For decades, the advertising industry has been dominated by three main players — the agency networks: WPP, Omnicom, and Publicis.
However, David Jones, the former CEO of French advertising conglomerate Havas (another of the big players, but outside the top three) thinks the dominance of the old guard may come to an end in as little as 10 years.
He has a motive to say so. Jones resigned from Havas in January last year to form what he calls the “world’s first brand tech group,” You & Mr Jones.
While he does not describe You & Mr Jones as a direct rival to the likes of his former employer, the company essentially will be competing with ad agencies for business from brand marketers. Jones told Business Insider he wants to eventually help brands “with every single part of the marketing process: creating, producing, distributing, targeting, measuring — all better, faster, and cheaper using technology.”
You & Mr Jones has raised $US350 million in funding, and has already made investments in crowd-sourcing company Mofilm, content marketing platform Pixlee, and viral news site Mashable.
Jones told Business Insider that clients are “frustrated” with the service they are getting from their ad agencies. It’s not just Jones saying this, a qualitative study released earlier this month commissioned by UK advertiser trade body the Institute of Practitioners in Advertisers entitled “Mad Men to Sad Men” found evidence of a “widespread breakdown in between agency and client communications.” The report (which will be published on the IPA website later this week) continues: “Many of the conversations were highly charged, expressing frustration and emotion. Both sides tended to point the finger of blame at each other.”
Jones thinks there will be a shift away from the traditional agency model.
“[Publicis CEO] Maurice Lévy and [WPP CEO Sir] Martin Sorrell have done amazing jobs in the last 30 years, and they have built phenomenal companies of the time. But I just think that 10 years from now the opportunity is there to build a totally different type of company in this space because the world has changed,” Jones said.
“20 years ago, brands ran completely different advertising in different parts of the world. And you needed a different ad agency for each different part — big global brands needed 300 ad agencies, there was no global media agency. And the process of creating and producing that content was an incredibly analogue experience. Today it’s incredibly digital. Pretty much every brand runs the same work globally, and anything you put on YouTube or Snapchat is global. That whole model of having 120,000 employees is no longer needed,” he added.
Jones admits that companies like WPP and Publicis could just pivot to offer similar services as You & Mr Jones. But he says it won’t be easy with their vast legacy businesses to protect: “Most existing technologies undermine their hours-based legacy model … even the most advanced of the big holding companies has more than 65% or 70% of their revenue coming from the traditional industries … and many services they want to sell at a premium because they have that legacy business to protect. The most exciting new companies and tech talent don’t want to be sold into large networks — and that’s where the old-world standards have a disadvantage.”
There has recently been an unprecedented wave of brands calling media agency reviews — some $US25 billion in brand ad spending is currently up for grabs. Jones doesn’t think all that money will be returned back to the big holding companies.
“Will they keep the same slice of the pie? No, I don’t think they will. I think the pie will get split elsewhere. You see it happening with many of the world’s biggest advertisers already. What they have cut back on is that wonderful expression they use: ‘non-working media’,” Jones said.
Evidence of that is already plain to see: Procter & Gamble, the biggest advertiser in the US, for example, announced in April it is looking to cut $US500 million in agency fees.
Jones thinks that gives nimbler organisations like his a leg up. They can charge cheaper rates and don’t have the operating costs of bigger businesses.
He added: “If you look at [the networks’] senior management focus, their company life stage, if you’re WPP and Publicis, you’ve done it. You won that race. But there’s a new race that’s starting, that will finish in 10 years. It’s like when the Olympic gold medal winner runs a couple of Olympics and then says ‘I am retiring.’ Someone will win the next Olympics.”
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