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Op-Ed: The Rise Of The Discerning, Enabled Consumer Has Disrupted The Agency Model

Op-Ed: The Rise Of The Discerning, Enabled Consumer Has Disrupted The Agency Model
Advertising

‘State of the Digital Nation’ series author and former ustwo owner Jules Ehrhardt explores how the era of the empowered consumer caught the ad industry off guard, prompting a crisis for the agency model

PSFK Op-Eds
  • 21 june 2018

It turns out that humans don’t enjoy consuming advertising nearly as much as others enjoy making it. The rise of the discerning consumer, empowered through technology to filter advertising from their lives, represents a seismic shift that has rocked the foundations of the industry and the fundamentals of the agency model itself. The effects of that shift, and the failure of the industry to respond, are only just beginning to be felt. In the chaos of the necessary creative destruction of the agency industry, new models will be forged, and the next generation of the creative class will take the helm. In this new reality, you’re either a revolutionary or you’re not.

Cause

In the future, only older, poorer people will experience advertising; hardly a compelling market. The remainder of the addressable market will have filtered it from their lives by technological (plugin, browser and OS-level ad blocking) and financial (ad-free, subscription services) means.

We’ve reached peak linear TV. Its viewers are literally dying off, and its population pyramid now resembles that of Japan. TV ad spend, the last great bastion of the advertising industry has, after a bloody-minded, denial-fueled lag, begun its downward trajectory.

Testing more age-old foundations, the very notion of brand loyalty is being challenged with the rise of D2C, private label and brand-less product lines. The ‘influencer’s’ influence is destined to wane as consumers wise up that it’s all still advertising, and the authorities crack down for any confusion otherwise.

Consumer attention has splintered across hundreds of new digital platforms, creating a mind-bending puzzle. Consequently, the cost of and competition for the dwindling reserve of human attention has never been greater, and the landscape has never more confusing. The consumer has delivered a brutal ankle breaker.

The industry’s response to this sea change in consumer behavior, tastes, and technology? More advertising. The abject failure to respond to the trends of the last decade has profound consequence far beyond the advertising and marketing industry; the fallout has compromised the integrity of the agency model itself.

We’ve experienced an unprecedented period of economic stability and growth in the wider economy. The sun is shining, yet few are making hay. Agencies are dealing with single digit profit margins and, worse, heavy losses and layoffs. The advertising industry got Kodaked, and they are bringing all of us down with them.

Effect

The generation attending this year’s Cannes Lions International Festival of Creativity—a week-long confirmation bias orgy—are those responsible for driving the industry off the cliff. The generation that didn’t travel, those who could save the industry, are left behind wondering whether they should bother or board the tech lifeboats. Just like the baby boomers did for the planet, the incumbent leaders destroyed the industry’s economy and ecosystem for the next generation.

“If it looks, talks or feels like an ad it’s not going to win.” A leading light in the industry excitedly calls for Cannes Ad entries, without a trace of irony. Overly invested in the status quo of advertising, leaders have done none of the hard work to retool, and instead opted for a blend of denial and business as usual.

It could all have been so different. With the increasing cost of access to a dwindling reserve of paid attention becoming self-evident (hat tip Faris Yakob), some of us in the wider digital industry recognized products and services as a path forward. You wouldn’t need to rely on attention grabbing tricks and ‘big ideas’ if you offered meaningful utility to the consumer. When you’re useful, the product is the marketing.

However the marketing industry at large gave superficial regard to this path, or any other, and failed to develop a contemporary offering. In doing so it blew the strategic advantage it enjoyed in its client relationships by burning bridge after bridge in pretending it could deliver one. Here began one of multiple breaches of trust between agencies and brands, that would contribute to unravelling the system.

Trust has been fundamentally broken, and consequently brands are taking work in-house at an unprecedented pace. Agencies are now fighting over a dwindling pool of work in a buyers market. They are heavily discounting, nigh cannibalizing themselves, to secure work while offshoring at scale to be able to afford it. On the client side ‘procurement’ has stepped in to negotiate terms with the mindset that ‘creativity’ is a commoditized, mass-produced widget. In this environment, agencies are not allowed to be profitable and the emerging generation of talent finds itself growing up in a self-inflicted recession.

The new Hail Mary for the ad holding groups appears to be developing consultancy and digital transformation service offerings. Digital Transformation… brought to you by Kodak. If broken trust and burnt bridges weren’t enough, the big five consultancy companies have come to eat everyone’s lunch. The arena has been redrawn and one side is outgunned, and unprepared. Over the last five years, ‘Design’ has been consumed nose to tail. ‘Digital Transformation’ involves both strategy and implementation, yet nearly every agency with the capability to implement has been purchased by the consultancies. Meanwhile the ad holding groups have been busily ‘consolidating’ for the coming battle.

Many of us in the rarefied, relative comfort of strategy, digital products and services, thought we were rubbernecking a slow motion ad-industry car crash. We didn’t realize we were caught in the same multi-car pileup. In the developing Adpocalypse, parallel industries and the agency model itself, all of us, are being sucked into the vortex. Buckle up!

The ‘death of agency’ articles are by now a well worn drum. Those who claim to be bored of the same old warning year after year miss the point; the forces corrupting the industry come in the form of multiple cancers rather than a heart attack. Amid the consolidation and rebranding of deckchairs, it would be no surprise to see an ad holding group ‘go down’ via merger or sale in the next 24 months. We’re at the precipice of an ecosystem collapse. In its wake we will of course still have agencies and we will have marketing. But it will be a much different landscape, rid of those who got us into this mess by preventing progress, with the next generation at the helm.

While the industry accelerates towards its necessary creative destruction, it is worth asking the question what it means for the industry’s atomic unit, the creative class (you and me).

Reset

For the creative class—those who create design, code and culture—the existential challenge to long established models poses confronting personal questions. It’s time to all admit the emperor has been naked for quite some time, and that his court is collapsing. In this environment, you’re either a revolutionary or you’re not. The good news is that we’re creative, because that’s what it’s going to take. In fact we’re best positioned to survive and prosper in the coming age of machine learning, automation and AI.

We need to deploy that creativity to redefine the terms of business for the creative class and forge new models. It means confronting the broken methods and routines of the past. It means escaping the cursed prison island of the paid-for-time client service model. It means building models, with demonstrable potential for significant upside, capable of attracting funding from seasoned investors. We must share our learnings under an open source model, so we can all progress and learn from each other. So let us all embrace the coming chaos, because what we will create in its aftermath will be breathtaking and fulfilling. Viva la revolución!

You can read the latest in the ‘State of the Digital Nation’ series here, and follow Jules Ehrhardt’s work here.


Lead Image: Joshua Earle | Unsplash

It turns out that humans don’t enjoy consuming advertising nearly as much as others enjoy making it. The rise of the discerning consumer, empowered through technology to filter advertising from their lives, represents a seismic shift that has rocked the foundations of the industry and the fundamentals of the agency model itself. The effects of that shift, and the failure of the industry to respond, are only just beginning to be felt. In the chaos of the necessary creative destruction of the agency industry, new models will be forged, and the next generation of the creative class will take the helm. In this new reality, you’re either a revolutionary or you’re not.

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