Jan 2, 2018

Ad agencies reeling from brutal 2017

Most of the major advertising holding companies — like WPP, Omnicom, Publicis Groupe, IPG, Dentsu Aegis Network and Havas — posted little to no growth in 2017, AdExchanger reports.

Data: Yahoo Finance; Chart: Lazaro Gamio / Axios
Data: Yahoo Finance; Chart: Lazaro Gamio / Axios

Our thought bubble: Ad agencies, which bill a significant amount of their time to digital services, are facing the same pain on the media buying side as publishers are on the selling side. Tech has gobbled up the once-lucrative margins from traditional advertising, like print and TV, on all sides.

The pain points:

  1. The decline in ad spending in the consumer package goods category, one of the more traditionally steady ad spend verticals.
  2. The rise of digital practices in consulting firms, like Accenture and PwC, which attributed to strains on the traditional agency model.
  3. The fall of the traditional "agency of record" model, as a result of bringing programmatic and digital teams in-house.

The bright side:

  • Ad spending cuts can be cyclical, and clients reenergize their ad budgets to boost spending again once the market strengthens.
  • Training and consulting opportunities exist for agencies to help clients set up in-house digital shops.
  • An emphasis on brand safety this year will force clients to think more strategically about high-impact, custom executions that tend to be the specialty of traditional agencies. (See item #7.)
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