Ad Agencies Caught in Recession Backlash?

Q&A with Miles Nadal, chairman and chief executive of MDC Partners Inc., the world’s ninth-largest marketing communications firm.

How do you think ad agencies will need to change in order to meet the economic challenges ahead?

The impact of the economy affects all business. Companies are by the day shrinking and they will be much more discriminating about how they deploy capital. Clients will be far more focused on where agencies put their resources — more focused on putting it into talent and spending less on overhead and non-productive costs. Clients will look at campaigns and strategies that produce results in the marketplace. An ongoing theme has been targetability and measurability of impact, of return on marketing investment.

But we have a $600-billion industry globally — no matter what the change is, it’s still an enormous industry and enormous opportunity. If you produce brilliant work, clients will ultimately beat a path to your door.

What are the biggest risks and opportunities ahead in the business?

There is such fear right now and consumer confidence is so low, it’s hard for clients to make commitments at this point in time. The impact on agencies is that it is hard to forecast the future right now and they have no idea what budgets will be. We are telling our agencies to assume a 10% cut in fees from every client, and that’s a good client. It could be worse. I have this expression: “Flat is the new up 20%.” So if you’re flat, this is like a great year. As for opportunity; in 2001, clients really believed great agencies had to have many offices and many services in many countries. The advent of the Internet has leveled the playing field. You don’t need to have all those things to get big clients. Clients do not care about where you are from. They just care about the impact of the work and I think the opportunity for agencies is that if you do brilliant work you can take it to the biggest marketplaces in the world and clients will be receptive.

Is the momentum in the industry coming from creativity or technology?

I think technology is going to continue to evolve and change the distribution of brilliant ideas. But I think if you go back in this industry to the great heyday of advertising, it is and has always been about brilliant creative. Brilliant creative is the driver that resonates emotionally with consumers and gets them to take action. Technology has also enabled us to get brilliant ideas from our consumer marketplace; there is such brilliant work being done on YouTube that is just being done by consumers. I think it is the ability to use creativity and technology in harmony that creates impact.