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Media Buying Briefing: The way the recession has effects on independent agencies

Grit your teeth, because its likely to be considered a bumpy second 1 / 2 of the entire year for the marketing and media landscape overall.

No-one sector will escape some brush with depressed numbers or client loss and which includes the broader agency landscape. Actually, some already are feeling the pinch, both within the somewhat secure domains of holding company environments, but additionally over the swath of independent agencies serving up media, digital, experiential, performance and creative work.

In a minumum of one case, an unbiased media agency lost clients who could no more afford to advertise due to supply-chain issues. The top of strategy and planning, who declined to speak for attribution, confirmed client losses. Weve had clients who said, we literally cant sell anything, we dont have any longer product to market, we need to shut down advertising, said the exec.

Meanwhile, other agencies have observed client pullbacks on spending, or had clients award RFPs, and then pause any work that has been said to be started. Said the top of investment for just one major holding company: The economic uncertainty and continued supply-chain issues and today new spikes in COVID have major categories pulling back, including automotive and telecom advertisers.

The CEO of an unbiased mini-holding company said about 50 % of most independent agencies just dont take time to browse the tea leaves of economic uncertainty, and the ones will be the ones who may battle to survive. Inevitably clients are likely to peel back 10, 20, 30 percent of brand advertising and peel back some social, said the CEO. What theyll peel back last, needless to say, may be the acquisition media because thats the bread and butter. But specifically for the independents, who may be focusing on a 10% margin, if their clients simultaneously are 45 days late on cashflow, while their workers have gotten raises and budgets roll back 30 percent, It doesnt have a whole lot to produce a large amount of uncomfortability extremely fast.

Digiday spoke with several independent agency leaders to obtain a handle on precisely what sort of damage could hit the media agency world, and how lousy it’ll be. Several common factors stick out:

Specialization is endangered

Specialty shops that align with an individual or narrow avenue of clients may be in trouble, and really should consider either diversifying their clientele beyond a couple of verticals, or expanding their services into the areas to lessen risk.

Typically, you see, you understand, experiential advertising and a few of the more upper funnel brand building take some of these initial hits, said Jared Belsky, CEO of digital agency Acadia. Its not necessarily gradual usually those cuts go deeper. Therefore sometimes theyre caught flat-footed.

Seth Hargrave, CEO of independent Media Two Interactive, said hes had the opportunity to avoid a significant downturn despite being truly a digital specialist shop. Were a specialized agency when it comes to media buying and technology, however the flip side of this is we wish as diverse of litigant base once we may possibly get, said Hargrave. Because that insulates us to a particular degree, and provides us opportunities when times are tough.

DTC falling out in clumps of favor

Agencies are pulling from direct-to-consumer advertisers, especially startups, which frequently sell luxury products (that dont sell well in a recession) or arent strategic within their approach. Several agency execs said theyve deprioritized DTC as a category, after it had been red hot going back 2 yrs.

There is this big flourishing of small brands, DTC brands and independent performance marketing companies, that has been driving plenty of performance marketing, independent agency growth. That side is shaking out, said Michael Stich, CEO of Court Avenue.

We arent as thinking about DTC opportunities anymore, said an executive at an electronic agency who spoke on condition of anonymity. Weve had some before. While we love their entrepreneurial spirit, the rigor isnt there and sometimes the expectations arent there. Sure, you could have 1,000 percent sales increases in year one, but do you know what that meant? You sold 1,000 units that doesnt mean you truly have a sustainable business.

Strain on the client results in strain on the agency

Agencies have to be ready for clients to exert greater scrutiny on planning and execution because CMOs and marketing departments are receiving that same extent of scrutiny from their CFOs and procurement people.

The CFOs are running the show, said the strategy/planning head that lost clients. Theyre like, We have to conserve cash. Which is among the easiest place to allow them to pull from.

CMOs and marketers will be backed right into a corner showing proof return, agreed Hargrave. They always are, but that constriction will probably be significantly higher during the period of the second 1 / 2 of this year due to the financial pressures of the recession.

