The $30 Billion Summer: The New Normal or a Black Swan?

By Steve Fajen

At the moment there are sixteen major media agency reviews being conducted, with roughly $30 billion at stake. They began in the late spring and should be winding down very soon. Since there are arguably only sixteen or seventeen major media agencies, this is creating a logjam. We advised a few of our clients to delay their reviews until the field clears. The question is, will there be a new cascade of industry-wrenching media reviews this fall and winter?

What was startling about this summer surge was not the sheer number of accounts up for grabs, but rather the size of the accounts in play. It’s like a game of musical chairs, with too many big-time players and too few unoccupied large chairs to accommodate the game.

So given that others might also be advised to keep their powder dry, is this surge the new normal or a black swan?

A close inspection of data collected every year by the American Association of Advertising Agencies (4As), reveals that at any given time there are 40 media reviews being conducted, not 16. Most of the time we don’t notice them because the majority are conducted for smaller clients or a single brand within a larger advertiser’s portfolio. What made this past summer so remarkable was the number of LARGE ACCOUNTS that were in play.

So why did this happen in the big leagues in the first place?

In a few isolated cases a new CMO may have wanted a new agency. In a few others, the incumbent’s work or resources may have been deemed lacking. More than likely though, there are other reasons.

We think there are three major reasons for the agency changes in many cases. The first is that the client wants to consolidate business at one agency or holding company to increase efficiencies. The second is procurement departments have become more powerful and are constantly looking for a better deal and more transparency, while the incumbent won’t cut fees any farther. The third reason is by far the most important and is a marker for the future.

Clients are increasingly looking for their agencies to keep ahead of the ever-accelerating digital curve. Agencies are being pressed to innovate within the boundaries of programmatic buying and their trading desks, both of which are more tactical than strategic. They are being asked to assess a multitude of digital platforms and then integrate the moving parts. If they don’t appear to be measuring up to the task, changes are made.                                                                                                                                                                       There will always be volatility between clients and agencies for many of the reasons outlined above. But we will only see another great surge in agency review activity if it is precipitated by a major event or series of events yet unseen.

So this summer was a black swan.

The agency model is being tested. Very likely that model will evolve and when that happens a new surge of reviews will become the new normal. However, while that day is coming, it is an evolution and not likely to eventuate this fall or early winter.

We believe agencies need to rethink their model for working with clients (including transparency) and clients need to more fully evaluate the costs involved to service their business. Both sides need to appreciate the value of the relationship and restore the trust and confidence necessary to avoid another stampede.

Originally published in Digiday