Coronavirus aftermath: What agencies in adland will emerge stronger?

COVID-19 has now infected more than 428,000 people around the world and 55,000 in the United States. As the virus forges on, companies continue to take hits, with many already going through rounds of layoffs, reducing pay and freezing hires.

No one knows exactly when life will go back to normal - or the "new normal" - but everyone, adland included, will come out on the other side of this, some more unscathed than others.

Campaign US asked consultants and industry insiders to share which agencies are best suited to weather these current storms.

Which shops do you expect to come back stronger after the coronavirus outbreak passes, and why? Independents? Mid-size? Boutique? Holding companies? Media? Creative?

Nancy Hill, CEO, Media Sherpas

While we've never experienced anything quite like what we're going through now, there are points in time we can look to for reference as to what agencies will come out of this in a good position. The dot.com crash in San Francisco, followed almost immediately by 9/11 was devastating for that community. Battery Street was like a ghost town, empty office buildings loaded down with Aeron chairs were plentiful and UHaul had no trucks for rent (they had all been used to leave the city). The agencies that survived, notably Goodby, BSSP, Grey, BBDO and Duncan/Channon, to name a few, survived because the leaders were transparent and decisive about what needed to be done and what everyone's role was in making it happen. I won't sugar coat this; it wasn't easy for anyone and some people did lose their jobs, but sometimes it's important to know what you're foundations are so that you can get back to basics in order to get stronger. That's what I think we'll see. I don't believe that the agency ownership matters, true leadership and the confidence to move forward does.

Greg Paull, Principal, R3

In this case, the meek shall not inherit the earth. Strong networks will become stronger, they have more means to leverage their capital to ride the next one year. The crisis will accelerate the cut on fat layers and dead wood, and there will have to be new ideas for becoming nimbler in ways of working

Independents, especially media-based or small, with clients mostly on project basis will struggle because they will run out of cash.

Daniel Jeffries, Founder, Jeffries Consulting

All agencies are going to struggle because the majority of clients will be reducing advertising budgets significantly.  I reckon we’ll see a 30-40 percent drop in ad investment over the next 12 months depending on how soon we come out of this which means a lot less service need from agencies.  Agencies that are carrying a lot of debt will be under the biggest pressure – if you look at the debt load of some of the group companies that could definitely become a factor.

Small agencies may be able to plow through but they will, no doubt, have to trim resources to the bone as cash flow will be their biggest threat.

Biggest concern will be the number of talented individuals who will be looking for any opportunity to earn a crust – this could see a talent drain and a further hit on new talent coming into the industry – the only saving grace (if you can call it one) is that almost every industry is being hit at the same time.

Ken Robinson, Partner, Ark Advisors

Rather than predicting who will come back stronger, let’s see who will come back. Period.

Holding companies have the distinct advantage of diversification working in their favor (across multiple clients, regions, countries, sectors, etc.). They will come back, though not all regions at the same time or equally. And some holding companies may return in a new form – closed offices, retired agency brands, merged talent/shops, etc. I would not be surprised if we see a holding company (fire?) sale in the next 18 months.

That’s not to say that independents won’t play a key role in the "comeback." They most definitely will. We’ve seen time and again how tenacious, flexible and scrappy these shops can be in adapting to marketplace disruption. Particularly founder-led agencies. Though many may fly under the industry radar, their CEOs fly in their own private planes. In the agency world, fame does not guarantee fortune (and many agency owners will take fortune over fame any day of the week).

If history is any indication, smaller shops will find themselves within a new competitive set. We will see shops of all sizes and critical acclaim fighting over every new business opportunity, regardless of the size of the prize. Sadly, in that market, clients get easily romanced by (industry) famous talent and agency reels containing Super Bowl spots and other well-known campaigns (but who knows if the team that produced the work they love will still be employed).

Stephanie Nadi Olson, Founder and CEO, We Are Rosie

When we come out of this global pause, the old normal won't make sense anymore. We have a huge opportunity to embrace the pause and think long-term about what makes sense for the workforce and for business. The biggest marker of success for our industry (and beyond) will be the ability to cut through all the bullshit that has been getting in our way for years: massive overhead (offices, travel, and beyond), homogenous teams, hierarchy, short-term focused financial models, inflexible processes, bait-and-switch tactics, and participation in client arrangements that don't make financial sense for the business. It's a jump ball right now and any agency –big or small, boutique or full service – can use this pause as a chance to listen and adjust to create a future that serves the highest good of the talent and their clients. The winners will be the leaders and organizations who openly and authentically acknowledge, own, and offer up new structures to fit our brave new world. My hint: lead with the people in mind.

Claire Telling, CEO, Grace Blue

The agencies who currently have the deepest pockets and most diverse client list will have an immediate advantage to survive in the short term.  If your client list includes companies in the healthcare, biotech, cloud based services, and e-gaming sectors— all of which are well-positioned to survive the pandemic— then you may not feel the same sort of immediate downturn that agencies with travel, retail, and finance clients could suffer.

There will also be a greater need to be agile and pivot quickly as regular TV production come to a halt.  So if you are a business which has a nimble business model and you can quickly deliver brilliant work in social and digital, then you may also be better positioned than those agencies who do more work in the events and experiential space over the coming weeks.

In a few months, every big brand will be wanting to tell their coronavirus stories about how they helped the world during the pandemic.  Those creative agencies (of any size) who can tell the most compelling and original brand ideas about the coronavirus responses will be the agencies who come out ahead.

Mitchell Caplan, U.S. MD, Flock Associates

The harsh reality is that all agencies, like other businesses, will be deeply impacted by the COVID-19 crisis.

At some point, as business gets back to normal, I believe that creativity will still be important, and creativity will arguably be the most important issue as brands re-engage with consumers. So agencies that are able to hang onto their very best talent will be situated for success.

As with any crisis there is some opportunity as well: now is a good time for clients and agencies to think about how to transform their relationships for the times ahead. Are your current teams, their skill sets, and how they work together structured in a manner to address the future marketing environment?

Matt Ryan, CEO Roth Ryan Hayes 

Over time all types of agencies will come back, and maybe stronger than they were before. If I had to pick one category coming out first from these challenging times? I would think those focused on mid to lower funnel sales building work will see the fastest return as marketers seek to catch up on lost sales.

Avi Dan, CEO, Avidan Strategies

During the 2008 recession, we saw advertising decline by 13%. The slowdown that lasted 3 years. This time, the coming recession will prove to be much more severe, both in terms of the ad spend deterioration, and the duration. In 2008 ad agencies had entered the recession from a position of strength. In contrast, this timing could not have been worse. Two of the holding companies, WPP and Publicis Groupe, had lost revenues even before COVID19 and the other barely grew. I do think we’ll see a lot of small agencies closing their doors due to plummeting cash flow, especially if the trend toward 120 days payment by clients continues. The highly leveraged holding companies will undergo far-reaching restructuring and streamlining, and we are likely to see mergers similar to the intended, but aborted, Publicis and Omnicom merger, in the wake of the great recession.  Independent, and highly regarded midsize agencies are likely to absorb the body blows better by lowering margins. This was the case with Wieden, Crispin, Goodby, Anomaly, 72andSunny and Droga5 during the last recession. We will see private equity swooning in on the holding companies and buying pieces of their operations at bargain basement prices while talent will flee.