Advertising Agency Outsourcing: An Opportunity and… New Competition

I wrote this post about advertising agency outsourcing seven years ago. I am resurrecting it for a couple of reasons.

First, the use of outsourced freelance talent, as in not full-time employees (FTE), is a solid part of running a 2020 agency in a world of business uncertainty:

Will I win that new client? Will I lose our largest client? Will I ever get an agency of record client again or just get used to living with projects?

As an ex-agency owner, I know that keeping FTE costs down is a good idea. Given ad agency gross margins, having a bunch of FTE’s at a 70% utilization rate is not sustainable. Duh. That’s why I was initially intrigued by Victor’s & Spoils agency model. If there ever was an industry that needed to explore new models… it was/is advertising.

Second, it is worth noting that the Vistors & Spoils’ outsourced advertising agency model (actually crowdsourcing model) discussed below did not work. The agency, which was acquired by Havas in 2012, closed in August 2018. Why did it close? There are lots of thoughts about what happened. Consider…

Was crowdsourcing itself simply unmanageable? Is crowdsourcing a tool versus the basis for an agency? Was it’s possibly brutal system too unfair to freelancers? Did clients not get it? Is it simply too difficult to build and manage a complex marketing program using “anonymous” outsourcing?

And, on.

Finally and just an FYI. Here is the Victor’s & Spoils crowdsourcing competition that netted the agency’s logo. So, $2,400 to the winner of an advertising agency logo?  That’s it? No comment.

Advertising Agency Outsourcing

Note: This blog post was originally posted in 2013. The primary points remain relevant.

The advertising industry has been outsourcing for decades. Freelancers are woven into our daily fabric. We use copywriters to write website copy and gun-slinging art directors to beef up new business pitch concepts. In the past few years, advertising agencies have gone beyond the traditional freelancer to add technologists and digital service firms to work in the background to make us look like sharp database, mobile, and social media experts.

Our outsourcing options have grown exponentially through the use of digital tools. We now have easier access to more talent marketplaces which have also resulted in new threats to the advertising agency model itself.

There is the power of emerging market labor: Ogilvy, Wieden+Kennedy, and Sapient all have offices in India that tap into the subcontinent’s skilled lower-cost talent. Most multinational ad agencies also use into their vast systems to find talent in other lower-cost countries. According to Firstpost, “Group FMG produces video, print, digital and mobile ads and has more than half its employees based in India. “We are applying all the clichés of Thomas Friedman’s “The World is Flat” to the advertising world,” Aditya Sharma, co-founder and chief business development officer at Group FMG. And, why not? The latest rounds of Clios have been won by art directors in faraway lands.

Google Trends Web Search Interest crowdsourcing Worldwide 2004 presentInterest in crowdsourcing is on a growth spurt, see Google’s trend line for the term “crowdsourcing” on the left, and has become a new freelance agency model. Victors & Spoils is known for its use of distributed problem solving to create advertising campaigns for blue-chip clients like Axe, General Mills, Harley-Davidson, and Levis. For sure, despite the benefits from having a more open market, freelancers have had issues with this model. However, the efficiency of freelance crowdsourcing works for clients. I suspect that Victors & Spoils is finding the middle ground.

Online freelance markets are booming. Elance reported 345,000 new freelancers and 826,000 jobs posted in 2012. Behance reported serious growth last May when they received an infusion of VC capital. According to their blog, “Users’ projects have received over 1 billion views and over 75 million views in just the past 30 days. Behance now showcases more than 2 million creative projects – after passing our first 1 million-project milestone just eight months ago.” I can imagine that many agencies are posting projects in this heavily trafficked marketplace.

The new world of freelance services may become one of the tools that agencies use to resolve the social media beast – social media authorship and management is, to put it mildly, labor-intensive. I have been using an ODesk freelancer in the Philippines to assist me with pinning “every advertising agency” website to my Pinterest agency site. In this case, I have a simple task that can be easily managed. In just a couple of weeks, he has efficiently pined over 1,000 ad and digital agency websites. This has freed up my time to write mini-website reviews.

On the SEO side, I have worked with a search engine marketing company based in Budapest that uses excellent English speaking writers across the globe to help their clients write guest posts.

The opportunities for agencies to leverage the flat-earth marketplace of freelance services are clear. Given the current and expanding outsourcing options, agencies need to continually explore how the Internet has dramatically expanded their freelance network, talent base, technology resources and can lower the costs of doing business.

On the other hand, many of these new services pose a significant threat. Just as the Victors & Spoils model is often criticized (feared?), we need to keep up with and continually review new Internet-powered services because they represent a growing form of competition. Just like you, savvy clients can directly outsource their work to India, Behance and 99 Designs too.

Advertising Agency Models

If you are interested in exploring new advertising agency models, give me a shout. I’ve examined many options.

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