Future of advertising: Agency as open source platform
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Tag / open source
FAQs – Open Source Ad Agency business model demystified
In an earlier article, I proposed a new business model for advertising agencies. As I see it, it is a logical next step for the industry to remain relevant and to thrive. Unless it evolves like this, expect marginalisation of creative industry.
I have been speaking with a few industry leaders. There were some interesting themes of concerns and ideas emerging from these conversations. The biggest is about ‘human creativity’ that most think is a trump card that no one can wrestle away from them. There is a grain of truth in that assertion. However, look at the numbers – it doesn’t take creativity for google and facebook and consultancies to steal creative agency’s lunch. Agency margins have never been this low – which means, the kind of creativity we so dearly hold, has never been valued so lowly. Digital ecosystem has fundamentally shifted the value of our kind of creativity and we seem to persist in denial. Most of my creative and intelligent classmates are not in agency business (from a school that was historically setup to train future agency leaders), but in media, brand management and digital businesses. That should tell you something.
Anyways, here’s some of the broad themes of concerns about my idea of ‘open source ad agencies’ shared by senior leaders in the industry. Weigh in to make the idea better.
Essentially, there were six themes of concerns for the idea –
1. Becoming ROI oriented (SMEs want quick results)
2. Possibility of becoming fragmented unprofitable business
3. Will it upset existing corporate clients?
4. Existing client architecture – many small businesses within larger ones
5. Should the tools be really foolproof.
6. Reputation at stake
Cost of opportunity: Firstly, I will look at these decisions from a broader perspective: if this idea is even remotely possible and say a competitor creates this, would we be able to bounce back to compete in the ‘winner-takes-all’ game of online services in the future?
This idea will need a little longer horizon to payoff and a fair bit of disruption (but not necessarily with existing clients).
1. Businesses want ROI from advertising. Should we fight it or embrace it?
I understand the concern. This is actually true about not only small businesses but also larger corporates. I see companies already looking at big data to cut down on every conceivable inefficient costs even in high growth developing economies like India and Sri Lanka.
This is inevitable. We have to be prepared for it. The digital systems, when used appropriately, helps make better sense of data. One of the minor points in the article was about opening and curating all of agency’s historical campaigns effectiveness data across the globe. Now that would be a herculean task to make that data consistent and usable by a bot, but it is possible. But once we have that data at one place and an algorithm to parse through it and add to the body of knowledge about what works – we will have the single most valuable tool in advertising – an oracle that can guide real time about effectiveness.
The tool and the data remains agency proprietary. Only the results are visible to paying customers. This is where the premium will be charged in the future.
How would the agency like to become the only creative agency that can give effectiveness predictions with decent enough (and improving) confidence levels?
2. Fragmented unprofitable business
That is a real threat. It will be a low margin high volume growth. And as such, in a way it is a second business for the agency. (Perhaps a sub-brand of the agency)
To really evaluate it, we will need to know the cost of its implementation and possible market sizes we can realistically win. I can do that, but that will be a longer exercise. There will be big cost and efforts to create the system, but the fruits of the system, however marginal, will continue for a sufficiently long time.
Also, the way I envision it, this system doesn’t cut down manpower that is currently employed for corporate clients. But the new system that is largely consumer facing, will need smaller human support who will manage bots. So costs would be dramatically less and hence help profit margins.
3. Will it upset existing clients?
I have envisioned it to be an ‘addition’ to existing business, not a disruption to existing structure. So in a way, this new additional service can delight existing clients with the new intelligence that we will have from the community and user, without them being concerned about their data leaking into the Open OS.
I have made a distinction in my article – when decisions are made by committees/ hierarchies, they require people on the other side to work with. So the existing system with all its checks and balances will exist for such clients.
The additional online interface is for clients who usually make decisions individually (personal brands, SMEs). These two segments, who will pay less, will never have the kind of servicing, planning, creative support that the corporate clients have.
So that takes care of the expectations.
