The big squeeze: how consolidation puts pressure on agencies with Michael Farmer from Farmer & Co

What happens when agencies suddenly lose their identity? This episode is about a big topic that concerns many agencies, often without them noticing it directly. Agency purchases, connections, clashes and the dissolution of agency brands. Maike Farmer explains why more and more agencies become part of large networks, what that does to their culture, creativity and quality, and how independent agencies should now react strategically. The following conversation with Maike is in English. An episode with a broad view for everyone who wants to set up their agency in the future. At this point we would like to tell you what it is about us and our partner Teamleader in this podcast. We invite exciting personalities from the agency scene to each episode. With your knowledge and your experiences, we want to create inspiration and motivation. We also want to help you create your own agency. And that is where Teamleader with its powerful agency software comes in. It already helps over 4,000 agencies to keep deadlines, to control budgets, to increase profit margins, to plan capacities and much more. So that you can fully and completely concentrate on your creativity. From agencies to agencies. And here we go with today's episode. Welcome, Michael, to the podcast. Welcome back, should I say. Welcome, Michael, to the podcast. Welcome back, should I say. Thank you for having me here. It's a great pleasure to speak with you always. And I did enjoy our two sessions last time we are together. Let's see if we can break some new ground today. Yeah, exactly. We also enjoyed that conversation as well, did our listeners. So let's get cracking. Agency consolidation. We've said the words many times in my intro. It has been a defining trend over the past few years. From your perspective, what's really driving this push? Well, Robin, I think it's a great question. Robin, I think that agency consolidation is another name for cost reduction. If we look at the history of what holding companies have been doing in the industry since the late 80s, 1986, WPP first acquired J. Walter Thompson, later named JWT. Now the name has disappeared because it's been consolidated with Wunderman, YNR, and VML. That's been a long time. It's been almost 40 years since holding company WPP made its first acquisition, its first major acquisition. Throughout the last 40 years, the holding company playbook has been cost reduction. Cost reduction of the agencies that it has acquired over time, and that cost reduction was engaged in in order to drive up margins, which in turn would drive up the share price of the holding company and make the C-suite executives very rich, as well as the shareholders. So when we talk about consolidation, which is a newer trend, at WPP, we had a combination of JWT with Wunderman and YNR with VML. And then those two big entities put together as VML last year, four agencies into one, and there have been other consolidations as well. But what it really does is to eliminate a whole layer of top management and the back office support staff that deal with it. So it really is another form of cost reduction, but with major consequences for the cultures that used to exist and used to allow these agencies to differentiate themselves from one another. Of course, you know, when you put together two agencies or three or four, you end up eliminating the cultures that made them distinct. And I think one of the problems of consolidation is this loss of culture, which really creates an industry in which the operating units, the ad agencies, the stockholders, the shareholders, the shareholders, the shareholders, and the ad agencies that exist are rather undifferentiated from one another. They don't have anything special to say about their histories. I hear you say a lack of culture and undifferentiated as well. You have been specifically outspoken about the impact of holding companies on creativity and profitability. So exactly how do these holding structures hinder agencies? Well, holding companies are in the business to make money, and there's nothing wrong with that. There's a long tradition outside of advertising, back in the '70s even, of industrial companies buying up dissimilar units of businesses as a way of driving up their own share price and driving up their own profitability. There's nothing wrong with that. It's perfectly normal. The problem is that when the holding company derives its growth and profitability from doing things that weaken the businesses that they own rather than strengthen them, then I think there's cause for alarm and a legitimate cause for critics like myself to call them out for what they're doing. And although the first 20 years or so of holding company operations, let's say from 1986 to 2006, although their cost reduction activities in getting their agencies to reduce the number of people they had, although that was a good thing because agencies were highly overstaffed during the media commission days that went up to about 2006. So getting rid of those surplus resources was a good thing. The problem was that around 2006, all the surplus resources were gone and the holding companies only knew one game to play. They only knew the cost reduction game. So in continuing the program of giving highly aggressive budget targets to their agencies, for which bonuses are attached, in giving them those aggressive targets, they forced the agencies to start cutting out