How small agencies are remaking advertising.

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July 30 2010 6:29 PM

The Little Shop of Dollars

How small agencies are remaking advertising.

In the ad business, big agencies rule—but the once-mighty Super Bowl commercial is no longer king. Executives still manage campaigns from the top down and creatives work mostly in-house on TV, radio, and print ads. But small entities such as agencies, creative shops, and production companies are poking holes in a tired model with their flair for digital branding. The 30-second, multimillion-dollar pop no longer suffices.

These little gems are hungry like Audrey, the insatiable plant in The Little Shop of Horrors. And Big Advertising needs to feed them to survive—because they have a grasp of social media that no account executive can rival. Stalwarts like WPP's Ogilvy & Mather and Omnicom's BBDO weathered the recession through cost-cutting and layoffs, but, in some cases, lost high-profile clients. They still hold the purse strings. But they're relying more on lean creative shops, so common in the little-guy economy, to advance critical customer relationships in the digital landscape. With U.S. ad spending down, it's hard to see how the bloated silo model can endure. Small firms that innovate without fixed costs are better set to manage uncertainty.

They're also better equipped in this new creative climate. Advertising has always been an extension of a company's product. But as Facebook demonstrates, increasingly marketing and product are one in the same. Bigger agencies, however, are still warming up to this thinking. Sometimes a campaign gets rubber-stamped because the client wants it—and the executive want to keep his job even if he disagrees with the direction. A digital and technical shop like Luxurious Animals, co-founded by three partners in 2008, is less interested in feeding a client's ego than in propelling its relationships forward. And it can advance those relationships in a more nuanced way than its large counterparts, even as it works alongside them. "I know better than an agency, which is a generalist, how a consumer is going to act in this space," said Torsten Gross, the firm's chief strategy officer. The company recently won a Cannes Cyber Lion Award for its work with BBH on Axe, the men's grooming products owned by Unilever (UL).

Executives eager for fresh ideas are also turning to small shops for content, either directly or indirectly. Advertising has long maintained that it's in the storytelling business, but it is edging faster toward narratives that customers can associate with brands. And those scripts are being written by the little guys. Lexus looked to the skeletal agency Skinny for an interactive film to promote its new hybrid, the CT 200h. Lonelygirl15 co-creator Mesh Flinders started Jumping Rock Films—a mix of advertising and film projects—in 2008 after collaborating on several YouTube videos about a teenager named Bree, who was later found to be fictional. The videos resonated and then became a series. Flinders incorporated Hershey's (HSY) and Neutrogena products into that series, and still fields calls from brands who want lonelygirl15 content. His firm consists of just him plus computer—but can balloon to 25 during a project—and a bunch of equipment. Flinders is turning a screenplay about two college grads on a road trip into a pitch for Abercrombie & Fitch or Forever 21. Five years ago, it would have been produced like a traditional film and would perhaps show at a festival. "These brands want Will Ferrell or Will Arnett to do Funny or Die. They don't want to buy a corner of a Web site, even if it gets 10 million hits a day," Flinders said.

Small shops aren't just changing the way brands are presented. They are exposing cracks in big agency operations. For years, big firms have courted big clients, resulting in symbiotic relationships that endure for decades, like a brand's bond with a customer. They still do. But that system is showing signs of rust. The wars between strategic and creative are only getting worse at large agencies, where research has started telling creatives what to do. At small entities with fewer resources, there are fewer divisions between strategic planners and the ideas people. BBDO interfaced so often with small outfits that it created a department to handle its relations with third-party shops. It rarely uses the same one twice. "I think it's a little bit analogous to iPhone apps," said Brian DiLorenzo, director of integrated content at BBDO New York. "They are growing like weeds."

Moreover, for some little-guy entities, advertising is turning into a broader problem-solving business. Often, a lack of marketing momentum is a sign of a larger issue. Skinny was tapped by global telecommunications firm Vodafone to tackle a conundrum. "There was no love," said founder and chief creative office Jonas Hallberg, referring to the lifeless mobile stores and sterile focus on plans and services. The firm worked with 10 partners to devise a platform that allowed users to experience Vodafone in a different way. Skinny is autonomous, but it benefits from incubation within MDC Partners, and it relies on the holding company's back office for administrative purposes.

Of course, in the little-guy economy, many small digital shops that struggle with growth will die or be eaten up by the behemoths. A handful will experience massive growth and a few will stay small and profitable. Their appetites will be satiated.

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