These are, it’s fair to say, interesting times for advertising agencies. And while the industry collectively debates the future of the model, pootles around the edges of clients’ mutating requirements and tries to pretend that the ad fraud time bomb is not about to explode, Johnny Hornby and The&Partnership are facing the challenges and opportunities head on. Last week they announced that they’d joined forces with Wunderman and Group M to build a multi-discipline shop dedicated to their News UK client. Pulse Creative pulls down walls and draws together creatives, content producers, direct and social experts, data-heads and media specialists to form a responsive, solution-focused, full-service agency – just the thing for a news behemoth. Earlier in the month, CHI&Partners revealed that it had ditched the traditional creative teams for a more fluid way of working that would allow them to recruit the varied skillsets that clients demand.
However agencies choose to do it, they need to reinvent themselves, says Johnny, who warns that they may soon find their breakfast, lunch and dinner swallowed up by tech giants and the giant management consultancies. LBB’s Laura Swinton caught up with him to find out more about his vision and concerns about the future of the ad industry.
LBB> There’s been some interesting news coming out of The&Partnership agencies recently, in terms of collaboration and organisation. Why has it been important for you to try such radical new solutions?
JH> In this market place we all need to think pretty hard about change and reinvention. In the next five years the big challenge is that we in the industry have not configured ourselves in the way that clients want to buy us. If you go back 25 years clients would go, “I want a TV campaign” or “I want direct marketing”.
Now clients are thinking about the world very differently and it probably starts from data. The truth is that if you look at it from a client’s perspective nowadays they need creativity and data to come together. The days of having nine different agencies and asking them all their different solutions is over; all their opinions are biased by their ability to make a profit in their own medium and their own skillset. Today the client brief is usually about a business problem like growing their customer base or improving perceptions of their brand. The brief isn’t ‘I’d like to do some advertising’ or ‘I want more social’. I think we all need to configure ourselves very differently.
LBB> It sounds like a conversation the industry has been having over the past few years, but few agencies seem to be engaging in any kind of substantial change. Why you and why now?
JH> We’re not doing it everywhere but we’re doing it in a number of places: Canada, New York, London. It feels like the kind of configuration we’ve developed for News UK feels very much more like the future.
News UK’s Chris Duncan said that he didn’t want to spend his time allocating the work between eight different agencies, nor did he want to be handling budgets for eight different disciplines.
I think there are big things we as an industry have to fix, and I’m sure there are other ways of doing it, but first we need to remove any financial barrier to collaboration. At least now we’ve got a bunch of people who can take the client’s problem or business opportunity and tackle it without any fear of what the channel answer is.
We’re taking people from very different skillsets and blending them together. News UK has got 70 people there; we’ve got people who are creative content, video content and social sitting next to the analytics people so they can see what’s happening in real time and can adapt that creative work. We’ve got media people so the stuff that’s working gets pushed out harder and the stuff that isn’t gets pulled back in. A news organisation is a very dynamic fast moving environment, and actually people are very excited by it. People like being with people from other disciplines because they learn from it. I’m sure that in 1966 if you went into J. Walter Thompson they would have done your full marketing campaign for you. But the industry has allowed itself to get split off, starting with the media agencies not being full service any more. We’re probably the only full service advertising group, in the wider sense of the word, in London, in terms of having media as part of the service through m/SIX. We we were all together back in the ‘60s and it’s kind of come full circle.
LBB> What are the dangers for the industry if it doesn’t evolve?
JH> It’s going to be data driven creativity so you wouldn’t want to have a creative agency in either advertising or mobile or anything else that isn’t linked back to the data. Certainly not any agency that genuinely has aspirations to be a marketing partner for a brand or corporation.
The other threat for the industry is that if we don’t do this, Accenture will. I think the biggest threat for the industry in the next 10 years will be from two places. On one hand it will be from the Googles and Facebooks. At some point Facebook will turn up and say to Keith Weed, ‘you don’t need media agencies, you’re going to a hundred different sources to get your customised audiences. Why don’t you come to us and we’ll do the whole lot for you?’ I don’t think they’ll quite win with that but I think it’s a threat. I think Google will do the same.
And as clients start using things like marketing automation, which they are, then I think management consultants like Accenture and McKinsey and BCG become very big competitors. They’re buying up digital agencies already and they’re going to keep doing it. Where it gets really interesting to me is where, as a hypothetical example, Accenture take out Havas. I’m not predicting that specifically, but if you look at the market cap of Accenture, it’s not impossible that they’d take out WPP one day.
LBB> Where does that leave smaller creative companies? Even some of them are bringing in media expertise or data and analytics?
JH> There’s a big challenge for the small companies though it’s not impossible. But if you’re having a conversation with WPP about media and data, in the UK 40 per cent of ad impressions across any media will be bought by WPP. If I’ve got 40 per cent of all the ad impressions and I’ve got an anonymised cookie pool that’s a similar sort of size, in a fair fight I’m just going to deliver much better. The problem that smaller companies will have is that they’re not going to have a lot of data to analyse, and if you don’t have it you have to buy it in. I think the smaller companies will be fine on Innocent Smoothies or something for big brands spending a lot of money, the volume of data you can aggregate is really important.
One of the things we have benefited from with our partnership with WPP is that we have access to GroupM media agency and M/SIX and we have access to that scale of marketing data.
