Now that industries across the board have realised the magnitude of COVID-19’s impact, it has been understood that advertising agencies of all sizes and types — both legacy as new players — seem to be laying off employees or enforcing pay cuts. Having said that, even before COVID took over everything, adland was grappling with a talent exodus, economic downturn and severe financial pressures.
So, what do adland heads think should be the way forward and how does it plan to emerge out of this crisis.
The dizzying number of suspended events, postponed launches and disrupted travel over the last couple of months seem to have doubled as a series of epiphany moments for many advertisers. However, industry leaders note that despite the dire situation, there are opportunities for agencies. The common consensus is that the agency of the future is the one that can build on diverse capabilities.
Tarun Rai, Chairman and Group CEO of Wunderman Thompson South Asia, emphasizes that agencies need to offer more services to their clients and that the advertising industry needs to have multiple revenue streams to make ourselves a more robust business. “We need a larger share of our clients’ marketing budget beyond traditional advertising. The coming together of Wunderman and JWT has helped hasten that process for us. We can now offer end-to-end business solutions to our clients at scale. Our capabilities now straddle the entire consumer journey from data-driven, targeted communication to on-ground activation and e-commerce. Marketers have, increasingly, been looking for agencies that can offer truly integrated solutions as they worry that working with multiple partners can lead to inconsistent messaging. With the Covid-19 crisis and pressure on marketers to be more prudent and efficient, the need for this integration will be more acute. Wunderman Thompson is in a sweet spot to deliver this seamless integration,” he remarks.
It’s no surprise that tech- and data-focused agencies are in high demand. In a survey conducted by eMarketer, 74 per cent of senior marketers surveyed said that it is important to have an agency with marketing data/analytics capabilities and that this would be a deciding factor in the agency selection process.
Anand Bhadkamkar, CEO, Dentsu Aegis Network India, too feels that tech-capabilities are something clients will look at predominantly as they embrace the digital journey post COVID-19.
"Though we are moving out of the lockdown, from an ad agency perspective, the industry has been largely working from home since the last few months and I think that will continue for a while. Flexibility will be of key importance as we operate. Moreover, embracing digitisation and digital/tech capabilities across the networks is essential. This would entail digitization in offerings at both ends, clients as well as agencies,” he noted.
Bhadkamkar also observed that creative strategy, ideation, delivery, the way you target and reach the consumer have all witnessed a sea of change. “The behaviour of consumers is changing rapidly when compared to what it was pre-COVID. There is a lot of short-term planning and immediacy in the decision making is imperative. Earlier, it was large-format advertising, while now there are several data points available for facilitating a targeted audience or consumer reach through digital and social media platforms. Additionally, it is also about reaching the consumer at the right time with the right messaging to facilitate decision-making,” he explained.
Raj Kamble, Founder and CCO, Famous Innovations feels that the main part of the preparation should be hiring and retaining talent.
Kamble asserts that the industry can't have a short-term view about this. “Lots of big agencies have shut down their offices in other cities, which was very surprising to me,” he said.
Pointing out to what the other preps should be in place, Kamble said it was digitization. “A meme was floating recently - lots of big agencies hired CTOs to convert their traditional agencies into digital, but Covid did that job much faster.” He says that in the last few months, everything is only digital and the convergence of mainline and digital has finally happened. Furthermore, Kamble feels that mainline agencies have an advantage because they have a better handle on brands, strategy and creative and with a little added capability, they can easily take every brand's digital mandate. “Covid-19 has done 90% of the job, now agencies need to continue down that road - choose the right people who understand new media and get them on the board - so that clients don't need to go to 3 different agencies in the future, and creative and digital can be integrated much better.”
With the pandemic affecting businesses and ad spends, advertising holding companies have been preparing for a drop in demand, and have told employees to expect staff cuts and furloughs.
To be sure, there have been enough signals from holding company CEOs like Mark Read, John Wren, Michael Roth and Arthur Sadoun, and this has helped us read the runes of what is down the pipe.
In an internal weekly email to employees, Omnicom Group CEO John Wren wrote that the pandemic has had an impact on the economy and clients' businesses, "and in turn, on ours". He wrote that the company has solidified internal measures to meet the changing needs of its clients. The holding company operates agencies across the advertising world, including BBDO, DDB and TBWA.
IPG CEO Michael Roth too sent out a memo to employees about reductions in staff, salary cuts, furloughs and other cuts in spending.
He noted that IPG agencies are hit by the “significant economic impact that is causing businesses and consumers to decrease spending including clients in especially hard-hit sectors”. Citing the need to adjust to the new economic reality, Roth acknowledged in the memo that IPG has found a need for “a range of options to reduce expenses as we face a business environment without precedent”, including “deferred merit increases, freezes on hiring and temporary labor, major cuts in nonessential spending, furloughs in markets where that option is available, salary cuts and, unfortunately, reductions in staffing levels”.
WPP, one of the largest advertising conglomerates in the world, has announced that the members of its executive committee, as well as the board, have committed to a 20% reduction in their salaries or fees for an initial period of three months.
Closer home, several agencies have implemented salary cuts and lay-offs. A relatively newer digitally-driven ad conglomerate let go of over 60 people in the wake of the massive dent on business caused by the pandemic, a source close to the development shared. Meanwhile, bigger agencies have been trying to weather the storm by slashing staff salaries. Even legacy ad agencies have had to enforce at least top-level salary cuts. An ad giant that has been big on acquisitions axed senior leadership salaries by 10%. It has also been known that another leading agency (its Chief executive recently stepped down) has slashed staff salaries by 9-16%. Moreover, an independent agency that sprung in 2007 has cut staff salaries by 15-50%. Even the ad giant owned by the largest advertiser has implemented a 20% salary cut for its senior leadership team.
Almost every single business in advertising has promised to halt extraneous spending, and freeze hires and pay rises.
A source on the condition of anonymity shared that widespread travel disruption, cancelled events, and economic uncertainty is sure to hit the global advertising sector hard as several marketing campaigns have been eliminated, and ad spend is expected to plummet. “Most advertising companies will experience negative impacts on their business as ad revenues globally dry up. Advertising companies need to tailor their clients' campaigns to fit tighter budgets,” the source said.