Selling out: The daily dilemma of the independent agency

If you didn't believe this, why the hell would you be prepared to live on bread and water; pimping yourself out on Linkedin to any remote connection - that may or may not remember you as the guy they did PE with in high school? The fact of the matter is that you believe (wrongly or rightly), that the market is hungry for something that challenges the status quo and, as such, will be willing to take a punt on your offering.

Who is challenging said status quo? Well, in SA, up until 2013, it was a bunch of hard-hitting independent agencies; making waves predominantly in the world of all things digital. In this mercurial world of high margins, social media and microsites; clients (and more importantly, procurement) were struggling to keep the finger on the pulse. They felt the pressure to engage digitally with their consumers (often doing so out of necessity vs. strategy) while paying handsomely for the privilege.

The big global networks wanted to get in on the action for two reasons. Firstly, growth through acquisition has always been part of their global strategy. Secondly, with motives that are eerily similar to colonial rule; slow growth across Europe and North America makes sure that Africa is still seen as the next frontier - and the Southern tip is identified as an appropriate place to start.

© Robert Byron – 123RF.com

And so, the agency sale of the century began! In the digital space, Publicis bought Machine and later Liquorice; WPP bought Cerebra, Quirk and Gloo (the latter through Ogilvy); and Hellocomputer was snapped up by IPG. Away from the small screen and into the ATL space, WPP (by re-introducing Grey) swallowed up Volcano; while on the activation front, Dentsu Aegis nabbed Crimson Room; and Brandsrock joined Saatchi. This is the lay of the land, to date. Rumour has it that we can expect one more digital play as well as one or two larger activation/BTL moves in the coming months.

Take a breath to let that all sink in.

The next logical question is, why? While the above makes the networks' motives look obvious, the question still remains; why would these brazen cowboys opt to join forces with, and ultimately work for, The Man?

There are a few reasons and it's not all about the moolah:

1. Cash: OK, let's get it over with; cash is king. Like the New Zealand rugby squad before most World Cups pre-2011, one of the questions that torments independents is; 'Have we peaked too soon?' Will the next agency flavour-of-the-month make us lose clients and cause our ultimate demise?' As such, cashing out* on a high PE ration, basically a multiple of your annual profits, might not be a bad call. *Be wary of the dreaded earn out, where networks will essentially only pay you the full amount when you hit certain targets. Whispers via the grapevine suggest that this could result in over-worked staff and a focus on quantity instead of quality.
2. Global relevance: It's a little like the favourite barman at luxury bar, Caprice, on the Camps Bay strip going on holiday to Miami and discovering that no-one gives a sh*t about him on a global scale. With deals being done in boardrooms in New York and Paris, as an independent, you risk being marginalised when global network deals bundle agencies together. No matter how much your client may like you, like Eskom; their power has limitations.
3. Strength in numbers: In a similar vein, some SA clients are looking for more full service solutions. Given an incredibly tight daily schedule, the management of multiple specialist agencies (with multiple specialist egos) can be too daunting a task. As such, a solution that provides a specialist offering under one roof* might be very attractive and, in turn, guarantee additional revenue for formerly independent agencies dependent on the brutal pitch process. *Be aware, you become highly dependent on the ability and competency of network partners. There is potential for friction around being the coveted agency of the agency.
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As an independent agency, focus on:

1. Entrepreneurship: You started a business because you had the ability to spot a gap in the market. If the big networks were able to spot that gap and move quickly, they wouldn't need you! Firstly, this is most likely a combination of red tape with corporate processes and, secondly, incentive. When you are on the gravy train, why get off to look for something better? It's likely that you will develop an identity that teeters somewhere between that of the hare and the tortoise.
2. Vision: One of the great things with having your own business is that you are responsible for plotting your destiny. Granted the market, and your clients, shape your direction to a degree but the vision for your business does not have to be boxed in by profits and turnover. Nor is it restricted to what the rest of your network ecosystem dictates or permits.
3. Bed time: What!? Well, this has two parts to it. Firstly, when you are up all night eating food out of boxes preparing for a pitch or drinking stale coffee on the new Safair 5.30am flight (thanks for that!), you can only blame yourself. Secondly, when you are the boss, you get to decide what time the doors to your office open and close. When you are not the boss, no one cares about your 5.30pm Sweat 1000 class. In a nutshell; when you are working for The Man you will be expected to sacrifice the same blood, sweat and tears - but it will all be for someone else.

So that's it, the good; the bad; and the (sometimes) ugly, of selling out. There is no right or wrong answer. As a wise man once send to me, "Buy a car; don't buy a car. You learn something either way." The torture for us independents is trying to figure out, in advance, whether it's a Ford or a Ferrari.