muscle rather than fat. And of course, the first thing to go were the senior people who were the most expensive. So over time, there has been a reduction in the number of senior people, the number of mid-level advertising executives who had had vast experience in working with clients. And as a result of the downsizing programs, the cost reduction programs, the agency staffs have become more junior and more junior. And of course, that could only have an impact on the quality of the work that was being done, the quality of the strategic advice that was being given to clients. And I think that there has been a reduction in the quality of the agency outputs, the quality of the agency work for their clients, and a deterioration in the performance that the clients themselves have enjoyed from spending vast amounts of money on advertising. So I don't think this has been a good thing. And I don't think that the combination of agencies that destroyed cultures has been a good thing either, because it eliminated all those important things that allowed one agency to differentiate itself from its competitors, and give clients a basis for choosing one over another. As soon as all the agencies are undifferentiated, then the only thing that a client can think about is who's the lowest cost. And that's pretty much where we are in the industry today. So the holding companies basically are margin obsessed. They try to increase these margins by cost cutting, and that has its effects on both the quantity of the work and the quality of the work, you say? Yes, yes, indeed, Robin. And of course, I don't think the holding companies could have anticipated that in the early 2000s, we would have the invention of digital and social media in association with the advances in the internet. And of course, that invention, that initiative caused a massive increase in the quantity and type of work that agencies would have to do for their clients. Now, at the time, they might have thought, well, our agencies are more junior as a result of our cost reduction activities. But that's a good thing, because this digital and social stuff is for younger people, they know how to do it, they're comfortable with it. So they can crank out all the different creative deliverables that will be required. On the other hand, the one thing that was missing was whether or not the digital and social advertising that was being done by these junior folks was strategically correct to solve the low growth brand problems that advertisers began to have around 2006, 2007, 2009. So they couldn't have anticipated the massive growth in volume of work. But when they did, they continued to respond by reducing costs. You know, today, the average creative in a creative agency is doing somewhere between 250 and 300 deliverables per year. Whereas in the old days, when it was TV, radio and print, they only did about five, six or seven during the year. So the volume has been massive. The amount of supervision by executive creative directors has gone down. And the amount of work is really beyond what any creative can do well. And I think that the decline in quality of the work that has resulted from this has not benefited advertisers, because to be perfectly honest, the big major advertisers haven't grown very much since 2009. So there's a whole set of knock on effects that I think that came out of number one, agency cost reductions driven by the holding company to agency consolidations driven by the holding company, and three, the introduction and large acceptance of social and digital deliverables by advertisers. Let's assign some blame here, because we're going to talk a little bit more about this later, but we're going to talk a little bit more about this later. Are clients actually complicit in this model? Or are they just responding to the market pressures themselves? I think the clients are very complicit, because I think that they, like the agencies that they hire, were really unsure about what this digital and social advertising world represented for them. What they were told by the people that had the greatest interest in their adopting it, and who were they? They were told that you were going to be able to personalize ads now, so that Robin, and Kenneth, and Michael, and Susan, and whomever out there will have ads that are personalized, not only for their demographics, and their geographical location, but their actual buying preferences based on their income, and based on their personal characteristics, which are very highly documented in social media. So I think advertisers were kind of sold this idea that this digital and social thing was going to be very good because of their ability to personalize ads through ad banners, online videos, Facebook posts, and everything else that's involved. Now, whether or not that personalization actually worked is another question. But I think that marketing departments were under enormous pressure to prove that they were good at this, that they understood it, that they were sophisticated, that they were not lagging behind. They were out there at the cutting edge of digital and social, and adopting it for their brands and with their agencies. And I think that they spent more time trying to adjust to doing it, they spent more time doing that, than figuring out whether it actually worked, and whether it actually would drive improved brand performance. Now the data, if we look at the publicly available sales data of the largest advertisers in the world, that data tells us that