04 February 2008

Why Ad Agencies are in trouble

So I've commented before (and probably will comment again in the future) that the traditional agencies are facing rough times. I've talked about the challenges of the changing media markets, the issues with brand touchpoint rankings changing, the demographic changes, the brand control issues. I've alluded to the issues around business models.

But a tiny piece from Ad Week today says it perhaps more clearly than I ever could.

Dave Morgan, evp, global advertising strategy at AOL, said media shops have a faltering business model, with armies of comparatively low-paid digital media buyers propping up a layer of high-priced executives from the traditional side of the aisle.

The inefficiencies created by this approach are no longer tenable, and current trends will yield "leaner" agencies well versed in using digital-buying platforms, he said during a panel discussion at an investment-banking conference here on Monday.
In other words... the legacy models and structures are crippling Ad Agencies. More than that, the legacy mindset is combining with their lack of flexibility (and change resistance/arrogance) to make them vulnerable to more nimble (new) competition.
Despite the pessimism, Morgan stressed that AOL is not looking to go around ad agencies and convince clients to buy directly from the company's various networks such as Advertising.com, Tacoda, Quigo and Third Screen Media.

"We're not Google," he said. "We need agencies. Unfortunately, they don't have a profitable business model now."

"They've got overpaid television folks and underpaid online people," he explained in a later interview.”
So... what are you waiting for?
There are billions out there for the taking.


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