Agency groups are still searching for a convincing narrative in a world of tech giants

The future for agencies (some of them anyway) is as a “validator” between the tech giants and advertisers, according to S4 Capital’s Sir Martin Sorrell (below) writing the other day in the The Times. He also said the future was almost entirely digital but we’ve heard that before (he may be right of course.)

He also wrote that some some new AI software coming to market would mean that completed videos could spring to life in seconds in response to an AI brief. So that’s creative looked after too.

Nobody can foretell the future of course, as the UK’s chancellor Jeremy Hunt is finding as he seeks some so-called fiscal “headroom” to make tax cuts in this week’s Budget. Every time he thinks he has some money the official Office of Budget Responsibility tells him that, according to its forecasts, there isn’t any. This despite the OBR’s forecasts usually being wrong.

Agencies betting on the future are taking similar risks. Sorrell’s S4C has unravelled, to a degree as tech clients have slashed their marketing budgets, especially the part of it they spent with external agencies. WPP’s Mark Read, Sorrell’s successor, has found the same thing.

But it was never that likely that tech companies, who can make most of their communications themselves should they choose, would continue to fund the agency sector too. Especially when they’re cutting back staff and faced with increasingly aggressive legislators – Apple has just been fined €1.8bn by the EU for, in effect, making life hard for Spotify and others in the music streaming business. It is, of course, appealing.

So what are the opportunities for “validating?” In a way media agencies have always done this; telling clients which media owner deals are worth having and which not – and what they should cost. The trouble, as far as many advertisers are concerned, is that the media agencies themselves are among the least transparent commercial entities on earth. Much of the time the ad holding group biggies are flogging on at a margin media they’re bought themselves. Which, you suspect, hasn’t been validated to within an inch of its life.

There’s nothing wrong with this per se, so long as it’s clear to advertisers this is a media agency trade. Clients are free to buy media themselves if they want. Validating here probably requires a consultancy rather than a media agency employing thousands of people.

Like many of us, agencies are trying to adjust to a world where the tech giants in the US and China enjoy almost unparalleled influence over most walks of life, with formidable pricing power. You’d have to go back to the US economy at the turn of the 20th century with Vanderbilts and Rockefellers ruling the roost to find a parallel.

Agencies, especially the big ad holding groups, need to find a better narrative if they’re to carve out a viable role in this new landscape. Publicis Groupe has done so to a degree with its consultancy and data businesses. But it’s become a different sort of company in the process.