Startup Culture Has Agencies Failing Fast

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After 25 years in the marketing industry I left my full-time agency role to launch a startup. That year away showed me why agencies as they are currently running are doomed to fail.

In launching CanDo, the app I built to help people going through life-altering experiences, it’s fair to say I’ve had my eyes fully opened to the way businesses are operating outside the bubble. Here are the top three things to think about:

1. Pitching

In start-up land pitching is an industry unto itself. If I had the energy, I could go to a start-up pitch night any day of the week, and see a slew of presentations on why this thing is destined to revolutionize category X.

As with ad pitches there’s a tonne of performative nonsense, but the thing startups do better is communicating the important take-outs with brevity and simplicity. They often have five minutes and ten slides to explain and sell themselves to potential investors. You’ve got to get to the point.

We’re very bad at this in advertising.

I love to tell stories to evoke an emotional response when I’m pitching, but a 130 page pitch deck (and we’ve all had a hand in those), is frankly a grotesque indulgence. It says everything about your agency’s inability to stand for something unique, and also shows you know very little about the business you should be focusing on – the client.

The reality is, most agencies are much the same and if you can articulate your difference to a prospective client in ten slides or less, you’ll be doing better than most.

2. Business culture

Australian investors are risk averse. While their US counterparts are quick to see investable value in a user-base, Aussies look for revenue. They don’t want to take the risk that you won’t crack the payment model. The Catch 22 is often you need investment to get to that model.

This means good businesses heading overseas for investment, taking their people and innovation with them.

In my view advertising has a risk-aversion problem.

We see clients getting caught in this retail/offer-led/cheap media cycle (sometimes thanks to a misplaced focus on competitors and sometimes in the mistaken belief that marketing is a cost that must be minimized) and agencies often not particularly well-equipped (thanks to staff churn), to challenge clients on their brand health.

The problem is clients don’t need agencies to make a suite of mediocre retail ads, when they can create their own using tools designed for that purpose by Facebook, Google et al and often provided for free.

The truth is, if agencies were startups, not many would be investable in the current format of order-taking service providers, a role that is eminently replicable and commoditizable. You might say advertising agencies have a USP problem in that, no longer is there one.

3. Ideas

Ideas are cheap, and yours probably isn’t original.

Startup culture places very little value on ideas and nearly everything on execution. Given my strategy background you can imagine how thrilled I was with this revelation.

The focus in startups is on your business model, who owns what, and your product. But
don’t, whatever you do, overdevelop your idea or you’re considered profligate and
potentially cavalier with investor’s money.

No-one cares if you’ve had twenty great ideas that didn’t get built – everyone has an idea
for an app. Some are great ideas, but that is simply not enough. Your proof as a founder
worth talking to, is that you got your product made, you own it and you’re making revenue.

These fundamental questions are very rarely asked inside agencies, because agencies don’t typically own their end-product. They make stuff for clients, but rarely for themselves as a way to earn revenue.

Digital agencies often make apps for clients, so they earn a project fee and hopefully sign the client to an ongoing service agreement for maintenance. Good app-development businesses make their own apps, through which they earn revenue, AND also develop for clients.

Their KPI isn’t awards but revenue. It changes the way the conversation begins, which determines the product at the end.

Usurpers

Lean startup culture requires you to do everything possible to avoid paying for marketing or advertising. Promotion is about the hustle, being seen and making an impact. But you don’t want to look too good or too together (this was an actual criticism of CanDo from one influential stakeholder) because it smells like you spent too much money.

If this is how entrepreneurs are being schooled to grow their businesses, what are the implications for the future credibility of advertising? Not great.

Advertising is doing its very best to make itself boring and commoditizable. The reliance on the old revenue structures and giving everything away simply isn’t sustainable.
Agencies used to be famous, but they’re not anymore because there’s no real reason to care who they are.

Startups now claim a position of mythology in popular culture and are shaping the business leaders of tomorrow (and poaching the talent of today). If you don’t adapt to think like them, you’re destined to fail fast.

Rachael Lonergan

Rachael Lonergan is an award-winning creative strategist based in Sydney, who consults within the advertising industry. She is also the founder of the CanDo app, that turns empathy into action, through managing offers of freely given assistance during times of need.
Rachael Lonergan

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