Understaffed media agencies are turning to Google and other tech firms for help—inside the ‘terrible mess’

Understaffing issues causing ‘a terrible mess’

A former executive for a holding company agency, who left to go client-side last year, said he started with a team of 20 people in 2021 and all of those employees either quit or were moved to other teams. The executive, overwhelmed by the work, quit.

“I had no team and I physically couldn’t do anything,” the former executive said. “It makes me so angry because agencies are devaluing the work” by not staffing the account with the proper team to do what’s required.

A search consultant who spoke on condition of anonymity said the problem has been accumulating since 2020, when agencies started undergoing layoffs due to COVID.

“Agencies are certainly struggling for talent,” the search consultant said. “They always over-correct to the market and people don’t want to work for the big agencies anymore. There’s not a talent shortage. Agencies cut back way too aggressively in 2020, claimed there was a talent crisis in 2021, as if it was not their fault, and then started cutting back again in [the second half of] 2022. It’s a terrible mess.”

Read more: US ad employment fell by 1,000 jobs in February

Many ad professionals fled to the tech industry in 2021 because companies, including Google and Meta, were offering salaries twice the amount of ad agencies. Now tech companies have had to overcorrect amid rising inflation, resulting in mass layoffs. Still, even tech workers who have been laid off are not taking jobs at agencies that pay half the salaries they were making at the big platforms, according to several insiders.

“The agency has to somehow find a profit margin to supply more expensive talent to the client for the same fee,” the search consultant said. “So they end up under-servicing the client or trying to continually upsell the client on new services in order to make back the profit they’ve lost.” 

Matt Seiler, managing director of industry talent firm Raines International, and ex-CEO of IPG Mediabrands, said there are two main problems. First, he said, agencies are promising in pitches that they can do everything cheaper than the incumbent and then “they have to pay that back because they can’t honor their price commitment.” Second, agencies are making “staffing commitments they can’t afford to fulfill because the fees they’ve taken don’t allow them to put the headcount on it,” Seiler said.

He said agencies might promise a client a 15-person team in a pitch and then service them with a 10-person team, leaving five roles open as long as they can to save money.

“Clients will look for reconciliation on a quarterly basis and they’ll say, ‘How are you doing on all those bodies you promised me?’” Seiler said. “And the agencies will bullshit their way through it as long as they can, by saying ‘really tight job market, etc.’”

Agencies also have been promising senior talent in pitches and then servicing accounts with junior employees, Seiler said. Eventually what happens is either the client is satisfied with the work and lets it go or they move the business to another agency, he said.

Also read: Behind one agency’s potential staffing solution

How agencies fix the problem

Seiler has long been a proponent of pay-for-performance compensation models and believes it’s the only way to fix the problem. He was CEO of IPG Mediabrands in 2012 when UM, one of its media agencies, hired consulting giant McKinsey to analyze how other industries are compensated and come up with a system that more closely aligned agencies’ goals with those of clients.

But 11 years later, pay-for-performance is still not the standard payment for agencies.

“It absolutely blows my mind that there has not been more progress on this front,” Seiler said. “If your agency compensation is tied to how well your client is doing, you’re in a great place. They’re not trying to figure out whether you’re screwing them based on numbers of bodies or commission rates. You get paid based on the product you deliver.”

He said there are a lot of people in the industry making excuses for why a pay-for-performance model can’t work, including on the marketer side, with clients saying the model makes compensation too unpredictable.