their sales stopped growing in 2009, just about the time that digital and social came in, and their growth rates have been below GDP ever since. So apart from a few sterling performers like Netflix and Apple, for example, and Google and Facebook, most of the big advertisers have had serious growth problems since the adaptation of digital and social media. And I don't know whether it's because the advertising agencies are not doing great work for them, or whether it's because the advertising agencies are not doing great work for them, or whether it's because the advertising agencies are not doing great work for them, or whether it's because the advertising agencies are not doing great work for them, or whether it's because highly personalized ads that are on websites and on your iPhones or any phone that you use are just simply annoying, and you don't click on order to buy, you skip over them. So I think that the digital, social, highly personalized advertising still has a case to prove. And I don't think that advertisers have put in enough time and enough analytical effort to get there. I think they've spent more time trying to get lower costs from their agencies, and more of that than figuring out what will really drive brand growth again. One thing that I remembered from reading your Substack, which to our listeners and viewers comes highly recommended, of course, is a little phrase that I read, something about forcing agencies, holding companies, forcing agencies to change the way they think. And I think that's a great phrase to use. I think that's a great phrase to use. Now, allow me to take a bit of a naive position here. Don't increased margins lead to more value? Margin increase could be accomplished by being paid for the amount, the growing amount of work you're doing. That is possible. But increasing margin by reducing the number of people, that do a growing quantity of work, is not a healthy way to do it. Because there are limits beyond which an individual creative can do better and better creativity. You know, we opened this session, Robin, with you asking whether the holding companies were having an adverse effect on creativity. I would say that that is a knock-on effect of focusing on downsizing, in a growing workload market with declining fees, and reducing the number of people doing the growing workload. I think inevitably, when you push a creative to do more and more work, you know, up to one deliverable a day, you're going to have a knock-on effect on creativity. And then if you go in another direction and say, let's take a look at how P in Procter & Gamble sales or Unilever sales or Colgate sales have evolved since 2009, 15 years ago, you notice that their sales haven't been growing despite the huge investment in media. So, you know, I think there's a pretty airtight case that quality has gone down at least to the point where the advertising that is being done is not effective in driving brand growth. for the legacy producers, for the people that were successful, you know, in running their brand operations from 1960 onwards. You know, P&G, just as an example, grew at nearly 9% per year for 48 years from 1960 to 2008. Some of it, of course, from acquisition, some of it from new products, some of it from line extensions. P&G has been a remarkable, remarkable fast-moving consumer goods company. And they've also innovated in the technology of what they do in toilet tissue and baby diapers. They invented Pringles as well, a different type of potato chip. And Tide, they've continued to make improvements in the detergent. It's called Tide, over here. But yet, yet, in 2009, after growing for 48 years at 9% per year, they've been growing at a half a percent per year since. And that's with their massive investment in digital and social media. So I think there's just something that started to go very wrong at the advent of digital and social. And it was, of course, after already some 20 to 30 years of cost reduction by ad agencies at the behest of their holding company owners. So there's the evidence that something's fundamentally wrong. Let me quickly summarize where we got in this conversation up until this point. So since 2009, agencies have been set up as these digital online marketing assets. And the reason for that is that they're not working. They're not generating value for the actual brands. And instead of saying, all right, we need to rebuild the way these agencies work and revisit our playbook, they're actually doubling down on the cost cutting, thus further impacting negatively the value that these agents inherently have. Do I get this? You got that right. Let me add. Let me add one thing to it, Robin. In addition to what you just described, they also fire their agencies every three years thinking this isn't working. Let's run an RFP. Well, let's run an RFP. Let's line up a whole new group of agencies to bid on the business. And of course, the winner comes in at an even lower cost, lower fees than the people that got fired. And in addition, they're getting new agencies that work exactly the same way as the old agencies. So, you know, they're not really getting anything very new. Agencies are pitching business the way they've pitched it forever. They're proposing lower costs to do the work. And those lower costs lead to them getting winning. Somebody wins the business. And then, you know, after three years, they get fired and it goes to someone else. So there are a lot of ways that the fees come down. Part of it through procurement, being