Clients will say, ‘what I love about the small agencies is that they’re run by the founder and there’s a personal touch; you know who people are’. A lot of clients see that as a wonderful thing…. But as they get bigger they think, ‘shit but what if I don’t have access to those data pools? What if I don’t have that media buying clout behind me that gets me the relationships with Facebook or Google or ITV?’ Our model lets clients use all of the tech, data and media power that GroupM and WPP have, but to access it through an entrepreneurially owned business.
Part of the reason that we’re called The&Partnership is that we’re 50 per cent owned by the people who are in the room, and I do think that people who own their businesses care more than those who don’t; it just gives you that extra level of commitment.
LBB> I know that one of your personal major annoyances is digital ad fraud. There are so many parties involved in the chain: creative agencies, media agencies, ad tech platforms, the publishers. And so this new Pulse Creative model seems like it brings these parties together more closely and therefore potentially is an effective way to combat that issue, at least at a single client level?
JH> Combatting ad fraud is a constant challenge. I think to solve it requires changing attitudes on all sides. I think clients either haven’t been aware enough of it, or if they have been aware of it they haven’t cared enough about it because digital media is so cheap.
But I think when confronted with the idea that 40 per cent of their dollars might be fraudulently spent they should be thinking about it.
And from the agency side, I think the same thing. At media agencies, digital has been growing like anything but the mark up has been so bloody tight. A lot of it’s cheap, but it’s a self-fulfilling prophecy. Because it’s cheap, people don’t value it and because people don’t value it a lot of it’s fraudulent. The reality is that combatting ad fraud requires man-hours and time and technology in order to go after it.
There are basic things you can do that will reduce it. They won’t completely get rid of it and I’m sure when you get rid of that level there will be a whole bunch of clever criminal minds that will come up with something else. But my slight frustration is that in the media world and the client world there has not been enough impetus behind trying to get rid of it.
I don’t want combatting ad fraud to be seen as some sort of competitive advantage for our agencies. I genuinely think that it’s something that we all need to get rid of. But when dealing with our own clients, I just can’t be in a situation where I look them in the eye and say ‘30-40 per cent of the money you spend with us on programmatic channels is fraudulent’. A lot of my clients have been with us for 10 or 15 years and they’re very close friends. I couldn’t imagine a business where you say, ‘I’m going to sell you these teabags, six out of 10 will be all right but four will be rotten.’ It’s just not valid.
LBB> There’s a risk that even if clients aren’t being too demanding about it now, at some point they will be. And if the industry hasn’t prepared itself collectively, it’s storing up a problem for everyone, even the diligent agencies…
JH> Absolutely. If you buy the argument that the next 10-15 years will see us battling different people in our industry, the tech companies, the management consultants, the IBMs…you wouldn’t want to find that you’d left the door open for them to come in and say ‘well, we’ll clear it up for you’.
The other advantage that some of them have is their simple brand focus. And that comes back to my point about us not configuring ourselves to sell to our clients in the right way. Our industry has all these channel brands: Ogilvy, BBH, Wunderman, Mindshare… these are channel brands in a world where clients don’t want to buy our channels and Accenture is a single brand entity. So is IBM.
LBB> The thing with brands like Accenture or IBM is that they certainly say ‘analytical’, ‘smart with data’… but what they don’t say is ‘creativity’. And that’s the advantage the ad agencies could leverage if they changed how they structured and presented themselves?
JH> Yeah, I think that’s true. If the world will still be a combination of maths and magic, I don’t think the Accentures and IBMs have ‘magic’ credentials and nor do I think they have cultures that allow magic to flourish within them. Their challenge is that they may require enough ‘magical’ companies to attach themselves to their maths to make it make sense.
But equally I think the dangers of the so-called creative agency world is that the maths part of the equation starts to dominate, it becomes 85 per cent of the equation. If they get someone like Accenture to build their data platforms in-house, the agency just ends up being the icing on the cake rather than the whole thing. So that’s what I’m trying to do with The&Partnership; it’s a place where you can access all the skills of the channel brands in a way that suits the client.
LBB> Another topic that feels like a counter point to ad fraud is ad blocking… people who are fed up with what they’re being served up and publishers fighting back. What are your thoughts on that?
JH> Just because you can do something doesn’t mean you should. We as an industry have been pumping out loads of shit at consumers because we can.
It’s not very expensive to deluge people with a lot of shit, but what’s the effect of that? Well the effect is irritated consumers because you haven’t thought about it in terms of the trade-off that has always existed with consumers. In the past it was that if people could watch 30 or 45 minutes of entertainment they’d be ok with then watching 3 minutes of advertising. If you want them to look up and pay attention, you need to make your advertising entertaining – that was the old trade off. You understood that you can’t show an hour of advertising because people will turn off and in a way that’s what’s happening with ad blocking.
That’s hugely unfortunate because those original TV programmes got made and were paid for by Procter & Gamble, they were soap operas. And now we are failing to recognise the trade off and we need to do that quickly.
For me, that’s why it’s related to ad fraud – if 30-40 per cent of your spend ends up going to fraudulent impression anyway, and the rest of it isn’t that well made or targeted and it’s so cheap we might as well just chuck it up there, I think we need to have a rush to quality. On the whole, consumers don’t mind advertising if it’s delivered at the right time and in the right way.
I think there needs to be a real understanding that if we don’t remove the fraud and up the quality and use the technology we have to make a deal with the consumer that suits them, then we will continue to fuel ad blocking. Which is really too bad because advertisers have been behind some of the greatest content that’s ever been created. There is a deep sadness if we allow this to happen as the ad funded model will be harder to sustain.