Over the years there have been many attempts to create the ‘agency of the future’. Enfatico, the WPP agency that was built from scratch for Dell, was perhaps the highest-profile attempt to create a next-generation ad agency, writes Matt Straz. Unfortunately, the effort ended in failure and the agency was eventually shut down.
But the desire to create the agency of the future remains strong. There are two reasons for this. First, agency fees have been under attack for years because clients are keeping marketing budgets in check in order to maximise profits. Without the ability to dramatically increase fees and commissions, it’s difficult for agencies to be high growth engines.
The other issue is people. The war for top talent is fierce. As Maurice Levy, CEO of Publicis, said last year, “We need to fight with the startups, technology and platform companies for talent, not the banks anymore.” Agencies need to be a place where the most creative people in the world want to work.
One upstart agency is addressing both of these issues in a new way. Ignited, a full-service shop based in Los Angeles, has been building ventures on top of its existing agency business. Led by the agency’s founder and CEO, Eric Johnson, these initiatives leverage the relationships that they have with clients as well as the in-house talent at the agency. When an agency staffer solves a client issue in a way that leads to a new-business idea, that business can become an additional profit centre for the agency.
This approach is in contrast to other agencies that are trying to squeeze additional fees out of clients through performance-based compensation. Johnson and his team have put aside most of these contractual gymnastics because they believe that client fees won’t be rising dramatically − no matter what kind of incentives are put in place.
Ignited employees are rewarded when an idea becomes a new business: a $500 bonus for an idea, 5% of the production budget if the execution is sold to a client, and 5% equity if the idea is turned into a standalone business. While many agencies say that they want to be more like a startup, Ignited is actually walking the walk by allowing its people to be entrepreneurs from within the agency.
Ignited’s focus on entrepreneurialism doesn’t stop with its own business. The agency has also invested in a half dozen startups. One of those investments, Pixelmags, is a digital magazine publishing platform that now has deals with over 700 publications and 22 million unique users.
Agencies have been making outside investments for some time, of course. Holding company Interpublic Group has reaped millions of dollars from its early investment in Facebook. WPP has made dozens of successful investments in media and technology companies over the years. But Ignited is demonstrating that even smaller agencies can use their relationships to create new markets and nurture startups.
Ignited’s home base of Los Angeles is also unusual for an advertising agency. While 70% of all US media is still purchased on the island of Manhattan, it turns out that over 50% of all TV spots are now shot in LA, which has some key advantages when it comes to creativity, according to Johnson. “As marketing and content become more intertwined, LA is uniquely positioned to take advantage of it,” says Johnson. He may have a point, given the city’s leadership position in movie making, television production and music.
While it may be some time before we know what the agency of the future will finally look like, with its focus on entrepreneurialism, Ignited embodies the agency of right now.
This post is published with the kind permission of MediaPost.com