The biggest concern is the safety of their data. Again, corporate client data need not go through the open digital system, it can exist off the grid like it does now. What goes in the big data pile that will inform the effectiveness bot, is case studies and older data perhaps. There could be ‘opt-in’ mechanism with clients to ascertain what client data remains forever secret, what comes out eventually.
4. Existing client architecture – Treating smaller brands from big corporates as separate SMEs
That is an important point that I overlooked in my article. I see this as an opportunity to add value to their businesses. This model creates a sliding scale of services. what this allows is, no business, howsoever small, needs to leave the agency or become unprofitable for us just because it is a prestigious client – there will be space for all sizes of businesses without it straining profitability.
5. About creativity and promise of foolproof tools
This is the interesting part. Nowhere in the consumer journey is the creativity itself automated. The community might help them brainstorm or find a smaller shop/ freelancer who could help the client. Or at max, the client will be redirected to agency office if the scope of work is large enough. The creative output is always through a human. So we can continue charging premium for access to agency rockstars.
What the broader algorithms are helping clients with is – strategy, research, competitive mapping, analytics and critically – a confident direction.
The way I see it is, we will need to do two things: set the right expectations and make our existing tools smarter.
First, smarter tools. I fully appreciate the concern about tools being misused. As they sit now, agency briefs or strategic frameworks, are static guidelines. So it leaves even basic question open to interpretations.
In my experience, we often face the problem of receiving ‘bad briefs’ or incomplete briefs from clients. Then it becomes a guess game – what the client might really need/ want?
But let’s look at what BCG does for its interactive cases. Its a guided online journey to solve a business case. It has a simple interface that forces consumer to seek for the right data and right perspective to inform the strategic challenge.
Something like this could help set the expectation and help learn the tools first.
Then, the user will be guided through a smart algorithm (automated strategy framework) that will ensure that the right business problem is identified.
Often, that is half the creative work – identifying the right single-minded problem to solve.
And the process will help people in doing that.
Next comes the human interface – the actual creative interpretations and campaigns.
There are two possible options for clients – either to pay premium and access agency rockstars. Or find cheaper freelancers (Possibly agency certified? another revenue stream?) who they can find on our community and who can help them. Similar to uber’s rating for its drivers, or amazon’s ratings for its suppliers, we can have ratings for our freelancers. This mechanism has worked so far in most industries – even 99designs.com which is in similar space, but fundamentally different.
6. Reputation
Perhaps, to begin with it could be a controlled roll out or with another brand.
Setting the right expectation should help a lot. At the start of consumer journey it should be clear that what they will get is an Agency process, not Agency creative.
The consumer journey could make it very clear owing to its subjective nature, Ogilvy is only responsible for its creative output by its people, not the algorithmic output of a plan/ brief.
1. For free – access to free algorithms, certain datasets and case studies to all. cannot expect creative output or a definite solution, only a direction.
2. Personal brand wizard – wizard will interactively guide in creating a brief with client data. that they can then share with people in the community for ideas. None of which is a creative output or a definite solutions, again only a direction.
3. Small business boosters – Online collaborative tools (like slack, skype, etc) used to provide services with planners/ creatives depending on Scope Of Work (SOW). These could be a single team of 20-30 people (spread globally in 4-5 key agency offices) for the entire globe. They can help create creative solutions with quick turnaround. We will have to take responsibility of their success/ failure.
4. Full service – Corporate clients will see Agency as the most contemporary and innovative agency in the world! Who can deny that if we make this real. Besides, the first three options will create a substantial bank of possible new business leads.
Having said that, I understand, this is not the complete picture and we will have to dig a lot deeper to understand the massive implications of this move.
But can this be our new purpose? To make effective branding possible for everyone in the world.
The Advertising Agencies of future will be Open Sourced
The alternative ‘new normal’
Sir Martin Sorrell, perhaps the most powerful person in the advertising industry, recently said that the “new normal” for the global advertising industry is that of “low growth.” I think that is not necessarily true—if we examine the underlying assumptions about the source of growth for the industry.
