Seven years ago I wrote an article, The Dinosaurs of Cannes, thinking that the industry was headed for the dustbin of history if it didn’t change. While I wasn’t at Cannes this year, I was still surprised that many of the images on the social feeds coming out of Cannes hadn’t changed. There were scenes of late night parties and various agency yachts, including BBH and Vayner Media. Damn, I wonder how clients of these agencies feel seeing the fees they are billed going toward yacht rental in the south of France?
In the last month or so since Cannes I’ve been speaking to a lot of CMOs about issues within their agencies. It’s the same old story. Inflated pricing, expanded timelines and switching talent. I’ve been delivering the same message to all of them: It’s over. Working this way is no longer needed or relevant. It is estimated that 35% of every dollar of expense for a large company goes to keeping the bureaucracy alive. My hunch is that inside agencies that number is much higher, between 60 to 70%.
It’s ironic that now with digital tools you can replace the 60 to 70% bureaucratic costs of matching and managing the right talent to a project and instead put more resources into expanding the creative and strategic talent that can help drive your business forward.
This is really a story of mis-alignment. Every ad agency was built on an analogue business model with the goal of removing friction from the process of advertising for their clients. They fell into a trap. The only way for them to increase their revenues is to put more people on the work, slow the work down or sell more new business, using the best talent to focus on new business pitches. All three of these scenarios makes them misaligned with the goals of a client’s brand.
A well known CCO told me that his agency had done a $140,000 project for a client. To experiment with how this would compare to working in the gig economy, he sent the brief to the on-demand talent platform Topcoder. Topcoder came back with a bid of $5,000 for the same work. In the digital age work is getting done in new ways that removes friction and unnecessary cost.
Agencies are now getting overwhelmed by hordes of freelance micro-entrepreneurs, removing even more friction. They had a choice. They could have reinvented themselves. They didn’t. Now, they must rebuild their foundation on a digital business model or risk ending up in the dustbin of history.
Yet these freelance micro-entrepreneurs need new digital ways to connect with their clients, manage their workflows and extend their teams.
Recently, I was at Upwork’s Work Without Limits Executive Summit where Stephane Kasriel, Eric Gilpin, Bonnie Sherman and the rest of the Upwork team announced their new agency experience to provide a more streamlined way for companies to work with creative and strategic agency talent.
Upwork has had a robust community of companies and agencies working on the platform with over 14,000 agencies earning money on the Upwork platform. This represented over $200 million in project work in 2018.
When I was starting Victors & Spoils creating such a platform was the dream. And, it will only explode from here. Companies spend nearly $458 billion annually on contingent statement of work (SOW) spend.“As the use of contingent labor continues to increase, the model for engaging agencies is evolving to better meet the needs of the modern enterprise,” said Bonnie Sherman, VP of Product at Upwork. “We’re addressing the fragmentation within the landscape by delivering a fully transparent agency solution that quickens the time-to-hire and the delivery of quality work on large, high-value projects. By 2022, our goal is to become the destination platform to find both freelancers and boutique agencies.”
One of the benefits that Upwork is creating is that it removes friction from both sides of the marketplace, for companies and small agencies alike and that removes the cost of bureaucracy.
As I reviewed the platform there are several new features that should make the workflow easier for everyone:
- The Discovery Dashboard helps companies scope their projects.
- Curated Agency Listings allow businesses to drill deep into one category of work by browsing a list of pre-vetted agency profiles, enhanced agency profiles.
- Bring Your Own Agency allows organizations to onboard their pre-existing agency relationships to the Upwork platform.
For the last few months Open Assembly has been working with a couple of clients through the Upwork platform. It has removed a lot of friction not only for the client but has simplified most of the things that small agencies and consultancies find difficult—signing negotiating contracts, work flow and payment.
My hunch is that platforms like Upwork will replace holding companies as a way of organizing and delivering agency talent to clients. As we’ve seen in so many other industries, open systems, based on a digital operating system, beat closed systems every day of the week.
The revolution is on.
Editor’s note: This article originally appeared on Forbes.