"This could be the death of this industry," one of the UK's most senior ad executives told me last week. He was talking about the worrying trend for big company clients to treat creative and media agencies as they would, say, a supplier of industrial commodities.
We’ve all heard the "growing power of procurement" moans over the years, but 2013 has seen some companies take their purchase of creative services into a dangerous new zone; to a point where it could prevent a real upturn in the fortunes of some agencies next year, despite the otherwise positive forecasts you will read in this issue.
While Publicis Omnicom Group was the big story of the year in advertising, the trend in payment terms has arguably been the most significant development. This week, the IPA and the Marketing Agencies Association roundly condemned GlaxoSmithKline’s latest demand, which is for agencies pitching for a place on its global digital roster to state a percentage "rebate" and sign-on "bonus".
But this was just the latest in a raft of requests in 2013 from clients seeking to pay less or later for marketing services or getting agencies to pay upfront for the very "privilege" of working for them.
In the spring, a handful of US corporations tried to impose 120-day payment terms on agencies; then, in the summer, Premier Foods asked its shops to cough up an "investment" of about £40,000 to remain on its roster.
Such developments are a major concern for the big global holding groups. Indeed, it is one reason that POG was created in the first place: agency bosses’ recognition that they need scale to counter the growing might of global clients. But they could prove fatal for smaller shops, whose negotiating power and cash flow are more vulnerable.
Some argue that this is an inevitable process of capitalism, but great British advertising and media have always thrived on smaller, independent agencies. They fuel the ideas, the thinking, the talent pool for the developing networks. Indeed, this year has been characterised by a lack of progress from most of these smaller shops. Meanwhile, huge global media reviews have been manifold.
The good news – for it is Christmas, after all – is that the consumer spending and more impressive lobbying have given ad executives newfound confidence to resist unreasonable client pressure. They are fighting.
Thankfully, one suspects there will be enough enlightened clients – brands willing to take creative and entrepreneurial risks – in 2014 for smaller agencies to thrive. As ever, Campaign will be encouraging this driving life force for our business.
The article first appeared on www.campaignlive.co.uk