The advertising industry currently works on a pre-digital era assumption: Individuals and small businesses cannot be a sustainable source of business. Most agencies work almost exclusively for big corporate brands (apart from the token CSR/ NGO work that can help them win creative awards at Cannes). This strategy worked for the industry in the 20th century, since much growth was yet to come from globalising markets, increasing consumptive lifestyles, proliferating capitalist economies, etc. So agencies didn’t need other sources to grow.
But now, as the world stands (almost) completely globalised, consumptive lifestyles have maxed out and capitalist economies are struggling from one bailout to next, the advertising industry is finding that growing with only big-spending corporate brands is much more difficult than it used to be. Creative agencies are being squeezed by competitive pressures and demanding clients, who prefer to work on project basis rather than on retainer basis. Agency business was never as uncertain as it is now.
But what if advertising agencies actually embrace this uncertainty? What if we expand our horizons to embrace a wider set of branding efforts?
An open approach would be key to this.
In this article, I’ll discuss why “open source” is the answer for higher growth (and how we’ve so far gotten it wrong). And then I will articulate exactly what it means for agencies to go “open source,” and what will that entail.
The advertising business’ long tail
Let’s begin by examining two potential sources of growth for the advertising industry.
First, consider that 95% of enterprises across the world are small or medium enterprises (SMEs). If advertising is about helping businesses grow, then why don’t we help this 95% do that?
Yes, this would require a fundamental shift in the business model of advertising agencies, but would it not be worth it? Let’s look at the possible worth we can tap into.
SMEs contribution to GDP varies from 16% in low income countries to 51% in high-income countries. Let us assume they spend 10% of their revenues in marketing, out of which, say, 2% goes in creative/ strategy services. That is the 2% not coming to organised advertising industry right now. That is the 2% spent on work by either amateurs, freelancers, or in-house part-timers—often inefficiently, unprofessionally, and with hit-and-miss results.
Second, note the rise of “personal brands.” To help them grow in their careers, people want to build brands for themselves. At present, this expanding pool of potential customers can only look at self-help books, blogs, and other “gurus” for help. They don’t have access to professional services that can help them grow their personal brands.
Combine these two long tails and you’ll see the potential source of growth for global advertising agencies. The potential is huge, but no one has yet attempted to create an integrated offering for the three broad segments of customers: individuals, small enterprises, large corporate brands.
Change is difficult and scary for everyone, especially (it seems) for advertising leadership. Advertising professionals spend a lot of time bemoaning the death of the agency of record, shrinking margins, and frequent pitches. One gets the sense that everyone sees what the problem is and wishes to turn back time—return to the good old days.
But such nostalgia is a form of denial. And it doesn’t bode well when many in the industry fall back on nostalgia to make sense of their present.
In order to adapt the advertising industry to new challenges and new opportunities, we need to embrace a new idea. It’s not a new idea—just a rather a poorly understood one. The idea is called “openness.”
Misunderstanding ‘open’
‘Open’ marketplaces
We’ve seen several attempts to create an “open” marketplace of creative ideas. For example, places like Adhack hoped to be a “marketplace for ad creatives.”
It no longer exists.
The “marketplace metaphor” gives the impression that “open” simply means “a venue for frictionless exchange.” But that’s actually problematic in the case of advertising, because it treats ideas and creative people as commodities. When one exchanges a physical item for a certain sum of money, the exchange is complete—expectations met. Exchanging ideas, however, is more complicated.
An advertising client does not simply want any idea; she wants an idea that she thinks will help her business grow. Many variables are at play here: a client’s expectations, the client-agency relationship, an understanding of current market dynamics, shared creative sensibilities, an understanding of consumer’s emotional needs, cultural mores, etc. The final expression of an idea is almost always a result of a series of discussions, where the objective gets sharpened and creative work undergoes various iterations as it courses through several feedback loops. It’s nothing like a single transaction.
This mode of working is inevitable in creative businesses; any creative work eventually requires this kind engagement with feedback loops. A “marketplace” of either ideas or people can unfortunately never quite capture this kind of interaction, which is necessary for creative businesses. Advertising must embrace a different, broader, and more effective sense of openness.
Crowdsourcing talent
Some companies have adapted crowdsourcing (which is not an open source approach) to varying degrees of success.
