Thursday, May 23, 2013

Troubled Times in AdLand: Do Agency Layoffs Signal Industry Turbulence or Opportunity?

Less than a month after FleishmanHillard’s well-publicized (and pricey) rebranding –
an effort to preempt massive changes in the communications industry by demonstrating transparency, nimbleness and multichannel marketing – it looks as if at least one canary in the proverbial coal mine has become woozy.

Actually, make that two or three, depending on your math.

In what seems to be a very prominent and permanent trend (just read this Harvard Business Review article about the demise of the traditional ad agency if you don’t believe me), Omnicom Group, the world’s top media holding company, has faced a challenging few weeks as two of its subsidiary agencies announced widespread layoffs following the loss of major client accounts. P&G’s Gillette products division ended its 80-year relationship with BBDO and General Motors Chevy business severed ties with Goodby Silverstein & Partners. GSP also lost its Nintendo account amid additional client spending cuts. According to at least one person, BBDO could ax up to 10% of its US workforce.

Not good news for ad land.

While details of the brands’ cutbacks are not entirely clear, what little has been said speaks volumes about where the communications industry is heading. Think about it: P&G didn’t come to this decision lightly – severing an 80-year partnership doesn’t happen overnight. And it took 7 months for the brand to switch over to arch-enemy agency Grey, part of the Grey Group division of WPP.  An ambiguous statement from P&G released in April summarized their reasoning for the review was: “to generate fresh thinking and uncover new approaches to connecting with men.” Of course it was.

Fresh thinking and uncovering new approaches is what agencies get paid for. If your agency of record can’t deliver on those two points then any partnership will falter. Although it lacks details, the P&G statement is a damning indictment of a $1.47 billion communications agency that was once the creative engine behind Gillette’s 1989 slogan: “the best a man can get.”

GSP’s situation isn’t any better except to say that the company’s founder, Jeff Goodby, sympathetically addressed the human side of layoffs in an internal memo obtained by AdAge.

“Please be assured: No one takes this process lightly… We will do everything to find [those who have been let go] new situations. And if history is any indication, we will find ourselves welcoming some of them back in the future,” Goodby wrote.

Thanks for the encouraging words but none of that will come to pass if agencies of all sizes (ours included) don’t take a very long, hard look at their client relationships and determine whether they are healthy and spry or if they’re functioning on inertia and complacency – not a winning combination.

The lines between earned media, paid media and the marketing channels they’re promoted on continue to blur. In 5 years time I predict that there’ll be no delineation between digital, social or PR agency – if we aren’t able to provide these services to our clients, we’ll be toast.

So it’s incumbent on all of us as public relations and marcomm professionals to keep the client-agency dialogue fresh, insightful and current. That means staying up on the latest social media trends, voraciously consuming industry and client-specific news, spotting new movements and being ready to adjust marketing tactics once old leanings shift course. It means helping guide our clients through new territories and murky waters. And it means taking bold risks and telling them how it is, not how they want to hear it. It means being honest and offering solutions to problems they may not see coming – but we do.

Omnicom’s brand wounds aren’t fatal. As of this writing, OMC’s stock is up 24.1% for the year and US advertising agency revenue was up 5.6% in 2012. But all it takes is the slightest drop in fresh air before a real coal-mine canary becomes ill.

Will BBDO, GSP and other agencies appreciate these layoff warning signs for what they are and take corrective steps? In this business an 80-year relationship is unheard of – a guarantor of rock-solid success. If those professional bonds can be broken, then really, anything is up for grabs.