"With each consolidation, acquisition, or PE investment, marketing agencies' vision moves further away from being providers of agnostic services and creators of culture to purveyors of enterprise platforms and orchestrators of strategy and execution. Put simply, your agencies will no longer act solely as your agents but also as owners of products/solutions, resellers of technology partnerships and developers of emerging capabilities. The result: reduced headcount, increased reliance on media revenues and soul-searching about agency business models."
"A confluence of factors working together are driving this change, according to Forrester. The nexus of that change: all those factors putting pressure on how agencies charge for services, in turn pressurizing agency structures themselves. Most agencies have long relied on the time-and-materials/FTE/labor-based model, which is getting harder as margins get squeezed from several directions. First, the shift from long-running retainers to "low-margin product-based engagements" is making reliable revenues harder to come by."
Marketing agencies are shifting from singularly client-focused partners to owners and purveyors of enterprise platforms, products, and technology partnerships. Consolidations, acquisitions and private equity investments push agencies toward platformization and away from agnostic cultural creation. Traditional time-and-materials and retainer models face margin pressure as product-based engagements and in-housing commoditize creative work. The shift will drive headcount reductions, increased reliance on media revenue, and significant reevaluation of agency business models, roles, and autonomy as agencies develop and resell proprietary solutions and orchestrate strategy and execution.
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