Start-up ad agencies being squeezed out.

Talking to people in the advertising world there seems to be a feeling that start-ups face an uphill struggle far greater than the past.

There is a conspiracy of factors that make the jump to independence a bigger gamble than say ten years ago; recession, mega-groups, fragmentation, procurement, finance, etc. The barriers are very real and the risks also very real. Most start-ups begin without a client and therefore no income. This can become pretty scary very quickly as those phone calls go unanswered.

One of the big shifts over the last decade or so is the decline in bigger, well known advertisers taking the risk hiring an unknown, unproven agency. My guess this is a combination of two realities; first clients being locked in to global deals and second a risk averse attitude amongst clients. Also the fashion for wacky names might present another challenge. The marketing manager tasked with finding a new ad agency might think twice about telling his boss he intends hiring Pink Underpants who opened their doors a month ago in a mates attic.  It’s got ‘You’re fired’ written all over it in these worrying times.

My informants all seem to agree decision making is getting longer and longer. Quite a few clients seem to indulge in a lot of ‘tyre kicking’ – checking out agencies – but parking the move to a serious pitch scenario for the time being. For a start up this feels like the next decade, not next month. I’ve heard numerous agency founders saying ‘Don’t they understand we need to know where we sit in their considerations?’ The point is they don’t understand and neither is it relevant.

The early clients for start ups are very important as the agenda gets set one way or the other. Adam & Eve had a big leg up with the John Lewis business early on, 18 Feet & Rising picked up Nationwide in no short order. Stalling on the signature client can lead to a succession of smaller clients which can become a self-fulfilling prophesy.  Next is the work, reputations are made or lost by the early work. Most successful start-ups end up with campaigns they manage to bury at some point as their star rises.

My advice to any group thinking about starting in mainstream advertising today would be concentrate on creating a winning team that has major strengths in the core skills with nothing missed plus a serious commercial person in the mix from day 1 minus six months. Most conversations I’ve had with prospective founders of a new agency is a major lack of experience and  understanding of basic business management.  Guaranteed to lead to a crisis in month six.

Paul Hamilton is a founder of a shiny new ad agency called Will:London. Paul said the admin of starting a new company was time consuming and prolonged, often dealing with issues they had never dealt with in the past, and getting in the way of focusing on getting their client acquisition programme. His advice is get someone to get all this done for you whilst the founders concentrate on the stuff they know.

The early ’80′s (doesn’t it sound like a lifetime ago) saw the ’2nd wave’ of genuinely talented upstarts open their doors (AMV, GGT, BBH, WCRS, LH-S, et al) and they all seemed to pick up quality clients in double quick time. In the ’90′s it was HHCL, RKCR, DFGW and Simons Palmer. Each agency added defining clients early on that shaped their futures. HHCL had first direct, RKCR Virgin Atlantic, DFGW Daewoo (big news at the time) and Simons Palmer had Nike.

However despite the barriers seemingly greater at the moment the industry needs talented start-ups to stir things up and light a fire under conservatism. It feels like the perfect time to be creating distinctive work amongst the sea of mediocrity out there at the moment but the issue of risk averse clients isn’t helpful. The pool of brave clients has probably gone from a river to a trickle over recent times.

Wrangler appointed Simons Palmer a year after the agency started giving us a high profile client that provoked articles in the national press  such as ‘the jeans war’, i.e. versus Levi, another early client for BBH. I don’t think it’s a case of ‘summers were better then’, there seemed to be plenty of clients attracted to a bunch of independent chancers trying to create something worth being talked about. Added to Wrangler were clients such as BT, Nike, PlayStation, amongst many others. Our peers at the time also added good quality clients and we all competed like mad to beat the others with the latest high profile win.

It has never been easy to start a new agency and get in to top division inside 3/4 years but it appears to be a much tougher ask today. My view is any team thinking about making the leap must be totally serious, properly funded, with a solid team covering the key disciplines, and not leaving anything to chance. I also think it is worth the reality check of thinking about who has started within recent times, check out where they are today and try to analyse why the have succeeded or failed as sadly several names have sunk without trace.

Whilst the times are challenging it is worth remembering a 1% share of the broadcast advertising market generates a very sizable agency. The issue is working out the 1% of quality clients prepared to take the risk and be brave enough to appoint the new kids on the block.

 

 


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