PostAds Group predicts big changes in the ad business as the balance of power shifts.
The emerging trend of ‘Big Consultants’ acquiring ad agencies and entering the world of creative production is the stuff of Michael Douglas’ character Gordon Gekko in the film ‘Wall Street' where a quintessential Master of the Universe-type conspires to take over lucrative industries with such aplomb that it barely causes a ripple among the unwitting prey until it’s too late.
The story of the big consultants ‘quiet coup’ of the advertising business began in the C-Suites of Procter & Gamble in 2009, when Accenture parlayed its legacy IT relationships with CIOs and CTOs into a day in court with the CMO. Leveraging its expertise in strategy, technology and systems consulting, Accenture launched its interactive division to provide global marketing operational support for the world’s largest advertiser and officially put ad agencies on notice. It also sent a loud and clear message to Accenture’s consulting competitors: Madison Avenue was open for business. Like the Gold Rush of 1849, a stampede of big consultants including Deloitte, IBM, ICF and PricewaterhouseCoopers moved into the space by building and acquiring digital marketing capability. Industry sources estimate the overlap between ad agency creative work and IT consulting to be a $50 billion opportunity, ensuring Gekko-like consultants are here to stay.
In Wall Street, Bud Fox, played by Charlie Sheen, is the young protégé whom Gordon Gekko takes advantage of when he acquires and breaks-up for profit Fox’s father’s company, Bluestar Airlines. In this cautionary tale naivety is no match for avarice. Fox asks his mentor disbelievingly, “Why do you need to wreck this company?” Gekko’s reply: “Because it’s wreckable!”
And herein lies the issue for ad agencies: it wasn’t so much that they weren’t minding the store, it’s that the world changed and natural selection made agencies vulnerable to a more advanced predator. Ad agencies offer core competencies in creative work and big consultants offer core competencies in tech work; when the worlds of creativity and ad technology collided, marketers sought expertise in the areas they knew the least about: technology and systems.
The Gekko factor came into play when the big consultants with their deep pockets preyed upon the ad agencies’ lack of tech skills; knowing that tech skills are harder to acquire than creative skills, the big consultants bought and built creative agencies to compete for the whole $50 billion pie. Conversely, agency holding companies have struggled to fight back and acquire comparable tech skills – they’ve either been forced to build fledgling ad tech divisions in-house or struggled to find the capital to buy IT firms.
Cases in point: in 2016 Deloitte acquired Heat, an acclaimed San Francisco-based creative agency and literally overnight boasted a roster of top creative talent and clients including EA Sports, Hotwire, Esurance and Credit Karma. IBM acquired Resource/Ammirati and The Weather Company’s digital properties. ICF acquired Minneapolis-based Olson and its 545 creative employees, with key clients Hyatt, Luxottica, MillerCoors and Wrigley. And Accenture Interactive continues to build its roster with new client acquisitions, including running an agency search for Amazon’s media buying.
Creative agencies fall into two camps: those owned by large agency holding companies and therefore likely sheltered from consultant acquisition; and the small creative boutiques who are ripe as merger and acquisition targets. Over time, the great irony will be if big consultants morph into glorified agency holding companies – with the same issues of labour costs, operational management, talent retention and all the baggage that made agencies inefficient in the first place! This phenomenon may invite even larger predators into the space. Enter Facebook, Google and Amazon in the form of Sir Larry Wildman, the richer-than-Gekko financier, played by Terence Stamp, who partners with Bud Fox to take down Gekko. If the analogy holds true, the invasion of the ‘Big Consultants’ may be short-lived.
Are big consultants any match for the likes of ad tech giants Facebook, Google and Amazon when it comes to innovation, creativity, big data platforms and advertising technology? When Sir Larry Wildman decided he wanted to buy Bluestar Airlines, there wasn’t a lot Gordon Gekko could do about it. Gekko says prophetically, “The key to the game is your capital reserves. If you haven’t got enough, you can’t piss in the tall weeds with the big dogs.”
An alliance between agency holding companies and ad tech giants could be one way of undoing the big consultants pursuit of the $50 billion prize. Agency holding companies own market share of global advertising content volume; ad tech giants are the largest publishers of global ad content – if they got together like Fox and Sir Larry in mutual self interest to deliver superior creative-tech solutions, the big consultants would find themselves wondering like Gekko what hit them.
However, this scenario may be wishful thinking for the ad agencies. While the ad tech giants might use ad agencies short-term to gain a foothold in creating marketing content, they really don’t need them long-term. Facebook, Google and Amazon have already built their own in-house creative units. Marketers such as PepsiCO and Apple are doing the same: PepsiCo’s Creators League studio produces content for TV, online and branded entertainment while Apple staffs an in-house creative unit of 1,000+ people. Ad agencies are like Hemingway’s Old Man & The Sea big catch where so many sharks are taking bites out of them that by the time they return to shore there’s nothing left but the bare bones.
Here are our predictions:
Big consultants will continue capitalising on their longstanding C-Suite relationships with marketers and flex their IT chops over ad agencies;
Agency holding companies will continue leaning heavily on their creative-skills dominance over big consultants while trying, but failing, to shore up their IT credibility in the areas of programmatic media buying and digital content management;
Agency holding companies will cry foul over big consultants providing marketers both strategy consulting on agency functions - and then recommending their own creative and production executional capabilities to replace the agencies. Marketers won’t agree there’s conflicts of interest and proceed accordingly;
Agency holding companies will seek alliances with ad tech giants Facebook, Google and Amazon to blunt the big consultants offensive;
Marketers will continue to build in-house content studios and creative shops, further marginalising ad agencies as primary ideation partners;
Ad tech giants will leverage their content publishing and big data dominance with marketers for a competing share of the $50 billion opportunity;
Ad tech giants will overtake big consultants as the preferred partners for creative and ad tech services.
Or in Wall Street speak, Gordon Gekko (big consultants) will get the better of Bud Fox (ad agencies); Sir Larry Wildman (ad tech giants) will get the better of Gordon Gekko (big consultants); and Bluestar Airlines (marketers) and Sir Larry Wildman (ad tech giants) will live happily ever after.