The Death of the Agency Has Been Greatly Exaggerated | March 10, 2015

If I lived and worked in San Fransisco, the current “death of the agency” debate may have slightly more poignancy than it does in the UK. San Francisco and the wider Silicon Valley is undoubtedly living through a huge tech bubble, and has been for some time. The slew of new tech businesses quickly hoovered up the local talent, before starting to ship them in from around the country and the rest of the world. This includes dozens of Brits I know who have left these shores for a better life in California.

The tech giants have started to reach their local hiring event horizon, which is one of the reasons they’ve started setting up outposts in London - to gather up all the local designers and developers they couldn’t (or wouldn’t necessarily want to) relocate.

They’ve also started poaching local agency staff or even buying out whole agencies for their talent. So I know at least 4 agency founders who have been bought by the likes of Facebook, Twitter and Google the last few years. It would seem like design staff are now valued at around $1-2m per head as part of an acquihire, similar to their developer counterparts.

Does this mean the end of the agency? Well if I was running an agency in San Fransisco, I may start to worry. It’s a hostile hiring environment and a difficult place to recruit. After all how do you compete with 6-figure salaries, free staff canteens, company climbing walls and a host of other perks?

However that presumes that everybody at an agency want’s to go in-house. Working for an agency has a number of perks, not least the ability to cycle through a whole range of different problems and challenges during the year, rather than focussing on one single product. So maybe you’d prefer to use your design skills to help a charity, rather than optimising ad placement for a wealthy-beyond-belief tech company. Or perhaps you’d like to help improve the digital services offered by your local council, rather than inventing a new way to poke people online?

Not every design or development role at a tech company will be rewarding, even if the salary and environment are. Several friends on mine have described the acquihire scenario as retirement. Getting off the difficult design or development treadmill and settling for a gentler pace of life.

This rings true when you consider that most of the recent agency sales have been companies who are 10-years older or more. Many of these agencies have seen co-founders leave to work with large tech-companies or follow their own entrepreneurial ideas. If this is the environment you’re working in, I can definitely understand some agency founders wanting to get off the merry-go-round and have a more stable existence.

While some of these sales have been a graceful exit for agencies struggling to find business, the majority have been agencies at the peak of their careers, with big order books and companies falling over each other to work with them. So I hardly think that’s a sign of difficulty. If anything I think it demonstrates the ability of agencies to hire great talent, build brand and create demand.

After all, not every company is able to hire a kick arse team, so need to turn to agencies for help instead. Outside the Silicon Valley tech bubble there are all kinds of organisations that need our help, from online retailers to household brands, from universities and charities to museums and public bodies.

Some of these organisations are waking up to the need to upscale and bring some of their digital capabilities in house. As such agencies like ours are as used to integrating with in-house teams as they are working on their own. In fact a lot of clients come to us to help them improve the skills of their digital staff and set a standard, patterns and working practices they can follow. So we augment, extend and provide external perspective, rather than simply offering outsourced delivery.

The skills and resources required by digital transformation are vast, and I believe it’s going to be impossible for every company that has a digital component to resource it completely internally and maintain quality. So while monocultures like Silicon Valley may turn into agency wastelands, large and diverse cities like London, New York and Tokyo will always need a healthy and robust agency culture to both supplement and extend their digital capabilities.

Now this doesn’t mean that agencies won’t struggle. With services like SquareSpace and Shopify eating into the lower end of the market, I think many smaller agencies or individuals will find it difficult to complete. As such I think it’s even more important for agencies to work their way up the value chain than ever before. Otherwise they may find their market slowly eaten up by self-service products and white-labled tools.

On the positive side, this means that agencies will inevitably be forced to get better at what they do, raising the quality for everybody. This can only be a good thing in my books. Sure, a few agencies will wobble along the way, while others will sell their studio and move on. But for every large agency that exists, I see dozens more waiting in the wings, and boy, are some of them good.

So is the agency culture dead? Far from it! If anything it’s the healthiest I’ve ever seen it.

Posted at March 10, 2015 9:48 PM

Comments

Alick Mighall said on March 11, 2015 8:01 AM

At miggle we also find that there are lots of opportunities to supplement in-house teams, on specific projects, giving them the tools they need as part of the assignment to help them on a road to self-sufficiency. I also think the point you make about agencies working themselves up the value chain is important too, as their is no value in selling services which have become commoditised

Johan Ronsse said on March 15, 2015 6:53 PM

Andy, first of all, this article and the one with the diving analogy is great. How do you write 2 great articles in 1 day?

Anyway, I wanted to reply to this statement: “Now this doesn’t mean that agencies won’t struggle. With services like SquareSpace and Shopify eating into the lower end of the market, I think many smaller agencies or individuals will find it difficult to complete.”

I think the opposite is true, services like Squarespace and Shopify enable smaller agencies or individuals to actually deliver a service that they never could before. When an organisation has a need to be represented online, to sell things online etc. these tools make a single talented individual super-powerful.

You can add payments to a website with stripe in less than a day, it used to be a mammoth task of integrating Ogone and dealing with all kinds of issues. These days you can buy software that used to be thousands of dollars for one tenth of the price (I am talking about Logic and Lightroom). This software enables small companies to deliver a lot of value for their clients.