Today it takes only a brief look at the current situation of the ad industry to realize that it is an industry approaching commoditization. It has become visible how the general profile of every major ad agency is becoming almost exactly the same: all agencies belong to one of the big four holding groups; they all have a long list of high profile clients; they all have a long list of awards. Or as Luke Sullivan, author of the famous advertising book, Hey Whipple, puts it: “It’s pathetic how much this industry awards itself”. All of these agencies have a global presence; they are all promising complete integrated communication solutions and they all have some “unique” approach to how they go about conducting their business. In fact, a recent poll on Ad Age asked industry practitioners if whether they thought ad agencies are being commoditized. Strikingly, 88 percent of them said yes.
Now different industry experts have blamed this on different reasons. Adrian Ho of Zeus Partners has blamed it on the agencies’ continuous aim to only build a retained relationship with their clients versus aiming to create great work on project-by-project basis. Others have blamed it on the agencies’ attempts to find differentiation in the same place and through the same tactics. For example, Justin Lim of Blak Labs has stated that: “When advertising agencies work at raising their differentiation profile, they often run into difficulty. Having a staff of highly creative people with cool solutions to complex business challenges does not mean they are different, nor immune to creeping commoditization. At the end of the day, being better isn’t good enough.” Also, the billing system used by agencies got its fair share of blame. Avi Dan, founder of Avidan Strategies, has stated: “If I have to point at one reason that led to the commoditization of the advertising business in the past couple of decades, it is the adoption of the practice of the billable hour by agencies as the standard for pay. It is an easy way to price agency services, but treating ads as a commodity that can be measured in units of time misses the point. It makes agencies as interchangeable as widgets”.
And finally some experts have blamed it on how agencies are mistreating their most valuable asset:”ideas”. As Mike Fromowits, president and chief brand officer of Mantra Partners has stated: “Our industry is treating ideas, creativity and media, simply as tools that can always be made faster and more cheaply elsewhere”.
Though several assessments and views can be found on the current situation of the ad industry, so far, there hasn’t been one full exercise that aims to completely analyze, assess and understand the current situation of the industry in order to offer a recommendation on strategies for ad agencies to find ways to de-commoditize their offering. Considering this, Leo Burnett’s head of strategy (Saudi Arabia), Ahmad Abu Zannad has conducted an exercise that has been summarized in the white paper “De-Commoditizing the Ad Industry”.
The paper attempts to identify strategies and tactics on how organizations in the industry can create a sustainable competitive advantage for themselves, where such an advantage could come from and where it could lead an agency. It does so by summarizing a full review of the industry, assessing some of the strategies being put forward by leading agencies, applying classical corporate strategy formulation modules, and concluding on how and where the industry can potentially salvage itself.
The whitepaper is scheduled to be released in early March.