Since the creation of the Macintosh, there isn’t a single industry that hasn’t undergone repeated change, if not catastrophic disruption—at least, I can’t think of any.  Advertising is no exception.  With technology, anybody can create an ad.

In my day, television advertisements ruled, and they still do in local markets.  But advertising is now mainly concerned with the web and social media, creating sales campaigns that start with Facebook or YouTube advertising. And a lot of people can do that.  Just last year, Doritos ended its 10-year fan-created commercial contest, Crash the Super Bowl (though they still encourage people to create and submit Doritos videos year-round).  They could just as well have called it Crash the Advertising Industry.

As if that wasn’t enough, on the opposite end of the spectrum from this crowd-sourced creativity comes Big Data. A lot of large consulting firms, like Accenture and McKinsey, are dominating the most lucrative part of marketing today, doing very high end strategic and quantitative analytic consulting. Then the execution of their results is left to the commoditized advertising agencies at a very low margin.

In an article in AdAge, “Why Creative Agencies Need to Think Like Consultants in 2017,” Penry Price points out that to survive, ad agencies are going to have to adapt—and that’s just what the big ones are doing. “The businesses models of consulting and creative agencies are converging. While consultants, who have deep background in business strategy and enterprise technology, are adding creative agencies to their arsenal of solutions, large ad agencies are expanding their offerings too.” Accenture is going to start buying advertising agencies, and Publicis has been adding consulting firms like Sapient and Razorfish to their quiver.

Publicis has gone very broad and wide with a horizontal strategy where they’re competing in all areas, big and small. They have lots of agencies that can compete for any kind of business. But most ad agencies are not giant multinational holding companies.  For small agencies, the only option is vertical.

In my book Narrow Thinking, which you can download for free right now, I recommend niche marketing. This enables you to compete in a way where your advantages are so clear and profound that you can win the business based on your credentials and your track record.

But a vertical niche is not enough. Agencies have to prioritize the services they deliver.  They have to do the research, collect the data, and essentially come to clients with ideas and prices to complete an entire process.  They have to become the authorities on their potential client’s customers so they can bring an entire product to the table. Or as Price puts it, “Data is a key tool for consultants, and it needs to become one for creative strategists too.” The research and data enable them to tell the advertiser, “This is what you have to do.” Because done right, the agency will have 20 times more information about the customer than the advertiser does.

We call this a product, but it’s really a service that has a name and it has a price. And this puts the agency in a very good position to call the ball from then on. Nobody else has that much knowledge about their customer, and to the advertiser, knowledge of the customer is the Holy Grail.

Success for small agencies will come from a combination of specialization—the niche—and diversification of skills that enables great data collection (and further enriches the niche).

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photo credit: TarazKP 31_MAY_16_Morning Macro-8 via photopin (license)