In-housing, billing arrangements, and consultancy: How are agencies pivoting in 2024?

The Drum got together a panel of experts last year to discuss the merits of pivoting, rebranding, and reskilling to meet the needs of today’s mercurial market.

The good news is – it’s not all bad news: agencies have always had to adapt, and this might just be the latest example of that, in a history of never-ending change.

“How do we evolve while still staying true to ourselves?” Emil Bielski, former UK managing director of Croud, asked the panel.

The bill, please

The first challenge, of course, is identifying the headwinds and tailwinds buffeting the business models of agencies.

James Coulson, managing partner at Kepler, identify in-housing as “probably the biggest fundamental change in the industry, from a very traditional model of ‘advertisers always used to do this, and agencies always used to do this‘. Now that’s breaking down and the roles are shifting.”

He explained that with that, the way Kepler bills is changing. “We are in the process of moving most of our clients from a percentage of media spend - that’s the legacy historical model, clients like it because they just need a media budget - to an FTE model.” This allows clients to tap into more specialist resources, Coulson said.

Strategy stands out

“Our largest expansion of services has been on the strategy side over the past several years,” said Rob Blasko, former senior vice president of creative, strategy, and brand at Mas (now at Public School), adding: “Expanding strategy has been both a combination of intentional, but also forced because of the marketplace and what our clients are wanting to spend dollars on."

Blasko said that helping brands to “shape and craft” their strategy and what they’re doing in the marketplace was now a large part of the agency's business.

Wendy Dixon, global chief growth officer at M&C Saatchi Group, identified that while most of the transformation in the sector over the last ten years had been around integrating and upscaling digital tech and data, AI had automated much of that.

“Now the value is going back up the funnel to the strategy side, which is a good thing and interesting,” Dixon said. “It’s another pendulum swing, and I think our industry continuously is back and forth, but in new ways as technology pushes the whole thing forward.”

Sophie Caswell, head of innovation and strategic growth at Brew Digital, explained how, while smaller, her agency had done well over the years to pivot to respond to changes in client needs. “We evolved from design-and-build on the web. But when you take expertise that’s strategic and put it in a new discipline, and once people with that capability to do critical thinking are moved into a different discipline, and they get to grips with that, then you can evolve the strategic consultancy that you can give.”

Caswell added: “One of the things that people ask for, and we specialize in now, is helping people scale, and helping them with the strategy of how they scale and how they change and evolve.”

So, are all agencies are destined to become strategic consultancies? Perhaps not; Bielski argues that the cyclical nature of change in the industry is in “constant tension”. He pointed out that during his 18-year career, he’d first seen a big shift towards “all-under-one-roof” networks, focusing on digital and integration – before the pendulum swung back again to smaller agencies with specialisms. “You had this dominant period by networks and then back to specialisms,” he explained.

While managing agencies might be more work, he said, it was the best way for brands to ensure they have the most engaged people, with the greatest specialisms, working for them. “Mushing it all together, I think that business would lose something," he added.

It's just about being the best

Both Kepler's Coulson and Elizabeth Lindsey, president of brands and properties at Wasserman, pointed to recent experiences of losing clients as a result of restructuring - only to see them returning in a short space of time to request their agencies’ services.

The panel seemed to agree that agencies and advertising are in flux, but so it has ever been.

All change then, but with some constants remaining. Having worked for an agency focused on sports, media, and entertainment for 21 years, Lindsey suggested it best to conclude with a sports metaphor, which emphasized that the basics will always be crucial.

“The surest way to win the race is to know where the starting block is, where the finish line is, and to make sure that you are the best in between," she said.

"That, to me, is a perfect metaphor for how we run agencies: the starting block is ‘who you are, what you do, what are you good at, who do you have with you, what are the foundations you have to operate from’. The finish line is where your clients want you to be and what they need you to do.

"In between, if you can’t be the absolute best and operate with excellence then don't try.”