Its even happening with RFPs, said Dan Eisenberg, CMO of Blue Chip, an unbiased brand, media and shopper agency. Weve seen some RFPs around where there’s much more scrutiny from client side financial leadership back on the marketers to ensure that everything is is bullet proof for the reason that business plan, including market analysis, supply-chain concerns, distribution and sales forecasts, he said. Its forcing the marketers that are ready to enter the market to possess to circle back and become involved in far more internal reviews, additional layers of scrutiny. Sometimes they could even have to return back and rework that business plan, due to what theyre being asked.

Places to lessen

Agencies, particularly publicly traded firms which have to be worried about Wall Street punishing them, have a couple of things at their disposal to reduce risk if incoming revenue drops: freeze hiring, scale back on travel & expense budgets before you can layoffs.

Concentrate on your people, protect your people, make sure that if we’ve a recession and emerge from this recession, that you will be well positioned together with your clients as well as your teams in order to support, said John Harris, CEO of independent agency network group Worldwide Partners. Thats versus, Weve cut 10% of our staff Oh my God, now were back to attempting to hire people again, that is harder than its ever been.

Color by numbers

Everybody knows that streaming services carrying advertising will often flood us with way too many ads particularly if the ads repeat again and again. Ad platform Infillion, by using researcher Ipsos, surveyed 2,500 visitors to better understand consumer preferences and what gets their attention. Findings include:

  • 73% of consumers say the ads they see are repetitive.
  • 61% of consumers say they multitask during ad breaks in streaming content.
  • 67% of consumers prefer ad-supported streaming options to ad-free ones.
  • 50% of consumers see tailored ads nearly as good or helpful if theyre in sync making use of their interests.
  • Over 70% may likely offer more descriptive personal information in trade for more personalization in streaming ads.
  • The very best five bits of data consumers would rather divulge are:
    • gender (69%)
    • age (65%)
    • interest and hobbies (63%)
    • ethnicity (60%)
    • household size and detailed data about purchases (56%)

Takeoff & landing

  • Independent media agency PMG arrived the largest winner in Nikes overview of its $1 billion media business. The Texas-based shop will handle UNITED STATES integrated media duties, and also global digital work. IPGs Initiative also arrived successful in the review, handling integrated global media. WPPs Mindshare, Stagwells Assembly and Wieden + Kennedy all lost a few of Nikes business in the review.
  • Internationally, Publicis Media won consolidated media, creative and digital duties for PepsiCo India, carrying out a multi-agency pitch. Losing agencies include WPPs Mindshare and WundermanThomson, which had lost the remit back the spring.
  • The Association of National Advertisers released a report on procurement that found, somewhat unsurprisingly, clients think it is a wholesome and improving process while agencies dont to anywhere close to the same degree. Among other stats, probably the most telling in the report is that, almost half (49 percent) of procurement respondents agree completely they are knowledgeable regarding advertising/marketing, not just a single agency respondent agreed.

Direct quote

Its clear with Googles announcement [that] the is fighting implementing and testing alternative ways of third-party cookies, but marketers cannot continue steadily to wait until cookies have died to search out alternatives. Cookies were always an imperfect mechanism to make ads more relevant and personal. Whats more, is that most of the proposed alternatives are premised on companies knowing a lot more about consumers identities.

Ken Weiner, chief technology officer, GumGum, reacting to Googles latest delay in replacing third-party cookies until 2024.

Speed reading

  • Digiday intern Carly Weihe, with the support of senior news editor Seb Joseph and senior tech reporter Ronan Shields, crafted an intensive analysis of the tech platforms recent economic stumbles, and the result which will have on the global economy.
  • You need to give a pay attention to senior marketing reporter Kimeko McCoys first installment of a fresh podcast series called The Return, which addresses work/life balance as agencies start offices again. Episode 1 points the mic at Atlanta agency Fitzco.
  • I took a glance at the way the out-of-home industry-backed organization Geopath is attempting to update and advance hawaii of OOH measurement at the same time once the medium is sort of hot.
  • Finally, Im pleased to welcome Antoinette Siu to Digiday as media agency reporter. She’ll be helping me to cover the media agency world and all of the industries and business lines around it. She could be reached at antoinette@digiday.com.

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