Excerpts from Ad Age on March 16, 2023 by: Lindsay Rittenhouse
Platforms are increasingly stepping up to provide resources to ad agencies just to keep client work moving, sources say
As agencies remain woefully understaffed, some tech platforms including Google, Criteo and Pacvue are stepping up to fill holes to help the industry prepare for an anticipated rebound in ad spend by early 2024.
“A lot of clients are telling their agencies to plan for a second half rebound,” industry staffing firm WorkReduce CEO and Founder Brian Dolan said. The general consensus is ad spending will start to come back, “and that’s caused anxiety in agencies because they can’t ramp up that quickly. It’s going to be tough to get people in place,” he said.
Ad Age spoke with 10 executives, including agency CEOs, consultants and industry headhunters, who said ad agencies are working with very lean teams due to either their own layoffs or The Great Resignation of 2021, when people fled the industry. And agencies are unable to staff up because a lot of marketing spend, especially from tech advertisers, is still on hold due to the shaky economy, according to these executives, and there is the continued claim that it’s a struggle to find talent.
Whatever the cause, tech platforms are increasingly stepping up to help tackle the problem and keep campaigns running amid the staffing shortages. “Companies have been making [employee] cuts and also not replacing them, so places that had six people are now having three people do the same work,” explained one industry recruiter, who spoke on condition of anonymity.
Three executives familiar with the matter said they’ve heard Google, Pacvue and Criteo are loaning out resources, including developers, to understaffed media agencies for analytics work just to keep campaigns moving; in some cases, these platforms are also subsidizing headcount for agencies by funding hires.
“Some platforms are stepping up to say, ‘What if we help? What if we give you some funding to help you in the short term? Obviously the trade off is, you’ll use our platform,’” one of the three executives familiar with the matter said. “Everyone is trying to figure out how to keep the work going.”
“We have a handful of strategic agreements with agencies where we’ve helped develop their data and analytic capabilities, for example, through product or engineering support, to improve integrations with the Criteo platform,” a spokesperson for Criteo said, adding it does not provide any funds to support agencies’ headcount needs.
Understaffing issues causing ‘a terrible mess’
“Agencies are certainly struggling for talent,” the search consultant said. “They always over-correct to the market and people don’t want to work for the big agencies anymore. There’s not a talent shortage. Agencies cut back way too aggressively in 2020, claimed there was a talent crisis in 2021, as if it was not their fault, and then started cutting back again in [the second half of] 2022. It’s a terrible mess.”
“The agency has to somehow find a profit margin to supply more expensive talent to the client for the same fee,” the search consultant said. “So they end up under-servicing the client or trying to continually upsell the client on new services in order to make back the profit they’ve lost.”
“Clients will look for reconciliation on a quarterly basis and they’ll say, ‘How are you doing on all those bodies you promised me?’” Seiler said. “And the agencies will bullshit their way through it as long as they can, by saying ‘really tight job market, etc.’”
Agencies also have been promising senior talent in pitches and then servicing accounts with junior employees, Seiler said. Eventually what happens is either the client is satisfied with the work and lets it go or they move the business to another agency, he said.
How agencies fix the problem
But 11 years later, pay-for-performance is still not the standard payment for agencies.
“It absolutely blows my mind that there has not been more progress on this front,” Seiler said. “If your agency compensation is tied to how well your client is doing, you’re in a great place. They’re not trying to figure out whether you’re screwing them based on numbers of bodies or commission rates. You get paid based on the product you deliver.”
He said there are a lot of people in the industry making excuses for why a pay-for-performance model can’t work, including on the marketer side, with clients saying the model makes compensation too unpredictable.