Andrew Walmsley on Digital: Fortune favoured the brave

Andrew Walmsley
Andrew Walmsley

The web initially threatened marketing intermediaries, but not once savvy ones proved their worth.

If you've ever bought a house through an estate agent, insurance through a broker, or a holiday on the high street, you've probably thought about getting a better deal direct. It's tempting, especially when many intermediaries do little other than control access to information.

Back in 1966, as US interest rates tipped over the maximum returns permitted on deposit accounts, investors took funds from savings institutions and shifted them into directly invested government bonds. A new term was born - disintermediation - as savers cut out the middle man.

The phenomenon really caught on with the explosive growth of the web in the late 90s, as commentators predicted the removal from the value chain of layer upon layer of intermediaries. Everybody would sell direct to consumers, and terms such as retail and wholesale would wither and die.

But although we can all point to growth in direct sales, particularly in finance and travel, for the most part what has actually happened is that the intermediary layer hasn't died, it has evolved. Insurance brokers evolved into or Moneysupermarket. Travel agents morphed into Expedia and LateRooms.

As many old-style intermediaries have disappeared, others have grown up to replace them by finding new ways of creating value for consumers - using the capabilities of the web to improve choice, speed or pricing.

This change is coming to the media business, too. Sir Martin Sorrell, in his recent address to the International Advertising Association, observed that the media sector continues to be disintermediated by low-cost business models.

'The seeds of this problem were sown when the people who created the new media decided to give it away for nothing,' he said. 'Old media will never be as profitable again as it has been.'

The irony for Sir Martin is that the reverse is true for marketing services. For years, media agencies and creative shops had been engaged in a headlong battle for the lowest fees. As they competed to cut income, so the pressure increased to cut corners and seek less transparent revenue sources.

Ultimately, it came down to accountability and value. Even though econometrics could show the value of an agency, a good negotiator could always throw doubt on the numbers. And, regrettably, many procurement departments are motivated purely by cost - often lacking any connection back into the business objectives of their organisation.

The pressure was therefore ever downwards. But the emergence of digital didn't disintermediate agencies. Instead, for the smart ones, it presented them with a new direction.

If you weren't scared of accountability, data, technology and new ways of trading, you could build a new type of agency. One that was focused not just on cost, but on value - not input metrics such as TVRs, but output metrics such as sales revenue.

For the first time it was possible to demonstrate incontrovertibly the value the agency brought. To show how adding to the team (and increasing the fee) could get better results.

For many marketers, that has utterly changed their relationship with their agency. For others, who haven't changed, it's same as it ever was. Their agencies compete to reduce fees, because their own outfit hasn't got the means to measure value. So the process of re-intermediating the marketing services business is far from complete.

Far from disintermediation and lower profitability, it will be a process that will deliver better value for clients, and better margins for agencies.

Andrew Walmsley is co-founder of i-level

30 seconds on...   Sir Martin Sorrell

  • Sir Martin Sorrell is the chief executive of WPP Group, a position he has held since he founded the company in 1986.
  • He was educated at Haberdashers' Aske's Boys School in Hatcham, London before graduating from Christ's College, Cambridge and going on to receive an MBA from Harvard University.
  • Before founding the WPP Group, Sorrell was group finance director at advertising agency Saatchi & Saatchi from 1977-1984.
  • The Foreign and Commonwealth Office named him an ambassador for British business in 1997, and in 2000 he was appointed to a committee briefed to rebrand Britain abroad.
  • Sorrell is a patron of the National Advertising Benevolent Society, the marketing communications industry charity.
  • He received his knighthood in the 2000 'Millennium' New Year's Honours list, which also included actor Sean Connery, supermarket chief Kenneth Morrison, and rock musician Noddy Holder.


Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now


Lynx tells men not to leave love to fate
HBO captures awkwardness of watching sex scenes with parents
Primark to open first US stores with Boston chosen as flagship location
Marketing spend on the up but a reality check is needed before celebrating
Top 10 ads of the week: Jackpotjoy and BT Broadband fend off Kevin Bacon
Lidl beats Tesco to 10m Facebook fans
Center Parcs ad banned for encouraging parents to take kids out of school
Coca-Cola, Cadbury and Amazon named top brands for targeting youth market
Leaked document shows Nokia to be rebranded as Microsoft Mobile
Nike lays-off hardware staff in move that casts doubt on future of FuelBand
Greenpeace says save the bees or humans will die
What brands need to know about changes to VAT and online downloads in 2015
Jimmy Savile victims urged to claim compensation in new ad campaign
UKIP launches biggest  ad campaign and stirs up 'racist' accusations
Apple boss Tim Cook provides voiceover on ad touting firm's renewed green commitments
John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message