This year has seen a return to some strong growth (11% for the global industry in 2013, nearly double that of 2012), but also consolidation (H&K exec reshuffles, HP roster changes and Text 100/Bite merger across APAC to name just a few) . We’ve seen a return to confidence but also a number of agencies struggling; major pitches for the first time in a while; but driven by cost rather than quality or fit. 2014 has been a year of mixed signals and contradictions… Here’s my attempt to make sense of it all with five trends to watch for next year:
- Vorsprung Durch Technik. The application and increasing use of commstech is likely to be the single largest shift in our industry for years to come. We’re still in the foothills of what’s possible, but the promise of cost reductions, increasing specificity around audience identification, understanding which content and platform is most likely to influence or move an customer to action is nothing short of incredible. We’re seeing the application of technologies originally developed for media buying and the ad space mixed with dna from comms consultants. We now have the ability to run far more targeted campaigns, with more predictability of outcome, better engagement with audiences and at lower cost. 2015 will see agencies sprinting to understand and adopt techniques as clients start demanding these more integrated approaches.
- Consolidation continues as Asia looks West. The second half of 2014 saw lots of M&A action. Smaller brands seeing the prospect of integrated offers more readily adoptable through marriage. Linked to this, it’s been a tough year for some smaller brands. The luster of independence has diminished for some and the safety net of a foster parent has become very attractive. 2015 will see the continued heavy M&A activity as smaller brands club together, or are gobbled up by those wanting to fill out their own portfolio of offers. Linked to this we’re seeing much greater activity from the major Asian agencies starting to flex their muscle, money and intent on the global stage. Major moves by powerhouses like Baidu, ZTE, Huawei, Tata and others means the domestic agencies that have supported them now see a need to expand globally and support their flagship customers. From Blue Focus to Dentsu to Cheil, 2015 will see European markets (and the UK especially) look East more for buyers.
- Agencies look for new revenue streams. The last five years have seen increasing margin pressure on agencies from increased salary expectations to downward pressure on budgets. The rise of procurement and reverse auctions are here to stay, brands are under increased pressure to deliver more for less – pressure passed through to their agency partners. Agencies need additional revenue streams – predominantly from marketing and measurement budgets. Integrated communications not only offers brands better value, but agencies access to much larger budget holders. Margin pressure has seen the industry develop an hour-glass figure… lots of fragmentation and small shops at the bottom, a few 800lb gorillas at the top and the middle under increasing pressure.
- The ‘Integrated’ Arms Race speeds up. The need to offer paid, owned and shared media strategies as well as earned will lead, not just to increased M&A, but to multiple approaches of delivery. 2014 saw Weber launch SawMill, an ad agency. It’s the first time I can remember a brand within a holding group being allowed to launch a competitive capability within its own walls. At the same time, partnerships, especially for smaller brands wanting to remain independent will become a critical philosophy. Whether through acquisition, organic launches or partnerships, agencies will need to offer far broader portfolios to address both integrated campaigns and the search for additional revenue streams. Internally this will fuel a desire for talent who can see both the wood and the trees. Equally important is the up-skilling and reskilling of existing talent… moving them along a whole new talent spectrum and career path.
- Organisational Development becomes a critical capability. As the integrated race hots up internal team structures are ill-suited and inefficient at delivering the speed, connectedness and cost savings possible. For the first time, corporate behaviour, not technology, is limiting a brands ability to deliver integrated communications. Siloed thinking, poor or single-discipline campaign initiation, lack of budget, systems and leadership structures will need to be addressed. Leaders of both agencies and marketing departments will be pressured to reconsider long established norms in the search for speed, agility and cost efficiency. Clients are likely to look to their agencies to help guide the operational evolution.