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Agencies at risk from media owners

News, 12 December 2014

SHANGHAI: The media world has changed so completely that the traditional role of agencies is in danger of being usurped by media owners, according to a leading industry figure.

Richard Lee, CMO for PepsiCo and Tingyi Asahi Beverages in China, told Thoughtful China that agencies faced a threat from major internet businesses such as Tencent and YouKu which "have the capacity and capability to do one-stop shopping for brands".

He explained: "You can brief them about your brand positioning and your needs and they come back with a creative idea. And they have the means to produce them [ads] and even to place them."

And with so many people possessing mobile phones, taking pictures and passing them around to friends, "theoretically every single person can be a director, can be an advertising agency even".

Part of the problem, he argued, was that the creative teams in agencies were proficient – "well most of them are" – in the field of traditional TV advertising but they were less well versed in dealing with new digital areas such as social media.

Brands themselves had to take charge in social, he said. "Brands have to step up and have a clear point of view, a clear perspective on what the brand is doing with consumers and also with communities … Brands have to take a leadership role, they cannot delegate to agencies."

He saw the agency role changing to what he described as a "3C model", where they acted as consultant, curator and co-ordinator for a brand.

He added a fourth C – compensation – which he said also needed to change, "from a fixed retainer fee to a flexible structure based on performance". And he suggested exploring alternative models such as profit sharing, an approach he indicated that digital platforms were open to.

He further advocated streamlining both global agencies and brands, as the sheer size of many meant that "no-one is articulating a clear point of view of what the brand should be".

Data sourced from Thoughtful China; additional content by Warc staff