Agency holdcos face a new crossroads: reunite media and creative, or risk irrelevance

Five years ago, I observed in Campaign that the major agency holding companies were at a crossroads.

With burgeoning tech companies at the time, such as The Trade Desk, and network disruptors such as The Brand Tech Group, the traditional holding companies had to decide whether their commitment was to own tech and data or to declare themselves as tech integrators—free to use the best available on the market for the client task at hand. To rent, rather than own.

I argued that this was becoming the distinctive difference between the traditional holding companies, that only one of the routes would be likely to win and that their share prices would be the measure of which got it right.

While clearly not binary, the philosophical difference five years ago was fundamental—with Publicis at one end of the spectrum, having just acquired Epsilon, and WPP at the other, having just sold its majority share in Kantar. Publicis chose to buy tech and data; WPP chose to rent it.

The share prices did indeed keep the score: From the time of writing the original Campaign article, Publicis is up more than 130% and WPP down 10%.

This is now history, but as we end the five-year business cycle, the holding companies are coming up to another critical crossroads.

It is self-evident that the creation of advertising and marketing content is now going through its own tech-driven transformation, just as media did some years ago. It is equally clear that most creative technologies are focused on creating more content, faster and for less.

As a result, the sector is at risk of responding to increasing fragmentation and technological advancement by creating ever higher volumes of annoying and indistinctive content, thereby building further distrust amongst already bombarded consumers, as the Advertising Association has identified.

Such reductive thinking is a race to the bottom, at which point the risk of becoming commoditized and ultimately usurped by successful innovators is high.

As Rishad Tobaccowala wrote recently in his excellent blog: “Running your current business model more efficiently and effectively will not save you if others are using AI to rethink your business model.”

So, what is the new crossroads?

Today, media is a tech and data business. The most successful holding companies have managed to develop a data-driven product business model. This is a business model change—from an agency to a product and service company.

However, as data-driven media techniques have matured, the enormous step changes in productivity seen in the early days of this model have become relatively marginal.

Today, creative re-invention is a much bigger prize. But how do the holding companies avoid the reductive and self-cannibalizing path? Where is the new value that clients can benefit from and pay for accordingly? Success will not be the result of the optimization of creativity and production in a silo. That is the reductive path.

Success for the holding companies will more likely come from the recombination of media and creative capabilities—in other words, the joining of scaled media tech and capability with full format (video, social, etc) creative development and automation technology to create a new set of outcome-based products and services.

The traditional holding companies have a unique potential advantage versus the disruptors, in that they already have scaled media and creative operations.

The power is in the combination of media and content signals to deliver unified insight, media, creative activation and outcome measurement in concert.

The crossroads is the decision as to whether and how to combine these scaled operations; a decision that requires bold leadership, just as we saw five years ago.

What I am not describing here is the crude, performance marketing technique of dynamic creative optimization, which typically spits out ever-more volumes and variants of soul-destroying, crap advertising and often exists simply because it can lay claim to a consumer outcome, thanks to dubious attribution.

The next crossroads is one where truly insightful data, powerful enough to define and forecast human behaviours, meets the computer power and machines that can take a human-created idea in video and purpose it for a context and moment in time.

As ever, many will lay claim to doing this already, but in reality, this development is in its early stages and still some way from fulfilling the bigger opportunity.

Nor is this “back to the future”. It involves bold, directional choices.

Bringing media and creative together will put major stresses on the incumbent business models of the holding companies. Media is a profitable silo and has been a growth engine. Creative services are challenged by the prevailing reductive mindset.

While the holding companies have the opportunity to bring insight, media and creativity together into a coherent whole that genuinely delivers break through brand-building positioning and communication, the market is not standing still.

Companies such as VidMob and Smartly are bringing new models to market. The tech platforms have their own native versions—witness Meta’s recent announcements—and the privately funded disruptor networks no doubt see these developments as a way of breaking the incumbency of the traditional, scaled media networks.

Advertising agencies with a history and culture of challenging the prevailing conventional wisdom are again revisiting media; witness Mother’s recent appointment of a head of media, a new role for the creative agency. Native digital businesses, such as Croud and Brainlabs, are also fearsome competitors surely developing in this space.

Although clearly challenging, those holding companies that don’t commit to the necessary developments will become victims of the disruptors and will further remove themselves as strategic client partners. Those that do will benefit.

Again, there will be distinctive winners and losers, and just as we saw in the last five-year business cycle, the public market share prices will keep the score.

Iain Jacob holds various non-executive roles, including chair of Cogora, Nano Interactive, UKOM and Wooshii. He is a former EMEA chief executive of Publicis Media.