For decades, the advertising business has operated on a reasonably straightforward arrangement: agencies develop the ideas, agencies produce the work, agencies collect fees for both. It was a system that made a certain amount of sense, in the way that most systems do until someone notices they could pay less.
That moment appears to have arrived for a growing number of marketers, who have begun taking concepts developed by their creative agencies and handing them directly to social media creators for execution. The practice has the effect of severing the production revenue from the creative fee — a separation that independent agencies, in particular, are finding uncomfortable.
Shops including Joan, Mother, Gut and Via are now confronting what might be called the handoff problem: their strategic and conceptual work is walking out the door and into the cameras of creators who charge considerably less than a traditional production company and come with audiences already attached. (The creators, for their part, seem unbothered by the arrangement.)
The trend reflects broader shifts in how marketers allocate their budgets and, perhaps more fundamentally, in what they believe constitutes production value. A creator filming in adequate lighting with a smartphone can, in the eyes of many brand managers, deliver sufficient quality for platforms where the content will live for seventy-two hours before being replaced by something else.
For independent agencies, which have long relied on production margins to offset the thinner fees commanded by creative development alone, the mathematics are worrying. The holding company giants have diversified revenue streams and can absorb such shifts more easily; a thirty-person shop in Brooklyn has fewer places to hide.
How these agencies respond — whether by building their own creator networks, renegotiating fee structures, or simply accepting smaller checks — will say a great deal about where the leverage in the client-agency relationship now resides.
The answer, it seems, is not where it used to be.
Original story published in adage.com: "Creative agencies keep production when brands hire creators - Ad Age"