A Pandemic is Breaking the Ad Industry: Where Next?

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The COVID-19 pandemic has turned the world upside down and upset markets, with some industries, like entertainment, travel, and hospitality, hitting the pause button.

In difficult times, we look to ad spend as an indicator of overall economic health. Ad dollars are often the first line item to see cuts when organizations tighten their belts in a downturn. They’re also a top priority when prosperity is on the horizon and organizations begin spending again. With global ad spend taking a nosedive, and major ad-driven events like March Madness and the Olympics postponed or canceled altogether, the ad industry is facing challenges (some new, some familiar) over the remainder of 2020.

Facing down an existential crisis

Now, the ad industry won’t collapse, but it is facing an existential crisis in our new reality. Growth is flattening and we’re already seeing the layoffs begin across agencies. Emerging trends like in-housing further compound the threat to an agency’s prosperity. What’s more, even before we began sheltering in place, the growing complexity of digital ad operations had begun to reveal the cracks in weak and outdated modes of operation, unable to buttress agencies through a downturn.

The load that agencies bear is getting heavy. Today’s expanded range of digital media channels means agencies must track dozens upon dozens of performance metrics and cost types across a multitude of sources, from likes and shares to CPM and CPV. At the same time, brands want to pay less for more services, squeezing agencies — and their margins — even further and rendering current models untenable.

As agencies heed mandates from both the public and private sector to take entire workforces remote, their teams that thrive on collaboration are increasingly disconnected and distributed.

Agency employees need to do their jobs with less help, less budget, and higher expectations. Each new generation of ad tech solutions proliferates more disjointed point solutions that introduce additional complexity. According to our research, 71% of agency employees use six or more platforms to do their jobs, and 66% report switching between platforms 10-20 times per day. Try doing that remotely while maintaining a sense of solidarity and collaboration across teams.

It’s a stressful and incredibly inefficient way to work. In fact, research suggests that each additional task added to a person’s daily workload reduces their productivity by 20% and that switching between tasks causes a 40% loss in productivity. No wonder agencies have a whopping 30% turnover rate.

Understanding automation’s role in the ad ecosystem

Now is the time to re-examine how an agency should operate in an economic recession, and what it could look like afterward.

First, let’s acknowledge that programmatic advertising accelerated soon after the ’08-’09 recession because it provided accountability in spend (albeit with flawed last-click attribution methodology). And it will be part of the solution that boosts ad spending back to normal levels this time. Everyone would agree that activating ad dollars with speed, flexibility, and scale is key in and out of a downturn. But knowing its drawbacks and challenges (cookie-less future, high cost of operating, etc.) we’re going to need more. Surviving and thriving requires overall operational fitness.

Fitness means strengthening the bones that hold different parts together, the muscles that enable those parts to move, and the brains that command movement. For agencies, it means having systems and infrastructure that allow them to boost the speed and productivity of teams, reduce labor costs and improve the accuracy of the data they process for campaigns. These practices prevent organizational fatigue that manifests in employee burnout or the shaving of margins. Market uncertainty requires agencies to empower media professionals to do their best work even in these difficult times.

Creating a resilient workforce

By creating efficiencies across the entire organization, agency leaders generate positive ripples throughout a business. Tasks like vendor management, data gathering, report consolidation, and billing reconciliation are ripe for reimagining, streamlining and centralizing. Efficiencies in the seemingly minor back-office functions directly affect the most important aspects of the business:

  • Performance: Already overworked, agency employees working remotely are now facing extra pressure to show their value. They have little time to develop insights or thoughtfully optimize campaigns. Centralizing workflow across all digital campaigns, not just programmatic is needed so media professionals have more time to perform important high-value tasks — or to rest and recharge to be consistently productive.
  • Cost control: Automation simplifies workflows and increases efficiency, enabling agencies to continue winning new business without hiring more tech vendors or staff. By raising capacity without adding overhead, the result is a more agile, scalable business.
  • Continuity: With a recession looking increasingly certain, agencies must prepare for flat year-over-year ad revenue. They may also lose talent, but by centralizing client and campaign intelligence and communication, agencies can mitigate disruption and volatility in the market and the labor force, ensuring continuity for a stable and sustainable future.

Finding ways to centralize workstreams is a vital step in strengthening agencies during this turbulent time. By enabling employees to collaborate (with colleagues, partners, and clients) from a distance, automate tasks, and track their data, organizations empower their teams to deliver inspiring creative and maintain high performance, keeping client-agency relationships strong. Focusing agency resources toward operational fitness is necessary to weather the current crisis and to prepare your agency to meet new challenges once the madness is over.

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