In 2017, nearly half (48%) of all acquirers of marketing services businesses came from a non-traditional marketing communications background, with consulting firms playing a highly active role. Accenture and Deloitte rank high in the list of the top ten acquirers – the two consultancies, along with McKinsey & Company, have now spent $1.2 billion on marketing services assets, sending an aggressive signal to market incumbents.
Global consulting and technology firm Accenture marked its first serious foray into marketing services when it acquired London creative agency Karmarama in 2016, and now has 18,000 digital and creative professionals worldwide. Deloitte Digital made nine marketing services acquisitions in 2017, including that of Market Gravity in the UK, Acne Agency in Sweden, and now features as a key challenger on Gartner’s Magic Quadrant for digital marketing.
Increasing blurring of service lines
Traditionally consultancies have focused on large scale corporate transformation and IT projects; whilst the domain of marketing services has primarily been advertising strategy and implementation. Yet in this digital world, large consulting projects are increasingly framed around enhancing the customer experience. Consultancies are now looking at strategy execution capabilities, along with their traditional advisory models. For instance, Karmarama gave Accenture the ability to connect the thinking behind new strategic ideas with the actual implementation of end-to-end customer experiences through elements such as user experience design, customer focused data analytics and customer engagement strategies.
Power of data
Consultancies have a huge advantage over their marketing services counterparts via their access to powerful consumer insights collected over many decades. With data driving the vast majority of marketing services decisions including campaign design, events and customer touchpoints, this is driving a new level of overlap between traditional creative services and technology. With many consultancies pushing for this data to work harder and bring in new revenue streams, creative services is a logical next step.
Pressure on big marketing networks
Marketing and advertising giant WPP has hit the headlines recently for all the wrong reasons and it has highlighted the pressures on large marketing networks. Marketing budgets particularly for FMCG companies are shrinking. Equally marketing networks have been criticised for their slow reaction times, excessive complexity and the opaqueness surrounding their expenditure. Digital disruption has also resulted in media buying and production, market research, and strategic planning all becoming increasingly automated and commoditised, which has had a significant impact on agency pricing models. With big networks arguably on the decline, there have been rumours that one could look to sell to a consulting group.
The most valuable asset for a marketing agency is the talent that it employs, which makes it unlikely to see a hostile take-over by consultancies. If employees do not like their new incumbent owner, it is likely that they will vote with their feet. This leads to the next problem in that the cultures of marketing agencies and consultancies are very different. Consultancies also pay employees significantly more. Consequently it seems unlikely that consultancies will be successful at fully integrating agencies and therefore are likely to run them as stand-alone assets.
Integrated advertising revolutionised marketing in the 1990s, as creative agencies began to focus on a number of touchpoints. Today the threat from consultancies is likely to have as big an impact – which marketing services cannot choose to ignore. Whether a consultant can create a perfectly formed service, capable of meeting all creative and consulting requirements, only time will tell. The pessimistic view is that agencies will have to sell out to consultancies, as they see their market share increasingly decline. The more optimistic view is that as the marketing landscape continues to evolve due to technological changes, marketing services and consultancies will simply have to create synergies in order to meet client demands.