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It absolutely is. We’re undercut constantly by specialty houses, client groups are reorganizing their sourcing models for derivative work through chop shops because they have fixed asset pricing, keep trying to maintain status quo and dealing with client negotiations to lower price which in turn creates less FTEs so less people covering more work… and we work 70 hrs a week without overtime…
… we used to be a proper industry.
Solution: live and learn. Adapt. Charge more for intensive work and streamline the hell out of derivative work. Incentive derivative work being cheap by making strategic and core work meaningful, and educate client on that up front. Then you can separate core team from shared services (which would then be derivative work leveraging aligned creative and copy). Pay your employees better, at a ratio closer to cost of live as it was 10+ years ago (it’s hard to drink the kool-aid, if nobody is handing out kool-aid)
I think the agency model could definitely disappear in the next 10 years. I feel like most people are not willing to work the insane hours required by agency life. The old model of working your butt off in your 20s so you can have financial success down the line is not attractive anymore. Especially not when Gen Z kids are making more money being influencers on Instagram than going a traditional job route.
Working agency hours for health insurance is a small price to pay for someone who is single/unmarried in a high cost of living city.
The agency business model is traditionally derived from the media spend. Basing our earnings on how much media a client buys is why things are dicey these days. When everyone had to buy national TV spots, radio, magazine space etc, agencies did pretty well getting a percentage of that $ amount. In this fragmented ecosystem and rise of digital/social, clients don’t have to spend as much in media buys, so agencies see less $.
Project-based vs retainer model is also much more common now, trimming funds and making it tougher for agencies to weather down turns.
There’s also been a move to bringing creative/agency services in-house saving corps a ton of money, so there are fewer client projects overall.
And there are plenty of agencies who have “gone somewhere” (under). Those that survive are the biggest holding companies who every year have to scrape up more small shops and merge big ones to keep the efficiency wheel spinning - it’s kind of a Ponzi scheme.
I’d like to hold my opinion until the Fed’s raise interest rates. If our industry doesn’t improve once this happens, I’ll know it’s not going to be the same ever again.
Well said.
I have been thinking about what it would look like to have agency revenue share. Would we all work a little harder if we actually got paid our bill rate? If agencies are a margin game why does the overlords at IPG and WPP get paid before the rest of us?
All these in house people are stacking bills on stock options for boring work.