For example, 99designs.com solicits designs from hundreds of designers for a client. Unfortunately, this model is exploitative in the sense that a designer is not paid for her time; she’s only paid if her design is selected. In this way, the system is only useful for budding artists who are testing their skills, building their confidence and portfolios. It cannot sustainably scale to win bigger businesses or attract established creative talent.
Curated and crowdsourced ideas
A third example of crowdsourcing advertising agencies is Victor and Spoils (V&S). V&S is essentially a “normal” advertising agency with a “plug-in” for crowdsourced ideas. They open up some client projects to a set of strategists, creative directors spread across the world who have registered with them.
This idea has obvious limitations for sharing strategically important projects, speed of delivery, feedback mechanisms, and more. As such, V&S cannot sustainably scale because not many clients typically have the kind of patience that is required for the crowdsourcing process. Neither do they have the willingness to experiment. They want effective solutions quickly; they don’t care if those solutions come from within the agency or from consumers.
A better approach to ‘open advertising’
Small businesses know that advertising can help grow their businesses but are unsure about its effectiveness. They don’t have enough money for “experiments.” Before committing money for an ad campaign, they need some amount of assurance that their campaign will indeed deliver business results.
This assurance is possible now with big data analytics. Look at how Google shares some data about user behavior and campaign effectiveness. What if that was available for integrated campaigns—TV, print, digital, outdoor, everything. If a global advertising agency puts together data about the campaigns it has conducted across the globe over the last few decades, big data analysis can provide confidence level “thumb rules” that clients can use to make decisions real time. That is an important development waiting to happen. However, even this is only a part, even if an important part, of the bigger “open” possibility.
Surprisingly, there is no existing body of theoretical or practical work that explores the potential of open values in advertising. But I have a few ideas—and in the spirit of openness, I will explain them now.
Open source advertising agency
Open source:
‘Open’ = universally accessible and open to contributions.
‘Source’ = the proprietary logic that solves a problem uniquely.
Understanding a basic perspective on open source is critical. When people talk about “open source” and its relevance to the advertising industry, they might think only about using open source material to create advertising. Or they might talk about projects where users and a brand team co-create something. Some may use the term to describe collaborative cultures, and others might use the term to talk about crowd-sourced plugins to traditional business models.
All of these ideas are united by the smallness of their perspectives.
I’m talking about applying “open source” in a way that could fundamentally inform the advertising business model. So what is it, in this context?
The ‘Source code’ for advertising agencies is the unique method of approaching a business problem that guides them in finding, what they believe to be, the most effective and creative solution. As contexts and type of business problem changes, so do the methods. Typically, this ‘source code’ is a logical set of questions or framework that guides application of common sense to the work of solving business problems. They do so by enhancing clarity regarding strategic choices that the marketer has but might be blind to. Identifying the right branding opportunity/ problem is half the battle in effective communications.
These tools are very useful because it is quite easy to stray away from basic common sense when confronted with too much data. These tools also help in building conviction towards taking the right direction, when the easier (but possibly ineffective) direction seems more attractive.
These are some of the ‘source codes’: Ogilvy has its “Big Ideal“, “Fusion” and “Do brief.” Publicis has “Lead the change.” DDB had its “Springboards.” Saatchi & Saatchi has its “Lovemarks.” And so on.
And I believe this very decision-making process can be subjected to open source thinking.
Open strategy, open creativity
For example, suppose a firm wants to become an open advertising agency. It designs its own “interface” for creative problem-solving, such that people would be encouraged to use, adapt, and improve upon its planning and creative tools. Next, it will externalizes the wisdom its employees and its campaigns have acquired through the years, making it available to people who can learn from it and use it to inform their decisions.
For this to work, our firm will have to be cognizant of various requirements, and hence different consumer journeys for three broad bucket of clients. Again, these are:
- Individuals seeking help with personal branding at a flat fee.
- SMEs who need help in growing business with limited budgets and where individuals/ small group of stakeholders take decisions.
- Corporate owned consumer/ enterprise brands with high media spends, where decisions are made by committee/ hierarchies.
