The Advertising Agency Survival Guide. 2022 “Recession” Version.
I am republishing and updating my pandemic Advertising Agency Survival Guide blog post. It was originally written in 2020 when we all realized that we were heading into some Covidland hell. At that time, The Association of National Advertisers, the ANA, passed the article along to its membership. Why am I modifying the article for 2022? Because I think (not alone here) that we are heading to some form of recession. Recessions are not great for advertising agencies as marketing is one of the first line items that clients cut from their budgets.
Note: While we are not sure if a recession is heading our way, we do know that company valuations are down and that is not a good thing for marketing budgets. The odds on their being that full-blown recession … This from Bloomberg.
The probability of a recession over the next 12 months is now 30%, the highest since 2020, according to the latest Bloomberg monthly survey of economists. That’s up slightly from 27.5% in April and double the odds economists predicted just three months ago.
This from ADWEEK on Sir Martin Sorrell:
S4 Capital issued its 2021 Annual Report this week and company executive chairman Martin Sorrell in his letter to shareholders strenuously sought to manage growth expectations given recent huge reversals on the macroeconomic front.
Sorrell said that events and circumstances have developed to create a “perfect storm” that will dampen the “strong bounce-back previously expected this year and over the horizon in 2023 the clouds look even darker.”
Sorrell noted that GDP forecasts have recently been cut by the IMF and others to 3.6% from 5% just six months ago. “Less robust economic growth is important as it’s one of the drivers of S4 Capital’s growth,” Sorrell cautioned.
At S4 Capital, Sorrell added, “we’ll trim our sails accordingly and won’t be blown off course. But navigation will as ever, be challenging.”
Tough Question. Will Your Advertising Agency Survive This New Recession?
Here is my educated take on how advertising agencies will survive the big dip and how they will make lifeforce happen. It is my take on an Advertising Agency Survival Guide.
Having gone through the 2007 – 2008 recession as an agency owner, I saw approximately one-third of advertising agencies shrivel. My current survival advice is based on my having navigated financial storms as well as recent deep conversations with small and medium-sized agencies. I did not choose to rush out these thoughts. I actually thought about my thoughts. LOL.
Plus, this article is not short and sweet. You will actually have to read all of it. OK, it is sweet.
Two Quick & Very Important Points.
How long will the shit-storm last? I am talking about the inevitable/impending reduction in client spending.
Like you, I have no clue when any semblance of normality will return. I have to assume it will. Plan accordingly.
Chamath Palihapitiya is one of my most respected “advisors”. He has said that companies should be able to adjust and make new plans to survive 36 months. 36! Yes.
He says, think like this is a form of depression. Whoa. Yikes. Are you ready?
This is what I do know… If you want to be in the top 1/3, you can’t lose all or even some marketing energy or brand awareness. Why make your voyage back to the land of happy clients too uphill?
You will get my marketing recommendations below. But first, the big question.
Will Your Advertising Agency Fail?
Here is what an advertising agency principle should be doing right now. I admit that this is generalized given the diversity of the types of advertising agencies. But generalized does not mean its not an effective how-to for virtually any agency.
First – Two Definitions
- “Advertising Agency”: This is my universal term for most types of communications marketing firms.
- “The Good Client”: A client is a company that has consistently used any form of advertising or digital marketing. In your case, it is a client that meets your target criteria (you have that, right) and you think would want to hire you.
OK, Advertising Agency… What Are You Going To Do About it?
I am going to be tough here. At least 30% of advertising agencies will fail or falter in the next twelve to eighteen months.
This post provides my take on how to survive. For the winners, how to set yourself up for growth.
6 Advertising Agency Pain Points – I Know You Know This. But, It Is Worth Restating.
- Your current and future clients are starting to freak out. This goes from their business perspective (increases in consumer debt, lower spending by their B2C or B2B customers, that supply chain pain) and their own worries about their life savings.
- Some current clients have already reduced or canceled advertising and project spend.
- Growing agency profitability has been getting more difficult.
- You could be too slow in managing your costs.
- Agencies, too many, are already poorly positioned, do not stand out, and worse, are unbelievably ignorable.
- Many prospective clients “probably” do not want to hear from you. Well, they might if you have the right messaging.
Advertising Agency Survival Guide Strategies
I know what I am talking about. I’ve won and lost. My advertising agency survived the 2007-2008 recession. My $30 million VC funded ActiveBuddy digital business did not survive the 2001 dot-com bust. Don’t feel bad for me, Microsoft eventually bought our technology.