The Disintermediation of the Advertising Agency Business

LinkedIn Article by Tim Williams 
June 3, 2013

When was the last time you used a travel agent? It’s more likely you use Travelocity, Expedia, or Hotwire to book your travel.

Insurance is increasingly purchased online, bypassing the insurance agent. Think Esurance or

And while real estate agents often get involved with the mechanics of a transaction, most home sales result from online searches on sites Zillow.

Welcome to the age of the empowered buyer, where we have less and less need for the services of “agents.” This phenomenon is largely due to the power and influence of the Internet, which allows buyers of all types of products and services to go around the middleman and instead go directly to the source.

In effect, the “intermediary” has been disintermediated. Actually, Wikipedia has an excellent explanation of this phenomenon:

“Disintermediation is the removal of intermediaries in a supply chain, or "cutting out the middleman". Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly, for example via the Internet.”

The disintermediation of everything

Beyond travel, insurance and real estate, disintermediation has been happening in music (iTunes, Spotify, Google Play) publishing (Amazon, iBooks), and – dear to my heart – advertising agencies. Advertising firms historically acted as “agents” on behalf of the media, earning a 15% percent commission just like travel agents earned commissions from airlines and cruise lines.

Today, the advertising “agency” is being disintermediated in several disruptive ways. First, and ironically, agencies are being disintermediated by the very establishment they were designed to support – the media. Media companies like Viacom, Meredith, and Conde Nast all are getting into the advertising agency business themselves, in effect biting the hand that feeds them.

Production companies like Radical Media and B Reel are doing the same. In the past, these kinds of companies would have been viewed as suppliers or business partners to agencies – not direct competitors.

But the biggest and form of disintermediation for agencies is coming in the area they feel they should be most able to defend: developing creative concepts. And it can be summed up in one word: crowdsourcing.

Beyond your four walls to a global talent pool

The underlying idea behind crowdsourcing is to leverage the power of the Internet to engage the talents and knowledge of a global talent pool. The genesis of the open source movement was, of course, in software development (think Linux and Apache). But open source approaches are now being used in academia, healthcare, and even government. Netflix uses it to improve their “recommended for you” algorithms. Boeing uses it to generate ideas for optimizing the power produced by the solar panels on their satellites. And increasingly, marketers are using crowdsourcing to create logos, web pages, and even complete campaigns.

Visit sites like Crowdspring and you’ll discover a platform that allows companies to post a brief and receive an average of 110 ideas – for free. Crowdspring’s global community of over 137,000 writers and designers choose from the hundreds of projects posted on the site and develop ideas on a speculative basis. You, the client, then select the one you like and pay a pre-determined price, which is almost always a fraction of what an advertising agency would charge. That's disintermediation in action.

Similar models can be found at 99 DesignsIdea Bounty, and DesignCrowd. Other slightly different open source marketing models include The IdeaListsBlur, and eYeka. And in the realm of “expert sourcing” – vetted professionals who work virtually but not on spec – you’ll find well-established platforms like Ideasicle and Giant Hydra.

Already, there are agency models that are designed to leverage this new reality. Victors & Spoils was launched a few years ago as the “world’s first crowdsourced advertising agency.” Co: in New York operates in a similar open source way.

The crowdsourcing company Genius Rocket is described by Fast Company as “…what an ad agency looks like when it’s stripped of Madison Avenue skyscrapers, high-priced creative on payroll, sushi dinners at Nobu, and two-week shoots at the Viceroy in Santa Monica.”

One of the TV commercials that ran on the 2013 Super Bowl for Gillette’s Speed Stick was created and produced by a talented member of the Tongalcommunity, another of the open source platforms focused on marketing and advertising. Most disconcerting to traditional agencies is the price tag attached to this kind of work. Instead of the hundreds of thousands most agencies would charge to produce a spot worthy of the Super Bowl, Gillette paid $17,000, and reports that their ad was ranked higher than other spots in the program for brands like Coca-Cola and Anheuser-Busch.

Challenge or opportunity?

The agency community at large is surprisingly underinformed about – and highly suspicious of – these open source resources. But their reaction usually transforms from incredulity to shock when they log on and see that brands like Starbucks, Microsoft, Virgin, and a virtual parade of Fortune 1000 companies are already using these platforms. Marketers both large and small seem quite determined to leverage the power of crowdsourcing both for its speed and its cost effectiveness. Agencies, understandably, counter with the argument that “you get what you pay for,” and have serious doubts about the quality of the work produced by what can often be a mélange of amateurs or semi-professionals looking to make some extra money.

But practitioners like Will Burns, founder of Ideasicle, preach convincingly that the open source approach actually allows agencies and marketers alike to work with some of the best talent in the business and that the “expert sourcing” approach in particular has the ability to actually accelerate creativity. Says Will:

“Creativity tends to happen out there, where life happens, and not at our desks. Expert sourcing, being virtual, is a time-deferred model, linking up well with that truth. We infect the experts’ brains with a potent creative brief and then equip them with a mobile app so that when ideas hit them “out there,” they can easily post them and move on with life.”

Love it or hate it, the open source way of working is on its way to meaningfully disintermediating large chunks of the advertising agency business. Will it ever completely displace the highly personalized and customized agency-to-client working relationship? Perhaps not. But agencies would do well to stop seeing this as a challenge and start treating it as an opportunity.