With a combined revenue of $13.2 billion, the marketing services units of Accenture, PwC, IBM and Deloitte sit just below WPP, Omnicom, Publicis Groupe, Interpublic and Dentsu.
It was 2008. The venue - the global conference of a major ad agency group at a 5-star hotel conference room in Beijing, China. The speaker - the patriarch of the group on a video call from NY. A young, unassuming man in the audience gets up to ask, "Sir, what do you think of the Top 5 consulting companies getting into advertising/ marketing consulting?" The patriarch was unmoved (I guess, people had started asking those questions to him, already). He replied, "Do not forget consultants come and go, you sleep with clients every day, you are part of their journey... I see no reason to fear these things."
Fast forward to 2019. One of the top three consulting companies (by revenue, prestige, growth et al) of the world is also the sixth-largest agency firm in the world. While the business has been built largely on the back of interactive (digital) marketing services, they recently bought majority ownership of a profitable, much awarded, high-profile independent creative agency @NY.
For the first time ever, four consultancies have cracked AdAge's ranking of the 10 largest agency companies in the world. With a combined revenue of $13.2 billion, the marketing services units of Accenture, PwC, IBM and Deloitte sit just below WPP, Omnicom, Publicis Groupe, Interpublic and Dentsu. Last year, only two consultancies - Accenture Interactive and IBM iX - made it to the top 10. (Source AdAge)
What has changed?
While the consultancies always had better access to C-suites (especially the corner room), a combination of a few things is turning things in their favour:
1. Digital is the largest ad spend medium - Of the $600 billion global ad spends, digital is expected to take 41.8 per cent (vs TV at 33.6 per cent) - Source DAN, June 2019 forecasts. This has meant two things:
a. A new dynamic where traditional capabilities of creative and content solutions are not the only pre-requisite. Agencies must help brands manage the entire value chain.
b. Data and analytics is a key part of managing the new ecosystem. As new data/ big data snows brand managers every day, marketers are looking for 'data saviours' who can help them make better sense of the data.
2. Chief marketing officers are now responsible for 'business goals', not 'brand goals' only. This is a new challenge to someone used to spending money judiciously/ effectively - now they are accountable to those spends. They needed a new partner to manage this conversation/ responsibility.
Transparency has become a major issue for marketers. The issue took center stage after the 2016 release of a study sponsored by the Association of National Advertisers (ANA), USA. The study suggested that media companies commonly pay cash rebates/ offer free inventory to agencies in return for large volume media space/ time buys - their concern was that agencies typically do not pass this back to their clients. Two things have happened since this report:
(a) more than 500 RFPs have been issued/ pitches called since 2015
(b) agency holding companies' shares have seen double digit declines (2018 / 2016). The holding companies have seen major changes at the top.
In the ad agency business, trust in the agency's advice was the single biggest intangible that drove agency growth. Senior agency executives would recall that their annual 360 feedback form had a term 'Trusted Advisor' - the single biggest parameter to judge a consultant's importance to the customer (the client). Suddenly, every advice, every relationship came under the lens.
Meanwhile, the consulting/ accounting firms continued to earn respect and revenue across a range of disciplines - strategy/ management, operations, IT/ digitisation, innovation/ transformation and now, marketing. Business Consulting was always more expensive when compared against marketing/ advertising consulting - a downstream expansion at a comparable fee was easy for the consulting biggies.
Riding the change:
It is easier said than done as the consultancies have wider and better access to C-suites, higher credibility (expertise across functions and financial trust) and in some cases, technologically superior lineage. Consultants, often seen as cold/bean counters/ suits continue to miss the marcom industry's ace offering - creativity and big ideas. That leaves the field open for the consultancies to take away the media and digital piece (currently a large portion of group revenues for most holding companies) - more transparency, equal numerical aptitude, ability to navigate procurement departments, good understanding of the media/content business. The growing use of data analytics tools/ programmatic buying/ automation in the media agency/ digital agency business has meant old world buyer-seller relationships, qualitative communications planning instead of numerical media planning et al can be dispensable. To bridge any gaps, a buy out of a couple of promising media/ digital agency networks will do the trick.
Marketing Consulting is another area the holding companies would stand to lose, soon.
Lastly, non-communication research (household panels, retail panels, large scale quantitative studies - syndicated readership studies/TV people meter panels, online panels) could be another major zone of attack.
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All this and more, while we were sleeping with our clients!
(The author is co-founder and managing director, Mediant Communications, a new-age media and communications agency.)