers of metaphorical limestone.

Header image by Harry Gold.

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