Big Marketing Agencies Are in Big Trouble

Or (Why PepsiCo's Global Beverage Group President Hates Agencies)

Last week, Brad Jakeman, PepsiCo’s President of Global Beverage Group, stood up in front of 2,700 marketing and ad agency professionals at the annual Association of National Advertisers (ANA) Masters of Marketing conference, and declared that the traditional agency model isn’t just bending – it’s going to break.

Jakeman’s “pep talk” had a purpose: to explore the role of marketing in an age of disruption, and – given the overwhelming media response to his poignant lecture – it’s clear that many share his frustrations with the current state of the advertising industry and the agency model.

His intent was to shine a light on big agencies that aren’t adapting in an industry that’s always changing. There are many more ways to reach consumers today than ever before, but we, as marketers, are doing a poor job of conforming our advertising messages and tactics to connect with them – seemingly content to fit in with the crowd and preserve the status quo.

"My particular peeve is pre-roll. I hate it," Jakeman stated. "What's even worse is that I know the people who are making it know that I'm going to hate it. Why do I know that? Because they tell me how long I'm going to have to endure it – 30 seconds, 20 seconds, 15 seconds. You only have to watch this crap for another 10 seconds and then you’re gonna get to the content that you really wanted to see. That is a model of polluting content that is not sustainable."

Mega-advertising agencies are no longer nudging (read: pushing the envelope; challenging their clients to innovate and think differently), which is why we’re seeing Fortune 500 companies like Frito-Lay (owned by PepsiCo) abandon the AOR model in favor of hiring several small specialists for specific needs.

There are some exciting agency trends in motion here:

  1. In a world of customizable solutions, the multi-agency model is (finally) picking up steam
  2. Specialist marketing agencies are getting more business (and respect) from brands
  3. Corporate marketers are becoming more promiscuous with their agency relationships

The record-breaking numbers we saw this summer are tangible proof of the third trend.

In what is now dubbed “Review-ageddon,” the world’s largest advertisers put nearly $26 billion dollars in ad spending up for review – a number that exceeds the total amount for accounts reviewed over the last three years combined, according to a Morgan Stanley report.

If mega-agencies don't take the necessary measures to acclimate, they could be in big trouble – the days of working with a single AOR to handle all marketing duties will soon be a thing of the past, and the tide is rapidly turning in favor of nimble, talented specialist marketing agencies disenfranchising the mega-agencies.