upset that they don't think they're getting value for their money. So they cut fees. And part of it through them firing the agencies every three or four years, along with the chief marketing officer who has failed to deliver, and then bring on new agencies who work at lower costs and don't do a better job. It's just a vicious circle. I do think that where mentally the industry, starts to need to think about what works. We've adopted digital and social. It's, you know, two thirds of the spend today in media is digital and social, but it doesn't seem to be delivering brand growth. Do we need to rethink this? Do we need to go back to more traditional advertising? I don't know. That wouldn't seem to be a healthy solution. But there needs to be more focus on figuring out what works and then finding an agency partner that will work in a way that works to drive brand growth again, instead of just delivering a lot of material at low cost. Let's talk private equity. In the past five to 10 years, we've seen a lot of PE firms entering the market as well. How does their approach compare to the traditional holding companies? Well, that's a good question. And in some ways they're different fundamentally because a private equity concept is that they buy companies in the same way that holding companies buy companies. But the private equity firm has the established strategy of thinking about unloading them to someone else in five or six years after they fix them in some way and made them more desirable. desirable, or fixable. You know, they might buy companies that are undercapitalized or having performance problems that they think they can fix. And so they buy them using a lot of debt rather than their own money. And they make sure that they develop an understanding of why they have been underperforming and what they can do about it. They then work with the top management to develop turnaround plans that the top management are highly incentivized to achieve. And they monitor the performance very carefully to make sure that the plan that has been developed is actually delivering the value and that the management is following the game plan. And then in five or six years, if they're twice the size and more profitable and more viable, they may spin them off, float them. Or sell them to someone else or even have management buy them out. But it is viewed as a transactional thing. You know, they don't buy and hold. That isn't their game. And they're not really using their own money. That's the other thing. And they're really highly engaged with the management. They recognize that it's management's job to turn them around. The private equity firms themselves are not terribly top heavy. So, you know, they do rely on management to do the right thing. Let's contrast with a holding company that is presumably buying these companies forever. And they too are buying companies that have problems. Otherwise, they wouldn't be able to buy them cheaply. And they also expect the management to turn them around. But they expect to keep them for a long period of time. Now, the problem is that the holding companies, as it has evolved, at least in the advertising industry, have been way too lazy and way too passive in that they just said, look, we're going to give them tough budgets that they have to make every year. And it's their problem to figure out how to do it. And that's led the agencies to figure out that the best thing to do is to downsize every year. The holding companies only started being activists about 20 years ago when they were, and I'm taking this from really my understanding at WPP, where Sir Martin Sorrell, around 2003, seeing that digital and social was coming in, was unhappy that the major agencies, the big ones that he owned, Ogilvy, J. Walter Thompson, Y&R, etc., that they themselves were not diversifying. They were not adding the services that their clients were going to need. And Sir Martin said, well, they're not diversifying, but WPP has. I have digital and social agencies. I have below the line agencies. I have search agencies. I have PR firms. I have market research firms. So now I'm going to be the entity that goes to market. And I'm going to create holding company relationships. And there has been a very large change in the power structure within the advertising industry in which now the holding companies are the ones that are going out and answering the RFPs, supported by their agencies. But for the most part, the agencies are not out there on their own anymore. But just because a holding company is out there trying to win business for all its agencies doesn't mean it's doing the right thing, because what they're doing is cutting price even further than the agencies would cut the price. And if they win something, then they're telling the agencies, hey, it's great. We just won this RFP. Here's the amount of money we have to play with. And it's so inadequate relative to the amount of work that's going to need to be done that it's only contributed to the problems. A private equity firm would not do that. A private equity firm that owned an agency would expect the agency to go out and get its own business and to operate in a certain way. And I would suspect that the private equity firms that are buying ad agencies are putting in a lot more effort to understand why the agencies underperformed so badly. So and let's let's take the final difference between the two. The private equity firms are not public companies. So as soon as they buy an agency, the