Creative Ad Agencies Shake Up Legacy Model/WSJ/June 22


Under pressure to produce more work for less money, DDB and others look to move faster and more efficiently

Budweiser’s ‘Wassup’ commercials, which began airing in 1999, have become part of pop culture.ENLARGE
Budweiser’s ‘Wassup’ commercials, which began airing in 1999, have become part of pop culture. PHOTO: ANHEUSER-BUSCH INBEV NV

DDB Worldwide has helped transform brands with some of the most memorable advertising campaigns of the past two decades, from the “Wassup” commercials for Budweiser to the “I’m lovin’ it” tagline forMcDonald’s.

Now the famed DDB agency, founded in 1949 as Doyle Dane Bernbach, is facing its toughest makeover yet: reinventing itself in the face of a rapidly changing digital ad landscape.

THE AD REVOLUTION

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Under pressure to produce more work for less money or risk losing clients, creative agencies are trying to tweak their business models to move faster and more efficiently. Marketers have been calling for a more nimble ad model for decades, but the cry has grown louder in recent years as brands look to better reach consumers across a growing number of platforms.

“Technology has now enabled consumers to have an expectation of brands and companies that is much quicker,” said Wendy Clark, chief executive of DDB North America. Clients “need partners that are built on that marketplace of speed,” she said.

Many big marketers are looking to cut agency fees. They are pushing agencies to produce more content, shifting ad budgets to less traditional media and moving away from “agency of record” deals—retainer-based relationships in which a single agency was responsible for most of a client’s projects that in some cases lasted decades.

Critics of the agency model argue that traditional agencies move too slowly and are inefficient in how they charge for services and how they compete with new rivals from the consulting, digital and technology industries that are ramping up the services they offer directly to marketers.

“If a creative agency looks today as it did 10 years ago, it’s in trouble,” said Pivotal Research analyst Brian Wieser.

In response, Omnicom Group Inc.-owned DDB in January started adopting what it calls a “flex” approach in North America to break down silos between different departments, collaborate with outside partners more effectively and embed the client earlier in the creative process. It is no small feat, considering that DDB has 2,000 employees across North America.

Decades ago, advertising agencies took months to come up with a splashy idea for a brand’s 30-second TV commercial. Nowadays, agencies are tasked with producing content for clients in larger volumes on an ever-growing array of platforms—from online video toFacebook and Twitter—in real time.

“The agency model that exists was not built at a time when the marketplace looked like this,” said Ms. Clark, who is leading the DDB Flex effort. She joined DDB this year from Coca-Cola, where she helped roll out the beverage giant’s “Share a Coke” campaign and expand the company’s presence on social and digital media.

Under DDB Flex, the agency can create flexible and customized staffing structures and compensation models for different clients to make sure brands “never pay for more than you need,” Ms. Clark said. For a client that is open 24 hours a day, DDB, for example, believes that some facet of the agency should also be available 24 hours a day to create content, Ms. Clark said.

“To me the greatest risk is not recognizing this shift in the marketplace and not evolving the way we work. Because gone are the days that clients force-fit into fixed agency models,” Ms. Clark said.

DDB isn’t the only Madison Avenue firm looking to restructure to stay relevant. Publicis Groupe SA, for example, earlier this year unveiled its Sapient Inside initiative to help bring in digital and consulting capabilities to its creative agencies.

Last year Brad Jakeman, PepsiCo Inc.’s global beverage group president, warned fellow advertisers during a marketing conference that the agency model is “not going to bend, it’s going to break” if agencies don’t keep pace with digital change.

“The [agency] industry in general has had a great big gap when it comes to innovating their own business models,” Mr. Jakeman said in a recent interview.

While DDB’s Ms. Clark said she doesn’t think the agency model is broken, she does believe it has to keep changing.

“We’re constantly restless,” Ms. Clark said. “There’s no endpoint to agency evolution.”

—Suzanne Vranica contributed to this article.

Write to Nathalie Tadena at nathalie.tadena

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