The Power of Independent Agencies
Independent agencies are a powerful force today. Adweek found that, in 2019, 41% of US creative pitches had were by independent agencies. COVID-19 has accelerated the opportunity for independent agencies even further, with the shift to e-commerce, the shift to digital, and the move to digital business transformation through marketing technology. The nimbleness and autonomy of independent shops, as well as their freedom to think differently, allows them to innovate and transform quickly. Clients need and want this.
Conversely, holding companies are struggling to make up for lost revenue across their portfolios this year. According to MediaDailyNews, revenue for the advertising industry is expected to plummet by 10.2% due to reductions in ad spending, and holding companies will be the hardest hit. JPMorgan Chase analysts have said the largest and most heavily leveraged companies, like WPP and Publicis, and those most exposed in Asia, like Dentsu, are most at risk from advertisers cutting spending, while IPG could fare better because of its data and healthcare business. Furthermore, financial pressure is leading to furloughs, staff reduction, and shortcuts. Independent agencies are not as reliant on a bottom line, so they can better weather these storms on behalf of their clients. They can invest in their clients, and, as importantly, give up profitability to preserve their ability to grow. Holding company agencies just do not do this because of the pressure to make profits regardless of the environment.
Healthcare advertising has not been impacted as dramatically as the broader advertising industry. In fact, digital healthcare advertising spend is on the rise this year. eMarketer estimated a 14.2% growth in digital healthcare ad spending in 2020, second only to the computer products and consumer electronics category.
As independent agencies pivot to realize the opportunity created from these trends, holding companies continue to rely on at least 70% of revenue coming from traditional services, per Credit Suisse, making transformation slow and incremental. The opening for agencies whose services tie directly to e-commerce, digital, innovation, and business transformation has never been greater. In healthcare, the opportunity is further accelerated for these groups, making independent healthcare agencies the industry darling.
As we move into 2021, how might this new dynamic impact the healthcare agency landscape and client agency choices? Clients will continue to move their business to agencies that can serve them best, and independent agencies in healthcare just might be at the top of that list.
This article is also featured on Pharma Live.
References: MediaPost: Global Ad Spend Forecast To Drop 10.2% In 2020, Linear TV Ad Spend To Decline 16%; AdWeek: Wieden and Kennedy Leads COMvergence’s 2019 Creative New Business Barometer; eMarketer: Digital Ad Spending by Industry 2020; Credit Suisse: Ad Agencies Beyond the Pandemic, July 8, 2020; Gartner; JPMorgan Chase