Elanso

Is there really such thing as an "un agency"?

I'm always on the lookout for patterns: And the industry is full of them right now.  Consider but a few sources:

"I see the Agency of the Year being something different than the agency of today. The Agency of the Year will not consist of media planners and buyers. It will consist of strategists and project management, and it will spend the majority of its time on intelligent work rather than the grunt work that is traditionally where its efforts are placed. I see that the digital technology companies could become the Agency of the Year. I even see Google could become the Agency of the Year, because the definition of an agency needs to evolve. I see the Agency of the Year not having flash developers but focusing its efforts against design and art direction."
Is This The Year of the Un Agency?

"This downturn will be a perfect storm for the agencies. Many are not properly geared up to deal with the digital age especially the very big names. Ogilvy’s announced to cut 75 jobs from its NY headquarters (around 4% of total workforce). Most of cut comes from Ogilvy One which is the DM and interactive arm. Yes, it has always been treated as an “arm” and there were never any vision of serious investments in it. Their largest clients including Dove (they did some good work for them) and IBM are moving money to branded content and digital initiatives. Anyway they were never considered a key player in the digital world."
Ad Agencies and the Perfect Storm

"Service businesses run on talent, and when those services involve the Internet, technology or data and marketing analytics, that talent is in extraordinary high demand and expensive. Digital marketing may not command the lion’s share of ad spending today, but it will at some point in the not-so-distant future. This means investing in that talent now, knowing that it won’t fully pay off until the future. Obviously, this is hard to do in digital media buying, since the margins are so thin and the projects aren’t always very scaled, but that is the cost of market entry. Of course, it may mean using geography as an advantage. Some of the hottest ad agencies today are not in one of the traditional media metropolitan markets. The Martin Agency is in Richmond, Va. Crispin Porter is in Miami. Wieden Kennedy is based in Portland, Ore."
A New Era for Ad Agencies

"agencies are infamous for overworking and underpaying. That however, is probably a bit outdated in terms of current applicability. Agencies have lost the spark that once had employees willingly staying until witching hour. Today people work late under duress...if at all. And it really doesn't matter how much money is being thrown at execs....because the VC world can come up with more."
The Brain Drain

"Agencies don't spend nearly enough time strategizing for ourselves. We purport to be the strategists for our customers, but there is enough of a gray area in all the things we touch that even in online, there isn't a huge amount of accountability. We suggest a strategy, we decide how it will be measured, and we get buyoff from the customer. If it doesn't seem to be working as the campaign rolls out, we shift strategies and attack from another direction.

We try to keep our fingers on the pulse of advertising innovation on behalf of our customers -- but we don't hold our finger to the wind on our own behalf. We don't invest in research or strategies that let us evolve or be particularly proactive. Mostly this is because everyone at an agency is focused on winning, keeping and improving business for the next quarter's revenue. We have no idea how we'll differentiate from competitors in five years -- because we don't have the time to think about our own business."
Automating the Ad Agency

These are all recent articles written by credible sources.  So what's going on?  Well honestly if I even tried to answer that question, this post could easily turn into a white paper.  But for what it's worth—here are a few issues I see with the industry.  Call them challenges—call them opportunities, but I believe that we're seeing a serious shift in an industry that at it's core has not had a lot if incentive to adapt.  Until now.

The Bottom Line
Agencies focused on profit alone may find themselves shrinking as they continue to chase dollars.  Without investments in infrastructure that can thrive in digitally enhanced environments—agencies who rank revenue as priority #1 may end up with short term gains and long term losses.

Award Culture
From what I can tell, agencies are still rewarded for their creativity—only the industry's definition of creativity is narrow.  Clever, "viral" campaigns —special effects and  the art of good editing/directing command the attention of the people who hand out the awards as well as the press.  It's no wonder agencies put so much pressure on their staff to win awards even if it means producing something that has zero value to the average user.  I looked through the portfolios of the "hottest" agencies of 2008.  Guess what the majority of work made up those portfolios?  Yup—flashy micro sites, clever campaigns and ubiquitous banners.    There are glimmers of hope.  Crispin Porter who practically invented the "clever viral" category with their infamous subservient chicken recently designed a site for Dominos Pizza which features a visually simple interface that allows users to customize their pizza and then order it a local store (ones that support the online customization anyway).  Take away the ordering part and the effort might still win an award—and that's part of the problem.

Environments
As Joseph Jaffe eluded to—some agencies still don't exactly have the healthiest or most financially rewarding environments—this may have been fine in the past, when copywriters and art directors considered anything outside of an agency to be a dead end for their career.  For digital talent it's different—digital people including designers, developers and content strategists can find challenging work on the client side or start up and it's not seen as a bad thing.  If some agencies don't fix their culture problems—they may find themselves with talent who look the part but don't actually play it.

Billing 
This is an area I know least about.  But I've worked at several agencies with starkly difference billing structures—and I always seem to come across articles that raise this as an issue.  Seems to me that agencies need to get a better handle on how to bill out their resources in a way that doesn't cause as much client confusion.

These are just a few thoughts I have on the topic—I would recommend reading all of the articles I quoted here.  Agencies employ some of the best and brightest people—and despite some of the challenges outlined here, they help influence the quality of products and services, not to mention culture.  Still—change is afoot and adaptation may be necessary in order for innovation to happen.  In the words of fellow "fuzzy person" Jon Campbell:

"ad agencies are fundamentally broken and ripe for innovation"

Let the innovation begin.