To be able to cater to these three different segment at the same time, the agency will require a new business model, new practices, and new expectations of revenue growth. To get a glimpse of that interface, we can learn from pricing strategies of online services and adapt them to the advertising business (see Figure 1).
For example, our firm could curate and code tools that make its interface easier to use (not merely accessible)—to all, for free (think of the difference between Google’s search interface now and a Yahoo! search and directory from 1996).
For individual users looking to either build a personal brand or test new business ideas, our firm could provide algorithm-based assistance in formulating strategy (programs that take in key data points to choose the right tools/ perspective). Thereafter the focused “brief” at hand can help the person in finding the right ideas with the help of fellow idea seekers and creators in an open forum (look at the interface of Coursera classrooms, for example).
Say a small restauranteur seeks help making her business grow. She can either access free tools and figure out strategy for herself, or pay a flat fee and access the community of people who might help her. Perhaps she can even find a budding creative artist in the community who could help her in designing art works informed with the “brief” she formulated with the help of an algorithm earlier.
If she is ambitious and is seeking rapid growth—and doesn’t mind paying the fees for access to our agency’s team—then she can do that too.
With millions of people using its free tools, the firm stands to create the “default” language and logic of branding strategy for the industry. The first mover in the “open advertising” game stands to set the rules of that game for 21st Century.
Changing the model
Shifting to open models would help the advertising industry shift:
- From servicing a few hundred clients at max a year, to catering to potentially a million clients a year.
- From being critically dependent on a few large clients for survival, to a hedged bet with the long tail.
- From an enterprise-oriented orientation to more nimble orientation (something adaptable to serve anybody, from an individual to a fortune 100 company).
- From intimidating jargon to simplified tools that most people can use (simple and obvious always trumps complicated and laborious in advertising—may it be in ads, pitches or everyday work).
- From resource allocation per brand, to additional resources for Skype services and transition teams who would facilitate the transition of a project from online open source to inside the agency (and therefore confidential).
But it would not change:
- The creativity that human insight and human-articulated vision can provide.
- The business dynamic with corporate brands (apart from improvements in universal availability of data and tools).
First-mover advantage
The first firm to attempt this kind of open approach would see the following benefits.
New repository of consumer insights. The agency will have access to big data stores and metadata about users’ businesses, their preferences, and their possible growth trajectories. These data will be useful in building agency intelligence, its effectiveness, and its new business efforts.
Mindshare leadership. The agency will set the language and logic of business growth for a million business leaders of tomorrow.
Virtuous cycle of new business growth. Small businesses and startups would grow with the agency and might stay on as they grow big. Communities of thousands of enthusiasts and free tools users will help establish agency brand credentials. Word of mouth generated by the agency’s tools will position it favorably among business leaders.
Attracting good talent. The community would become a channel for budding talent to get noticed. The transparency in helping businesses grow will excite creative talent and attract the best creative talent to the industry again. The widened pool of visible talent and the plurality of projects will help the agency find, train, and mentor the right talent.
Increased marketing literacy among clients and agency personnel. To be frank, many of us in marketing and advertising industry could do with a basic marketing course. Even in 2017, many among us are unsure about digital marketing. Many advertisers could increase efficiency and improve quality of their efforts if they knew about concepts such as “insights,” “emotional needs,” and “strategic choices” in creative ideas and so on. By “opening up” the culture of advertising thinking, we will help increase marketing literacy and consequently increase confidence in marketing efforts. After all, if clients understand marketing better, they will be more confident about spending money on it.
I am eager to work on this idea and bring it to reality. If anyone finds it interesting, please get in touch. We might be able to do something together. 🙂
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Update:
1. Here’s a quick FAQ about the idea basis discussion with senior guys in the industry.
2. Here’s a quicker snapshot of the idea in presentation format, with an appreciation of platform fundamentals.
3. In interest of comprehensiveness, read this idea about pivoting.
The platform idea is a monopolistic pursuit. Everyone cannot aim for such goals. Hence the pivot idea gives two distinct strategies of sourcing growth for agencies.
4. This article won me a 2017 WPP Atticus award.
