Advertising holdings firms may be gradually losing their might.
Ajaz Ahmed, the visionary behind AKQA, just launched Studio.One - a new agency aimed at disrupting the "sluggish, top-heavy" ad groups that have been struggling with falling revenues and share prices since the pandemic. Ali Lyon asks: "Are these old guard agencies on their last legs?"
Ahmed may be known for his grandiloquent rhetoric, but his scathing critique of today's advertising industry hits hard.
As the founder of AKQA (sold to WPP in 2010), his knack for making bold statements is nothing new - AKQA's mantra included 'Get big or die trying,' and he famously wrote in his book, Notes from a Founder, that 'share of market comes from share of mind'.
But with Studio.One, Ahmed's strongest words are reserved for the traditional titans of the industry like WPP, for which he unleashed his most devastating barrels.
"We're witnessing a paradigm shift," Ahmed says of Studio.One on its launch day.
Unlike AKQA pre-and-post-WPP acquisition, this new agency supports a different organizational structure, outcome-focused billing, and most importantly, lean operations. The result? Superior, cost-effective, considerate work tailored to clients while offering a direct challenge to the gargantuan, bureaucratic ad groups within holding companies.
Ahmed's impassioned broadside against the so-called 'holdcos' comes after three turbulent years in an industry rapidly evolving. Holding companies have failed to keep pace, grappling with structural changes brought about by the tech titans like Google, Alphabet, Amazon, and Meta.
Rather than shell out for costly media buying intermediaries, advertisers are increasingly courting these tech giants directly. Affordable reach combined with hyper-precise targeting strikes at the heart of what holding companies have long offered value. Last year, big tech platforms amassed over half of global advertising spend for the first time ever.
Add to that the rise of AI-generated ads and visuals eliminating the need for high-priced ad agencies, and holding companies' woes are compounded.
Indeed, the diagnostics of the industry's leading lights paint a grim picture. Havas reported a decline in organic revenue, and Omnicom posted first-quarter earnings slides, while WPP's share price has more than halved since its early 2022 peak.
However, Paris-listed Publicis, who leaped past WPP to become the world's largest ad group with revenues surging by 6.3% last year, proves the exception that shows how traditional holdcos can thrive amidst industry-wide upheaval.
Ahmed, who parted ways with WPP CEO Mark Read over the latter's decision to merge AKQA with Grey, attributes holdcos' slow demise to more than just run-of-the-mill market forces. In his estimation, they've also made "misguided" strategic decisions that lead to excessive bureaucracy and diluted value.
"These bloated corporate structures," he says, "result in operational inefficiencies and render them less valuable than the sum of their parts."
Concurrently, smaller, independent creative agencies like Studio.One are on the rise, promising tailored, cost-effective services to an increasingly disillusioned client base. In PR too, Apella Advisors, co-founded by veteran PR executive James Acheson-Gray in 2019, rose to meet clients' growing dissatisfaction with expensive, faceless traditional agencies.
"Senior clients are seeking high-level strategic thinking and agility," explains Acheson-Gray, "and the traditional model offers them a sub-optimal experience."
To invert the pyramid structure and optimize their service, Apella and its peers focus on a smaller number of better-remunerated junior staff. Ahmed echoes this sentiment, stating that Studio.One's operations can be streamlined due to advanced AI operational and business tools.
Although they rely on diversified service offerings and economies of scale, traditional holding companies can adapt to survive. Embracing digital transformation, refining agility, and tailoring services to clients' needs are essential if they are to remain competitive in a rapidly shifting landscape.
In essence, while traditional advertising holding companies face significant challenges, their impending demise is not assured. Instead, they must evolve to relate in a digital-powered world where clients demand personalized, adaptable strategies.
- Ajaz Ahmed, the founder of AKQA, recently unveiled Studio.One, an agency positioned to challenge the "sluggish, top-heavy" traditional ad groups that have been battling falling revenues and share prices due to the pandemic.
- Ahmed's scathing critique of the advertising industry is noteworthy, given his history with AKQA, known for its mantra of 'Get big or die trying,' and his belief that 'share of market comes from share of mind.'
- Unlike AKQA before and after its acquisition by WPP, Studio.One adopts a lean operational structure, outcome-focused billing, and digital-centric services, aiming to deliver superior, cost-effective work while challenging the bureaucratic ad groups within conglomerates.
- The tech giants like Google, Alphabet, Amazon, and Meta have disrupted the industry, offering affordable reach and hyper-precise targeting, which undermines the value traditionally offered by holding companies in media buying.
- Artificial intelligence (AI) is also eliminating the need for high-priced ad agencies, further compounding the challenges facing the traditional advertising holding companies. However, these companies can adapt to survive, by embracing digital transformation, refining agility, and tailoring services to clients' needs.
