The word “disintermediation” is a mouthful. But it happens to be the best word to describe what’s happening to the advertising agency business. In fact, the same dynamics affecting ad agencies are affecting “agencies” of all kinds.
Consider what it means to be an “agent.” Travel agent. Insurance agent. Talent agent. Real estate agent. To be an agency is to be an “intermediary” – someone who represents a client to a third party. Today, most intermediaries are being disintermediated, mostly by the internet. Instead of having to work through a “middle man,” buyers of services are able to go directly to the source – and they do.
David Smith, a leading futurist with whom I once had the pleasure of sharing the podium at an IPA conference in London, observes the distintermediation of everything from music (iTunes) to borrowing (Quicken Loans). Instead of working through travel “agents,” most of us now book online directly with the airline. Instead of retaining the services of a third-party insurance “agent,” we buy our own insurance online at sites like Progressive.com.
The advertising “agency” version of this disintermediation is that marketers are increasing going around us to work directly with the media, production companies, and even directly to creative talent via crowdsourcing.
Disintermediation in media
“The Newest Ad Agencies: Major Media Companies” read the headline in Ad Age a few years ago, which reported “Companies such as Johnson & Johnson, Kimberly-Clark Corp., Clorox Co., Hewlett-Packard and Verizon have enlisted media companies lately not just as conduits to reach consumers but also as co-creators of programs to do so. And they sometimes bypass their usual media and creative agencies in the process.”
It’s in this same Ad Age piece that Becky Saeger, CMO of Charles Schwab said “If I were an agency, I would be really worried about being disintermediated, More and more, agencies are almost in the way sometimes.” Really – in the way?
More evidence of this trend came with reports like “What Is Conde Nast Doing Making Kenneth Cole’s YouTube Ads? Under Threat, Media Push Further Into Agency Territory.” Large agencies have lost large chunks of business to what used to be a supplier. Today, media companies are becoming more competitors than business partners.
Disintermediation in production
In the production realm, there’s even a word for the disintermediation happening to agencies; it’s called “de-coupling” – the practice of marketers either dictating the production resources to be used, or taking the production piece away from the agencies altogether. Agency observer Avi Dan writes about this as “Production Unbundling.”
Disintermediation in creative development
Even creative development – seemingly the best example of what can’t be “unbundled” – is being redefined by the effects of internet disintermediation. Marketers are now routinely experimenting with crowdsourcing and expert-sourcing sites like Crowdspring, Genius Rocket, CrowdTap, and many others.
Actually, Wikipedia has a lot to say about disintermediation, and agrees that it’s mostly the internet that has caused this new form of disruption. Says Wikipedia, “The Internet, World Wide Web and secure e-commerce has empowered the firms that create the product, service, or intellectual property, at the source of the value chain to directly sell to customers, thus eliminating the need for costly, and thus inefficient intermediaries.”
Disintermediation is just one more seismic reason agencies must rethink their business model, and why they must learn to embrace their new role as curator every bit as much as creator. No longer can an agency be defined as people sitting at desks in a particular office location. Speaking of the old assembly-line agency model, Fast Company observes “Because of a combination of internet disintermediation, recession, and corporate blindness, the assembly line has been obliterated – economically, organizationally, and culturally.”