The Death of the Advertising Agency Business?

I attended my first American Association of Advertising Agencies annual meeting in 1986 at the Greenbrier. Back then, the 4A’s conference was mostly a white bread affair with a guest list of mostly madmen holdovers. Today the conference is appropriately named Transformation, and is anything but a WASPy drink fest.

Bob Jacoby

What I remember about that meeting was Bob Jacoby, the CEO of Ted Bates, telling the story of how he sold Bates to the Saatchi Brothers. This is how Ad Age chronicles the story:

“A Princetonian and oil company economist, Jacoby left Compton Advertising to join Bates in 1962 and became chairman in 1973. On May 12, 1986, he set off an industrywide firestorm by agreeing to sell Bates, then billing $3.1 billion, to the Saatchi brothers for $507 million. Some 320 Bates shareholders profited from Saatchi’s spending spree, but it was Jacoby’s share, more than $110 million, that roiled the waters. Believing their long-held suspicions about agency profits had been confirmed, advertisers put more pressure on agencies for the demise of the traditional 15% commission, questioning loyalties and “marketing partnerships.” Bates lost $322 in billings and the deal unleashed suspicions that still animate the industry.”

Jacoby’s own account at the AAAA meeting was frankly rather cheeky for a guy who just cashed out for $110 million. Jacoby prophesied on the industry; the death of the agency business would come when all of the advertising agencies had been sold and all of the clients had merged, so that there was only one agency and one client left. That single client left standing would then decide to take their advertising in-house. And that would be that. 

I was reminded of Jacoby’s speech when hearing the recent news that Andrew Keller, of CPB fame, has crossed over to the client side. This trend amongst clients — particularly tech clients — building out in-house departments is nothing new. We have seen many renowned madmen make the move from agency to in-house; but, Keller to Facebook is really ground breaking. Keller was the top creative at one of the most celebrated agencies in the world.

Andrew-Keller-hed-a-2016_sm

As tech powerhouses like Facebook continue to grow by immense proportions and choose to build in house agency’s, I can’t help but to feel a certain dread that Jacoby’s prediction is not at all outlandish. As I have advocated numerous times before, advertising is an idea business. The best creative thinkers join forces to breed the best ideas. What will happen now that more and more of our brightest creative minds are lending themselves to one business and one business only – that of the client? Is the death of the agency industry closer than we think? 

 

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