Madison Avenue Revisited. The Verdict of the Advertising Industry: Murder, not Manslaughter

Holding companies WPP, Omnicom (and IPG) milked their agencies rather than help them become more effective for clients. The price: stagnant client brands, falling fees and short-term relationships.

Available for pre-order on Amazon: https://bit.ly/4bciet3. Will be launched at Cannes, June 2026.

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From the Foreword

The advertising industry is dying, and the murder weapon isn’t the algorithm, the internet, or shifting consumer habits. It has been fatally wounded by the fact that there is a complete misalignment between how it makes money and how it creates value.

Because agencies are paid for their time rather than their results, they have entirely lost their skin in the game. When you remove the senior talent, compress the timelines, and manage the creative process via procurement spreadsheets, you no longer produce culture-shifting ideas: you produce “assets.” (Often this is forgettable digital noise that annoys the consumer without ever persuading them).

It was not always like this. A very few people have managed to charge for outcomes rather than for inputs: but it is rare.

Rory Sutherland

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What needs to be done?

Ad agencies do not exist without clients. Agency viability depends on their having client relationships and the fees that these relationships generate. ‘Marriage’ is the only viable state for agencies; being ‘single’ or ‘divorced’ is a nonstarter.

Is it possible, then, to talk about “what should an agency do to fix itself?” Or, alternatively, “what should marketing do to fix itself?” Or is this simply a marital problem, requiring some sort of a joint effort to ‘fix the marital relationship?’

Both parties need to make certain changes.

1. Stop the cost reductions. Both parties need to stop using cost reductions to fix their respective performance problems. Both parties need to focus, instead, on understanding and fixing their genuine performance problems.

2. For advertisers, the main performance problem is moribund brand growth. Advertisers need strategies and action programs to fix this problem. Brand-by-brand performance diagnoses need to be carried out. Marketing mix strategies need to be revised to select the optimal marketing mix for each brand. The use of an MMM that optimizes for sales growth, like Mutinex, makes a lot of sense.

3. For agencies, the main performance problem is the gap between fees and scope workloads. It’s unconscionable that agencies, who generate a lot of stuff, do not measure the stuff, staff the stuff appropriately and charge for the stuff. Their scopes of work are too large, with too many unnecessary and unproductive deliverables, but only if agencies know what’s in the scopes are they in a position to do something about it. Agencies need to use SOW documentation and measurement tools to solve this problem.

4. Stop pandering, at least for a while, to Wall Street’s need for quarterly performance improvements. Major advertisers, and the financial holding companies, both need to carry out operational transformations, and these transformations will be disruptive. In addition, both parties will be digesting the implementation of AI, and this will bring about severe disruptions. Both parties, then, need to create major financial/cost reserves to deal with the twin disruptions. They can blame the reserves on AI, which might not be a bad idea. The reserves need to be very big, enough to cover the costs and fee disruptions for two to three years.

5. Commit to working together in partnerships rather than as ‘clients and vendors.’ Commit to relationships that have ‘improved brand performance’ as the objective, both for marketing and for its agencies. That’s a far cry from today’s relationships, which are either constructed around ‘working efficiently at low cost,’ or ‘delivering creativity in the hope that it has a positive effect.’

What is required of such a partnership?

Shared views about brand performance. Clients and agencies must have a shared view about why individual brands have been underperforming in the marketplace. This means that the parties must exchange data, carry out analyses and develop a consensus about the nature of each brand’s problems.

Shared views about scope of work spend and mix. Clients and agencies must have a shared view about what kind of strategies and deliverables have the highest probability of driving brand growth again. Both parties must participate in scope of work development and scope of work reviews. The importance of MMMs like Mutinex cannot be overstated; SOWs need to be reviewed, changed and optimized to accelerate brand growth rates.

Shared view about the appropriateness of agency fees and staffing to carry out the scopes of work. The deliverables in the scopes of work must provide the currency for the joint determination of agency staffing and fees. They should use ScopeMetrics® or an equivalent platform to define and classify the deliverables, calculate transparently the number and seniority of staff, and calculate the fees.

Shared views about how to continuously improve their relationships so that 100% of agency efforts is productive. Poor briefing and excessive rework rates need to be eliminated. Procurement needs to refocus on relationship process improvements rather than continuing to fee-bash.

• Agencies need to upgrade their skills to carry out their responsibilities in the partnership. Media and creative agencies need more ‘strategically oriented,’ senior people to handle relationship responsibilities and to direct the use of AI in productive ways. AI will replace junior creatives, junior client service people and junior media planners and buyers. In general, a more senior mix of staff will be required, trained appropriately to carry out their responsibilities. This will be highly disruptive, and it’s why a major financial reserve will be required.

• Both parties need to commit to one another on a long-term basis. Procurement, in particular, and all client service executives need to change their attitudes and work, in principle, on the basis that their relationships will endure forever. Toyota has always had this right, believing that Toyota should be investing in improving the capabilities of its suppliers, just as the suppliers should be investing in making Toyota successful. All of this is outlined in The Toyota Way, by Jeffrey Liker. Toyota’s principles need to be broadly implemented by marketing and its agencies.

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Will any of this happen? I’ve been somewhat disappointed, over the past several years, about the quality of C-suite leadership. This disappointment has nothing to do with the intelligence or capabilities of the C-suite leaders whom I have encountered or been able to work with. My disappointment has more to do with their motivation to do the right things for the long-term rather than optimize short-term performance.

In this, though, the blame should be passed to the financial holding companies, who establish the incentives and the KPIs for the agency leaders. Financial holding companies might pretend that they are operational marketing communications companies, but in reality, they are financially driven investor companies that optimize short-term profits.

• They did not intervene in agency operations to help agencies adjust to the change from media-based commissions to fee-based remuneration.

• They did not encourage agencies to ‘measure their workloads.’

• They did not intervene in agency client relationships to help shift remuneration from staff hours to output-based deliverables.

• They did not encourage their creative agencies to diversify into digital/social advertising. Instead, financial holding companies saw an opportunity to feather their own nests by creating holding company relationships, taking advantage of their own diversified portfolios rather than helping their agencies become more self-sufficient in the new media-integrated world.

• Finally, it must be pointed out, financial holding companies continued to impose ‘stretch’ budgets on their agencies and brow-beat them into cutting costs, encouraging the agencies to liquidate their talent bases in favor of growing short-term earnings.

It’s hard to argue that the holding company innovation was good for Madison Avenue.

The ultimate strategic benefactors from financial holding company actions will be the independent agencies, who have generally seen things as they are but have been overwhelmed and intimidated by the size and power of their financial holding company competitors.

It will take, I believe, a financial holding company crisis, like the dismemberment of a financial holding company like WPP (the most vulnerable financial holding company in 2025–2026) to motivate C-suite executives throughout the industry to do the right things.

AI will force this, in any case, for better or worse.

My hope is that this industry, which can be a force for good, providing essential services for clients and a fun and rewarding place for employees to work, will right itself after several complex decades of technological evolution, short-sighted decision-making and deteriorating performance.

All of this is within reach. The management imperatives are not difficult to understand or too complicated to implement. All that is required is a better understanding of the problems to be solved and the will to solve the problems.

The future of the industry is in the hands of its C-suite leaders. Let’s hope that they will do the right things.