Agency Life: COVID-19 Will Cause 4 Permanent Changes

The remote work experiment caused by COVID-19 will transform agencies.

Automation will become even more integral to agency workflows as consumer media habits shift, changing the nature of talent and services.

Highly office-driven cultures will shift to a more remote, distributed workforce, as companies reduce their real estate holdings to drive efficiencies during the economic downturn.

And agencies will rethink the necessity and extent of business travel – especially when it’s not directly related to client work.

“Agencies will continue to play a critical role with Fortune 500 marketers,” said Laura Desmond, former Publicis Groupe exec and CEO of Eagle Vista Partners. “At the same time, it’s clear for the last decade they’ve needed to evolve.”

Here are four agency trends that will become permanent in the wake of the pandemic.

  1. More automation

Agencies are betting data-driven and automated services, such as addressable media, automated creative production and first-party data management, will remain stickiest with clients looking for efficiencies in a downturn.

On IPG’s Q1 earnings call in April, CEO Michael Roth said Acxiom is better positioned than other IPG businesses to weather the crisis because of its focus on data management, which is always essential for clients, and addressable media, which is more measurable than linear.

“These solutions should be of particular interest to our clients in the current economic climate,” he said.

Omnicom CEO John Wren and WPP CEO Mark Read both noted on their respective Q1 earnings calls that their agencies are embracing automated production, which has led to record turnaround times and efficiencies for clients.

At Omnicom, one creative agency produced 20 video spots for a client in less than two weeks. And at WPP, creative agencies have turned around spots in one to two weeks that would’ve taken two to three months under regular circumstances.

“The [timeline] between getting a brief and executing a super idea has really collapsed in a very positive way,” Wren said.

Automation is often catalyzed by the need for efficiency. During the 2008-2009 economic crisis, marketers embraced programmatic buying in part because of the cost benefits, said Brian Wieser, head of global intelligence at GroupM.

Not all services can be automated, such as strategy and creative ideation. And even automated platforms, including demand-side platforms, data management platforms and customer data platforms, require expert management. But automation does beget new skills. Agencies will have to adjust their talent pools accordingly.

That’s already happening at GroupM and Omnicom, where traditional TV buyers are moving on. And IPG and Publicis acquired thousands of data scientists and technology experts with Acxiom and Epsilon, respectively, changing the ratio of talent at their organizations.

“[Those acquisitions] bring a broader data expertise beyond anonymous data,” Desmond said. “They also bring a product focus.”

More automation could lead to reduced headcounts on top of ongoing layoffs and furloughs. IPG is already preparing for the possibility that it won’t recall all furloughed workers, according to internal documents obtained by Business Insider.

“The question is, will those jobs come back?” said Forrester analyst Jay Pattisall. “I do see less people [at agencies] overall.”

  1. A distributed workforce

Agencies have an office-centric culture driven by in-person collaboration and ideation. But being forced into a remote work setup has opened their eyes to the benefits of flexible workspaces.

While holding companies are contingency-planning for phased returns to the office, Omnicom’s Wren told more than 80,000 employees they don’t have to come back if they’re not comfortable, per Campaign. Read of WPP said his agencies, which employ approximately 130,000 people, will likely never return to full office capacity.

“I think we will be more flexible [with] working in the future,” he said on WPP’s Q1 earnings call.

Until a vaccine is widely distributed, agencies will become even more accustomed to remote workflows.

“If everyone is demonstrating they’ve been just as effective, you have to imagine that does change things,” GroupM’s Wieser said.

With more staff working remotely, agencies can hire a distributed workforce, which is especially attractive if people flee crowded cities during the pandemic. WorkReduce, which places remote talent at media agencies, has received more requests from such people looking for remote work opportunities since the pandemic began, said CEO Brian Dolan.

“This virus could be with us for a while,” he said. “That could cause people to be less excited about being in Manhattan or San Francisco.”

Agencies can also lean more on freelance talent to deliver on client needs at a lower cost, or fill the gap on certain projects during hiring freezes.

“It can be financially advantageous to just have the head off of their books,” Dolan said. “They can cancel the contract with more flexible terms and no risk of layoffs.”

  1. Less real estate

If more employees work remotely long term, agencies can find major savings in real estate.

Agencies have been consolidating their real estate holdings for some time. WPP has moved its agencies in cities such as Manchester, Madrid, Detroit, San Francisco and Mumbai into the same building under its “campus” model. Havas has embraced a similar model in more than 60 cities around the world, where it places agencies across the holding company into the same building called a “Village.”

More of that is likely to come. Behind payroll, real estate is the most expensive line item on an agency’s P&L, Forrester’s Pattisall said. Reducing that cost will be even more prudent now that agencies must invest in safer workplace layouts and allow for phased returns.

“We will review opportunities to reduce our real estate portfolio, given the changes in our operations and the way we are working,” Omnicom’s Wren said during its Q1 earnings call.

But agencies won’t abandon their offices completely. Many are locked into long-term leases, and services that require heavy collaboration, such as creative and production, are not as easily done from home.

  1. Less Travel

Agency road warriors may find themselves grounded more often in the wake of COVID-19.

Even before the pandemic, some questioned the amount of business travel required for conferences, events and client meetings. If agencies find they’re able to conduct business effectively without as much travel, they’ll be even more critical of those budgets – especially in a downturn.

“Going to conferences is a function of people meeting with other people in the industry,” Wieser said. “If there’s another way to satisfy the goals of those relationships, then travel is less necessary.”

When it’s safe, agencies will likely still travel to meet with clients and court new business. But as they adapt to pitching remotely, they’re realizing some client and prospect meetings can be done just as effectively over a video conference.

“It’s never been easier to interact with clients all over the world,” Wieser said.

 

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