agency's performance is a private affair. It's not out there for Wall Street or the city to look at. The holding company, on the other hand, buys an agency and then the consolidated results are available for everyone to see and open for inquiry every time there's a quarterly earnings review. So there's a big difference. And I think that the private equity firms have a huge advantage in able to work, behind a curtain of private ownership and not trying to work out there in public. The other thing is Wall Street is greedy and it wants to see improvements every quarter. Well, the kind of turnaround that a private equity firm is looking at is a five-year turnaround, not a next quarter turnaround. So I think Wall Street puts a lot of pressure on the holding company to deliver ever improving results every quarter. And the only way they can do that, is to slash costs. It takes their eye off of the ball. It takes their eye off of the fact that they should be there trying to create long-term sustainability, not just quarterly earnings improvements. So I think the, you know, I think that the holding companies are likely over time to sell off their assets to, to private equity firms because the holding company, the company models failing, it really is failing strategically. Even if it looks okay from quarter to quarter by Wall Street. Now, Publis' group is in a kind of different class. They seem to be operating in a different way and they're growing and they're profitable, but WPP, IPG, Omnicon, Dentsu are not doing well. And when I say the holding company model is failing, those are the folks I'm talking about. So somewhat counter-intuitively, perhaps the, the profit seeking of private equity could actually be a positive force in the industry. Oh, yes. Listen, there's nothing wrong with seeking profits. That, that is, profits are the measure of whether you can charge more than, than your costs, you know, in order to run a business, but there are good ways and bad ways of making that profit. Slashing people in a talent business, not a good idea. Struggling to figure out what clients really need and tailoring an agency services for that. That's a good way of making profits. In fact, just think about it, Robin. If an agency said, my mission is to help my clients grow. And if an agency engaged in developing a proper scope of work that actually worked, and I'm not an expert, I don't know what that might be, but let's just, let's say they're smarter than I am on that. And they could figure out what worked and they actually could turn around P and G or Nestle or Colgate or Unilever or any of the other underperforming advertisers, right? If they could do that, don't you think they wouldn't get fired after three years? Don't you think they could charge more for the work they do every year? Because the amount that they would charge would be peanuts compared to the value that their clients would get from greater growth. So an improvement of 1% in growth for any of these consumer products is worth tens, if not hundreds of millions of dollars. And if an agency got a fraction of that, it would really improve their bottom line and their margins. So in a way, I think that chasing margin rather than chasing better performance for their clients is just the wrong way to go. And I don't think the holding companies have encouraged agencies at all to think about how they do better work for their clients. I think they've tried to figure out how they do what they do at lower cost. Okay. Michael, it kind of feels to me like agencies are stuck between two extremes. On the one hand, the bureaucracy, the top heavy structure, the business as usual of the holding companies. On the other hand, the smarter profit chasing of private equity. Is there perhaps room for a third model, one that balances financial health with creative freedom? Yes. Well, I think that a privately held agency is in a position to pursue that, but they are trapped by their own history. It used to be, if we go way back, if we go back from 1960, you know, when the creative revolution occurred and television started was really a big thing. Highly creative work sold products. That was the lesson that we learned from Bill Bernbach with the Avis advertising and the Volkswagen advertising. That was the lesson that we learned from Ogilvy in the Hathaway shirts advertising. They didn't worry about client performance. They worried about creativity. But as it turned out, because the economy was growing and because consumers were spending money on products and services, highly creative advertising on television in particular did drive brand sales. Okay. So the problem was that when the economy economic growth slowed down, which it did after 1990, and now we've had 30 years of much slower GDP growth, 30 years of consumers already having a lot of things that they didn't have back in 1960, that there isn't the same kind of effect of creativity, you know, and mass television has kind of gone away. So you don't have whole nations looking at the same channels. Looking at the same commercials, talking about them at the office if they saw something and it was particularly funny and particularly good. Nothing like that. Now we live in a highly fragmented environment in which everybody watches Netflix or Apple TV or Prime Video or any of the other things that are streamed. We don't have a mass culture anymore. We have a highly fragmented culture. It's harder for advertisers to reach them and people don't buy in a mass way like they did