Hermaneutics: Adland in review — restructuring after industry shakeout
by Herman Manson (@marklives) South African advertising agencies have seen heavy restructuring over the course of the last two years and, as procurement departments take a front seat in driving remuneration negotiations, and clients need quicker and more-strategic communication, it’s also become an increasingly competitive business. Clients, too, have been demanding black empowerment to go beyond the scorecard into majority ownership.
Having initially failed to adapt internal structures to the rapidly changing agency environment, ad agencies are being forced to restructure their businesses as agency giants come crashing down around them.
During the course of 2017 and 2018, it became obvious that a major shakeout has been underway in the SA agency market.
- Y&R Cape Town, one of the city’s iconic agencies, closed down and, by early 2018, the Y&R brand stopped trading in SA when the last agency office, in Johannesburg, was integrated into VML South Africa.
- The Jupiter Drawing Room (Johannesburg) also shut down; the agency stopped trading mid-2017 and the closure happened over the course of 3–4 months (Jupiter Joburg famously won R1bn of new business billings in three pitches over three consecutive days in 2007; its client roster came to include Absa, Edcon, MTN and Sasol).
- Ireland/Davenport, after a torrid ride between 2015 and early 2017, rebranded as Collective ID in October 2017; it also increased its black ownership from 21.5% to 52.6%.
- Another iconic Cape agency, The Jupiter Drawing Room (Cape Town), also skidded on thin ice after it lost both Hyundai (to FoxP2) and Windhoek Beer (to M&C Saatchi Abel Johannesburg) in 2017 — but, like Collective ID, it’s has managed to reinvent itself as a small-to-mid-sized agency through a combination of aggressive restructuring, new management, loyal clients and a bit of luck.
- In late November 2018, WPP announced that Wunderman and J. Walter Thompson would unite to form Wunderman Thompson, positioned as a creative, data and technology agency.
- As of January 2019, Interpublic-owned McCann Johannesburg will be merging with 1886, the wholly owned subsidiary of the FCB Africa group (also an IPG agency), to become McCann 1886.
All these events have led to agencies actively engaging in restructuring how they work and ditching silos, at least on the creative side of things. PR, activations, digital, creative — they all sit in the same office now. Agency offerings seem more unified, and account management has become the shared responsibility between creative leaders and members of the management team.
Traffic has also come in for reinvention: at Ogilvy South Africa, it’s built a professional ‘project management office’ that includes all project managers, resourcing (formerly traffic), specialist producers and any internal production capability that exists. The Cape Town agency talks of an agnostic delivery team that sits inside client account teams, with traffic having become a resourcing function that looks at organisational and account capacity. Traffic as gatekeeper has disappeared, and a more-direct relationship has been established with clients.
In late 2017, King James Digital — a merger of the King James Group digital agencies — came up with a disruptive costing model for digital media: charging clients zero management fees, with absolute transparency on all media buying and placement. King James Digital is only remunerated on a percentage of the cost savings generated on the media, in comparison to the benchmark of previous performance.
Publicis, whose agency brands include Leo Burnett, Arc Worldwide, Popimedia, Saatchi & Saatchi and Publicis Machine, has been building up its group offering, which sees the various agencies partner together on big pitches. Group agencies are also being moved into new campuses, so as to be located closer together; since July 2018, the 14 Cape Town agencies are now located at The Harrington at 50 Harrington Street.
A drive by clients for engagement with black-owned and -managed agencies has been a key trend over the past year. It led Jarred Cinman, the CEO of VML South Africa, to ask whether agencies committed to implementing the Marketing, Advertising and Communications Charter (MAC Charter) as fully as possible had not been sent down the wrong path — with clients caring less about the scorecard and more about actual majority ownership.
“As it turns out, I’ve been in numerous conversations with clients who quite openly say the BEE levels mean very little to them,” wrote Cinman in his May 2018 opinion piece on MarkLives. “Sure, they’d like agencies with high BEE scores. But what they really care about is ownership. They want to steer their spend toward black-owned businesses. In other words, in a choice between a Level 1 agency with 20% black ownership and a Level 4 agency with 51% black ownership, they want the latter. And this is not an aspiration for them. I’ve seen several pitches that stipulate these figures as criteria.”
Collective ID certainly went the majority-ownership route and, combined with the efforts of a new management team, has reclaimed an important space in the market. Other black-owned and -managed agencies are seeing rapid growth, and diversity at management level (in terms of both gender and race) finally seems to have gained unstoppable traction. Indeed, it seems as if agencies have finally started looking beyond the rise of digital to the underlying structural issues and is dealing with them decisively.
To many, it might have felt as if SA adland has faced its darkest hour — and has come through it much changed. Let’s see what 2019 brings.
Herman Manson (@marklives) is the founder and editor of MarkLives.com.
The column is adapted from an article that first appeared in the 2018 edition of Brands & Branding in South Africa, an annual review from Affinity Publishing of all aspects of brand marketing — consisting of case-studies, profiles, articles and research — also accessible at Brands.MarkLives.com. Order your copy of the 2018 edition now!
— One subscription form, three newsletters: sign up now for the MarkLives newsletter, including Ramify headlines; The Interlocker, our new monthly comms-focused mailer; and Brands & Branding, launching soon!