Three years ago, there was a lot of hullabaloo about the battle between established agencies and the impending arrival of the big brand-name consultants coming into the digital advertising space.
The consultancies were going after creative business, acquiring programmatic platforms, and diving into the media space. There was a competitive conversation bubbling up.
Three years later, things still feel the same as they used to. Agencies are here in droves, and nothing has really changed very much.
My observation isn’t that agencies are making a comeback, nor is it that the consultancies have decided to forego this business. I think the truth is more nuanced than that.
My observation is actually that there’s room enough for everyone to play in digital advertising. The industry has created a fully functioning ecosystem where agencies, consultants and one-off smaller shops can all sustain their respective businesses.
Agencies will be around in perpetuity
I spent the first 15 years of my career in the agency world, and loved it. I learned a ton and was able to practice a craft across multiple brands at a time, to see what worked and what didn’t. It was a proving ground for my ideas, and I think agencies will be around in perpetuity because others see it the same way.
These days, I get lots of people who ping me and ask whether the agency they want to launch is a good idea or not. My feedback is usually the same: What are your goals, and where do you see that agency in 10 years?
If you are looking to build some behemoth agency that would be ripe for acquisition in 10 years, I would steer you away from that path. If you are looking to create a more flexible lifestyle business where you can have fun, do great work and earn a good living, then I think it’s a great path to take. Like any other decision in life, it’s all about where you want to end up.
On the other hand, consultancies are the place where you learn the structured ways to operate. They have formalised much of the business and are there for things like learning how to stand up the tech stack, foster change management, etc.
Agencies are nimble and can be viewed as a playground or lab for your ideas, while the consulting shops are more focused on repeatable, scalable concepts. Think innovation vs. scale when you look at agencies vs. consultancies. That’s certainly not a 100% rule — there are exceptions — but this is how I tend to look at the playing field, which helps me determine who I may want to work with down the line.
People the common ingredient
Both business models have a common ingredient: people. The business model for an agency as well as for a consultant is based on billable time. That means they get paid by being in the room and working visibly on projects.
Agencies are squeezed due to pressure from procurement. So are consultants. I find consultants to be more transparent on hours than agencies.
That’s not to say that agencies are opaque. It’s just that the consultant model is more clearly based on FTE allocations, where agencies tend to do things like media buying commissions or for a set number of display ads, etc.
Agencies are paid more based on the product, while consultants are billed more based on their time outright. Once again, both models work just fine and both will live on for many years, but as you go to build your business you want to think through which is the right model for you.
I’ve done agencies and I’ve done a consultancy and now I’m in-house. All these paths are fruitful and fun, and will be available for generations to come. There’s certainly more than enough work to go around, and equally more than enough clients to pay for that work.
I say ‘cheers’ to anyone heading down these two respective paths. You’ll enjoy the days ahead!
This story was first published by MediaPost.com and is republished with the permission of the author.