between 1960 and 1990. So everything has changed and it's a little harder to be really creative and unique and have it drive sales the way it did so long ago. So something else is required. I'm not sure what it is. And I think the smart minds in marketing departments and at ad agencies should just take a pause and say, what we're doing isn't working. What we're doing in cutting fees and downsizing isn't working. What we're doing in expanding our scopes of work to do more and more digital and social isn't working. So what will work to drive legacy brands again? We're up against Amazon and other, you know, e-commerce providers. You think about how brilliant a job Amazon has done over the years to where they have, they have solved almost every consumer problem. They have almost everything that is sold under the universe. You can get it in one or two days. You can return it for an instant refund. You can read consumer reviews about it, which probably have more credibility than any advertisements have, right? And it's instant. Gratification without much risk. Pretty hard to beat that. Yep. Really hard to beat that. You know, I have a favorite breakfast cereal, Weetabix that I learned to, you know, eat when I, when I was living in Europe for 20 years, it's a little harder to get in the U S guess where I can get it the next day. Amazon. Yep. I can't get it at my local supermarket. But a drone will fly it into the bar. Well, I don't have drones yet, but you know, uh, I have people that deliver right to my front doorstep and then take a picture of the fact that the product is there. And if I, if I were to order it today, I would get it tomorrow. And I certainly wouldn't pay the price premium that I might pay if I found it in a, a health food store or something like that. So that's just a perfect example where, you know, Amazon can give me food products too. And, uh, and I don't even have to leave the comfort. Of my nice, warm, you know, house here to get it, that solves a lot of problems. And so I can understand why it's difficult for traditional advertisers to, to sell their products against that type of competition. You just made a perfect segue to my, my closer question for this part, which is about leadership, because of course, Amazon would not be where it is today without the leadership of a guy who you may hate or you may love. Um, I'm not gonna disclose my own position, but who throughout his leadership and his smarts did build a fundamentally different company than that was out there. Um, now for this discussion, you have praised publicis for evolving within the holding company model. Does that mean that it's not specifically the ownership structure that's broken, but also the, the leadership philosophy. Yeah. Oh, it's definitely the leadership. And you know, if you read anything about the history of Amazon, you realize that Jeff Bezos, uh, was driving all the attempts to succeed. And you know, Amazon, it wasn't like it was a very smooth thing they've sold. They've tried to sell jewelry. They sold books. They sold, you, you name it. They've tried a lot of things that didn't work and very often he was fighting his management. His management was much more conservative than he was. I mean, think about the following things. Number one, the innovation where Amazon would basically tell you where you could buy the same products, maybe cheaper on their website. How about that? Uh, and, uh, the instant, uh, refunds that they do. There are a lot of innovations that they make. where he was totally focused on what a customer needed, not what his company needed. And a lot of the innovations that Bezos made when he was really driving the ship, not his yacht, the ship, the great Amazon ship, a lot of those were counterintuitive. It was like, well, why should we give people information? Why should we give them the bad reviews? Why should we tell them how much money or how much cheaper they could buy it on another site? Why should we even provide a link to those other sites? This is crazy. But he was thinking, you know, I'm going to make it, I'm going to create a very trustworthy site. And I think in many ways, Amazon under his leadership and then under the leadership of the people that have succeeded him, they've kind of solved every uncertainty that a customer faces. When a customer pulls out his wallet or his credit card to pay for something, there's a lot of uncertainty when you make a purchasing decision, but look at how easy they've made, you know, the, the returns, you know even though they probably don't get a very good economic return from, from that. Now let's contrast that with a separate issue, Artur Sadun, who inherited or worked in tandem with Maurice Lévy, at Publicis. They had a unique concept. They were not going to both be a combination of center-led, Publicis-led and independent agencies that could kind of do their own thing. They really decided that they were going to pursue the power of one. And it wasn't going to be all about creativity. It was going to be about creativity plus technology. Plus analysis. Analysis plus data. And they were going to integrate those together and they were going to figure out how to do it. And they invested in a platform to do it. But most importantly, I think, they invested in changing the culture to where the people at Saatchi, the people at Leo Burnett, the people at Publicis USA, the agency, et cetera, had to think differently. Now, I will say, in all honesty, that I was a critique of what they were doing because