Advertising Holding Companies Facing Gradual Demise?
Ajaz Ahmed isn't one to mince words. The founder of digital advertising powerhouse AKQA has never shied away from bold declarations. Once touting phrases like 'Get big or die trying', his newest venture, Studio.One, promises to shake up an industry long dominated by slow and expensive giants.
For Ahmed, who sold AKQA to WPP in 2010, the landscape of traditional advertising companies like WPP, Omnicom, and IPG has been on shaky ground for years. The past three years have seen these 'holdcos' struggle to keep pace with the rapidly changing industry, wrestling with stagnant revenues, falling share prices, and massive overhauls in the way advertisers spend their dollars.
In recent years, the growing influence of Big Tech platforms like Alphabet, Amazon, and Meta has been a significant factor, offering advertisers cheap reach and highly accurate targeting. Relying less on traditional media-buying intermediaries, brands are opting to go straight to these tech giants, leaving the holdcos scrambling to add value. Last year, for the first time ever, tech platforms accounted for over half of global ad spend.
Artificial Intelligence has also made waves, with firms increasingly able to create serviceable adverts and graphic designs without the need for costly agencies. These structural shifts have hit the holdcos hard, with several reporting lackluster financial performances in recent months.
But for Ahmed, the problems plaguing the holdcos go beyond macroeconomic trends. In his view, these companies have made misguided strategic decisions that have led to bloated internal structures and conglomerate discounts, rendering them less valuable than their individual parts.
Studio.One, Ahmed's latest endeavor, aims to take full advantage of the holdcos' weaknesses, boasting a leaner structure, an outcome-driven approach to billing, and state-of-the-art AI technology to streamline operations. With the slogan 'Spirit Untamed', the agency hopes to uproot the staid, bureaucratic practices that have long defined the holdco landscape.
"We are a direct rival to the slow, bureaucratic, and expensive agencies within holding companies," Ahmed declares. "They've become dysfunctional."
The emergence of smaller, independent creative agencies like Studio.One reflects a growing preference among clients for more personalized, high-quality service at a lower price point. The trend isn't exclusive to the branding and digital realm; in 2019, for example, PR mainstay James Acheson-Gray co-founded Apella Advisors, which offers clients top-level, ultra-bespoke corporate affairs advice.
As the advertising industry continues to evolve, it remains to be seen how the traditional holdcos will adapt. For many, the future lies in embracing technological advances and investing in new tools to remain competitive. But for others, like Ajaz Ahmed, the future means breaking the mold and baking a better pie.
- Ajaz Ahmed, the founder of digital advertising powerhouse AKQA, believes that traditional advertising companies like WPP, Omnicom, and IPG have been struggling to keep pace with the rapidly changing industry.
- The emergence of Big Tech platforms and the growing influence they have on advertisers has led brands to opt for cheaper and more accurate targeting, leaving the holds companies scrambling to add value.
- In his new venture, Studio.One, Ahmed aims to take full advantage of the holdcos' weaknesses, offering a leaner structure, an outcome-driven approach to billing, and state-of-the-art AI technology to streamline operations.
- For Ahmed, the future of the advertising industry lies in breaking the mold and investing in new tools to remain competitive, unlike the holdcos who, in his view, have become dysfunctional due to misguided strategic decisions and bloated internal structures.
