Agency holding companies consolidating agencies
In response, agencies are becoming OK with with non-FTE-based payment arrangements that are more equity based, or discounted, or incentivized toward outcomes.
Dentsu seems to have caught on: “DTC advertisers are born from performance, building their brands online through smart targeting, engaging creative and seamless customer experiences, and Mute Six is the leading solutions provider for this hyper-growth category,” said Jeremy Cornfeldt, CEO, i Prospect US in a statement.
Until recently, there were then at the next level, a small number of mid-size holding company groups, such as Western Europe's Havas and Aegis and Japan's Dentsu and Hakuhodo DY.
Although each of these controlled several brands, their range was more traditionally limited, either in terms of geographic reach (in the case of the Japanese companies, who tended to operate mainly in Asia) or the range of services they offer (Aegis for example was a specialist in media, and offered no traditional advertising services).
(The DTC way of doing things also has made other marketers take notice: Digiday Research last week surveyed major brand marketers and found that none of them rely 100% on agencies any more, with 56% running “most or all” of their marketing in-house.) It also spurred new financial arrangements — e-commerce founders often don’t really believe that agency and brand interests really are aligned, so they prefer to do things themselves.Amazon already withholds log-level data from advertisers using its demand-side platform to programmatic buy ads.An Amazon spokesperson did not respond to a request for comment by press time.At the same time, the complexity of the changing landscape, combined with economic pressures, persuaded clients to move away from the traditional method of remunerating their agencies via payment of a flat 15% agency commission towards negotiated fees.
The refusal by clients to pay for inhouse services they didn't use encouraged most large agencies to spin out their more specialised inhouse departments as separate agencies in their own right, with their own fee structures. Media planning and buying departments were the first to become standalone units in the mid-1980s.Direct-to-consumer brands are mostly shy of outsourcing their creative chops to others, but do still rely on agency partners.