I was working with several Publicis agencies at the time. And I could see that this was going to be a takeover of the culture by the holding company. And it looked to me like the same kind of takeover that was going on at WPP. And I was critical of it. I was wrong because Artur Zadun did it with great seriousness. And great thought and great analysis and great intensity to where he really fundamentally changed the culture. And now, I don't think the agencies are very important. You know, you don't hear very much about Saatchi or Leo or Publicis, the ad agency, or any of the others that they own. You hear a lot about Publicis Group because he's created a single company, a single global company out of it. With the right strategy. On the other hand, I think WPP, Omnicon, and IPG, and Dentsu have not had the same kind of intense leadership. I think that each of those chief executives has spent too much time thinking about Wall Street, thinking about pleasing Wall Street, maybe even thinking about their own remuneration. I don't know. They're all pretty well paid. John Renn at Omnicon makes well over $20 million. A year. Philippe Krakowski's been making, I think, about, at IPG, $11 or $12 million. And he will pocket $50 million if this Omnicon IPG thing goes through. That's too much money, I'm afraid, given the fact that the people running the agencies and doing the work are so underpaid. But, you know, I think that Publicis Group and the other holding companies, there's a big gap between them. And then if we go back to Amazon under Bezos, he did a brilliant job. Now, do I like or admire him as a human being, a very rich human being who's not involved in the business? Who cares what anybody thinks about him or his personal life or his politics? That doesn't matter. You have to evaluate leadership when the leaders are in charge and what they've left in place. And Bezos. He's left in place the world's greatest company for meeting the needs of customers by any stretch of the imagination. Allow me to draw us back into a little bit of fantasy land, because imagine that I run an independent agency. I don't want any holding company acquisition or any private equity investment. What would be the keys for me to stay competitive and financially healthy without needing to, quote, unquote, sell out? Oh, Robin, I think we can make you rich right now. Here's what you need to do. Oh. First of all, here's what you have to do as an independent agency. The first thing is you are going to sit down with your management team and have a long weekend retreat. in which you think about where have we been? What kind of clients do we have? How successful is our work? What do our economics look like? What kind of people do we have and how are we paying them? And are we paying them a wage that allows us to continue to recruit the best in the world and to do a real self-assessment? And after you've done that assessment, I think you might come to the conclusion we need to move in new directions because we've been operating like the rest of the industry. And let's say that you had access to a recording of this one hour of conversation that we've had already, okay? You're the CEO of an independent agency. You've heard everything that you and I have been talking about. You say, here's what I'm going to do. Number one, I'm going to help clients grow again. I see the future as delivering improved performance for my clients, not delivering digital and social deliverables or delivering media buys in a lot of different channels. I can do that for you. No, nothing like that. You're saying, I'm going to deliver improved top-line performance for my clients. And I'm going to do that by being really smart about the kind of work that I'm going to propose or agree to work for them. And I'm only going to work for chief marketing officers and chief executives at advertisers who understand and want that from me. In other words, I'm not going to work for people that want a bunch of deliverables at the lowest price possible. I'm not going to go that route. I'm going to be selective in the clients that I pursue. And so with your team, you're going to figure out what it is you have to do and what skills you need to develop in order to, number one, understand and fix client brand problems, almost like a consultant. Number two, be really smart about scopes of work and the media that you're in, you know, knowing how to do it. How much you're going to do in TV, how much you're going to do in print and radio and direct and search and Instagram and all the other stuff. And then most importantly, you're going to insist that you get paid for the work you do and you're going to adopt foreign companies' scope metric technology to do that. But what I'm saying is there is a formula of things that you would need to do in order to completely differentiate yourself from the rest of the industry and create something that is more like a hybrid firm between having a consultant's analytical capabilities on client performance, et cetera, and the best of a creative agency's understanding of delivering work that makes a difference and changes consumer buying behavior. And you know something, Robin, if you did that as an independent agency and you said, you know something, I'm not going to be like everybody else. I'm not going to enter into RFP competitions like everybody else where the client's looking for the lowest cost. I'm going to seek out chief executive and chief marketing officers who want to use marketing and my