Advertising Agency Disruption

November 28, 2018

I started in the advertising business in 1996 with almost no knowledge of how actual agencies worked or made money. On my first day in the biz, I remember walking into the coolest office space I had ever seen, staffed by dozens of attractive, well-dressed associates. I soon realized that the key to my success as an account executive at this particular advertising agency was in extracting as much money as possible from my clients via increased media buys and additional production costs. I learned that much of the money was needed to pay for Class A office space and more importantly the owners’ palatial estates and fleet of exotic cars.

Advertising agency after advertising agency, the story was always the same- high client fees where a large percentage of those fees went towards sexy office space and lavish lifestyles for the owners. In the nineties clients didn’t seem to mind the costs as long as the work was productive and they were rising in their own corporate ranks.

I began to see hairline cracks in the agency model forming in early 2000s, along slide the growth of the internet. Sensing an impeding collapse at the advertising agency I was working at, I launched out on my own in 2006 with 3 partners to form a new agency.

We were committed to doing things differently and espoused the belief that a few smart people could do the work of 20 not as smart people. Our plan was to pass the savings along to the client. We added tremendous value to our clients by allowing them to bypass the big shops that were bloated and bleeding them for what we saw as mediocrity.

We were lean and scrappy working out of my house at first and then in a tiny, windowless office in the back of a shopping mall. We stayed lean, billing almost a million dollars in our first year and our margins approached 30%. Over the years we grew into mid-sized shop and our billings saw significant increases. However, we were eventually entranced by the same spell cast on so many agency owners before us.

We hired more people and moved into the same type of sexy office space we viewed with distain years earlier. We bought hip office furniture, threw great parties and began to enjoy the fruits of our labor. Margins shrunk. We were no longer the lean, efficient advertising agency we pledged to be. We were middle-aged and our waistlines and bottom line showed it. Budgets dried up as clients negotiated lower fees. Dissension began to grow within our ranks.

Two of the four partners would part ways with the agency after nearly 13 years of working together. I was one of them. I still loved the business that had provided for my family and given me such an exciting career. After leaving the firm, I took a few months off to reflect on how things (that had started so promising) had gone so awry.

The number 1 factor in our predicament was directly attributed to labor and overhead costs.  We hired and paid our employees well. The salaries we paid almost never correlated with productivity. Labor costs ballooned without providing the proper return on investment.  We took on more space when it wasn’t needed, more than doubling our rent. I should note that as nice as our office was, I could count on one hand the times clients actually came to see us each year.  Most times we found ourselves on planes going to see them versus them coming to see us.

The increase in overhead forced us to charge clients higher than inflationary prices. We wanted retainers for the predictable income when the market wanted project fees for specific work. Our overhead forced us to extract as much money from clients as possible to continue to feed the agency’s voracious appetite for cashflow. As clients retreated in-house, we had to cut overhead and reduced headcount.

As I reflected on how we could have done things differently, I began to see that a better way was beginning to take root across the country. The concept of a virtual advertising agency that was lean and specifically designed to solve clients’ challenges. The new model eliminates costly overhead by acquiring space on an as needed basis from shared office companies like Regus and DaVinci. Companies can now obtain space to conduct business and all the services of a leased office as well acquire larger meeting space when needed.

I should note that some of these spaces are just as hip as our office. Coupled with technology, it makes it nearly impossible for clients to recognize whether you are in or out of the office. In my experience, clients don’t care where you are as long as the work is getting done and producing results.

After a lot of soul searching and discussions with my wife, we decided I should build another advertising agency, Juno Collective, armed with all of the lessons I learned over the years from my prior ad agency experience. This time we are committed to staying lean by not investing expensive office space or costly overhead.

We’ve created a better labor model by assembling a team of talented individuals from around the world, hand-picked for specific projects. Doing so allows us to bring in world-class talent for our clients’ needs.  The reality is that talent doesn’t reside in just one ad agency or inside our nation’s borders. Talent is global, especially in the digital arena where code is the universal language.

I’ve worked with individuals from around the world who are talented, smart, and hungry. In my experience, they produce the same level of work if not better than you would find in the States faster and at a fraction of the cost.  We pass those savings along to the client. The other benefit is the international time zone differences. In most cases talent works while we sleep creating an almost 24-hour work cycle to solve client challenges.

We utilize technology to allow us to manage communication and human resources seamlessly as well as keep our clients up to date on project status. Cost effective project management and communication tools like Slack and Zoom allow us to stay on the same page often at little or no cost.

Combined together, these elements provide nimble, consumer-focused solutions at a tremendous value for our clients. Marketing dollars go exactly where they should be on solving our clients’ challenges.

David White is Managing Partner of Juno Collective (juno-collective.com) and 20 plus year veteran of the advertising agency business.  David’s experience spans brands both big and small including Toyota, McDonald’s and CSX. He resides in Maryland with his wife and two daughters.