creative slash media services to drive everybody else. And in that respect, you'd be finding a very, very rare breeds of chief executives, chief marketing officers on the one hand, and you'd be creating something unique in the marketplace. So, Robin, I think that if you follow the number one, our mission is improved brand performance for our clients. Number two, we need to understand why those brands have been underperforming and what they need to do. Three, we will put together and execute scopes of work that are appropriate for fixing the brands. And four, we will be paid for the work we do. And if we succeed in that, we expect to stay with our clients forever. We expect to be able to raise our price every year because of the added value that we're delivering. We expect to be able to pay and recruit the best rates in the industry and get the best talent. And to pull away from everybody else. We will grow. We will be successful. But being privately owned will be the secret. Having the right mission and the right skills will be the other part of it. You heard it here first. So, I'm going to start the world's best creative agency slash consultancy. It's going to be called Rare Breed. I will be, of course, involving Mr. Michael Farmer from Farmer & Company to define my scopes of work. It's going to be epic and we're going to be global leaders. Well, you'll need a media capability because don't forget the way things work today. The first thing that happens is people decide what media is appropriate rather than what creative executions. But I think that it is possible to re-merge in your organization or to develop strategic alliances with a media agency so that you are actually ensuring that you're doing the right thing. Assuring that your clients spend in the right channels and in the right amounts. I have one final question for you, Michael. Okay. Yeah, let's look at it from a different perspective. So, for the listener at home, there's a person you can see in this call. His name is Kenneth. He is the big research man. Let's say he also has an agency, but he wants to sell. What's the one piece of advice you would give somebody like Kenneth? Well, I'm going to say, why do you want to sell? I mean, have you reached? Are you 65 years old and you want to? Could you sell to your management? Could your management raise the money to buy you out? Do you really want to sell to someone who will take over the management and the running of the company? I mean, the question is, why do you want to do that? But if you're destined to do it, then I think that you probably should be looking for a private equity firm that already has experience. And the business and a track record in helping the ongoing management of an agency to continue to thrive and to grow and to do better work for its clients. But I would not go to a holding company. I would not sell out to anyone that's publicly owned. If you know anything about the need to generate quarterly earnings, it's going to kill whatever you've developed thus far. So try to keep it within the private realm. Sell it to your management. Sell it to private equity. And you're going to assure that it has a better chance of flourishing in the future than if you were to sell it to a company that is publicly owned. I guess we're both going to get rich now, Kenneth, with our respective agencies. Michael, as always, you've given us so much to think about. Thanks for joining us. Well, Robin, you know, it's always... Always a pleasure to talk to you. And you always help our podcast to get to the heart of the matter. And I think it's extremely important for executives today to really understand the nature of their problem. Their problem is their clients aren't growing. Their problem is they're trying to solve pricing problems through cost reductions. And they have misdefined their problems. And therefore, they've misdefined their solutions. And they've made things worse for themselves. So I think, if nothing else, Robin, I hope this podcast helps any of the listeners who are in leadership positions to understand that they need to rethink the problems that they have. And they are fundamentally price performance on the one hand. And it's the growth performance of their clients, not the fact that they're high cost and they need to reduce their costs. So I think cost reduction is the worst solution for the wrong problem. And I hope that we've, you know, we've chipped away at that today. And I think, Robin, you've done a great job helping us to focus on it. Thank you very much, Michael. Kind words. Please remind our listeners, by the way, where they can find out more about you and your work. Well, I can be, I can be reached at mfarmer at farmerandco.com. I publish weekly a Substack article called C-Sweet Blues, C-Sweet Blues, meaning the blues that senior executives have and trying to run their organizations. And I can be reached through that. I write articles. I write on this particular subject. And I would welcome hearing from anybody. I also have a website, www.farmerandco.com. And would be happy to hear from anyone and to either dispense advice or opinions or in the best of all worlds, help them from a consulting standpoint to be more successful doing what they're doing and to solve the problems that they encounter. So thanks. Thank you very much, Robin. Thank you, Michael. And thanks for listening and watching. See you next time. That was Agency Live Germany with Michael Farmer. 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