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The Dutch agency market is too crowded and certainly the externally financed groups are going to have a tough time. A consolidation battle is needed, believes
In a fascinating interview with
The Dutch market, for example, is under pressure. Of the roughly six large holding companies operating here, three may remain. That's because of money.
Specialist marketing agencies are facing tough times. Many have been financed with bank loans as private equity came on board. Lured by the successes of
Marketing agencies have little organic growth in turnover. Knaap: "You have to grow and reduce that debt position. Otherwise you have a problem. That top-line growth [however] is gone from the advertising industry. The structure of private equitg and banks does not fit with that. Banks base their loans on plans for revenue and margin growth. That's where things are complicated right now."
One reason digital agencies are not growing lies in the tighter financial policies of their clients. Companies in general are struggling with declining profitability. The first two expense items then cut are: hiring outside specialists and marketing and advertising. This puts pressure on the agency business.
A first step in the wave of consolidation is now being taken by the holding groups IPG and
A second, bigger blow to the advertising market comes from the rise of artificial intelligence. Knaap: "Generative AI is quite disruptive to our business. The production of text, audio, photography and video will all be automated. Creation, briefings, media buying and planning, machines can do it all. Agencies' end products are being disrupted by tools and those AI tools are only going to get better."
Marketing and advertising agencies like to tell themselves that "human creativity" will always win out over machines. Knaap puts that comment in painful perspective: "In holdings there are only a few truly creative people, who invent things. The rest make local translations. Machines are really better at that. Only the top people stay, the masses disappear. Eighty percent are in the longtail. That can no longer exist in its current form. It's not efficient."
The filleting knife has also passed over the organization at Monks. By the end of 2022, under parent group
Knaap's positive view of the market tells him that his S4 group, with a 1 percent market share, is easier to transform than those of the big six. "When you are successful as an AI company, your revenue goes down. So we are in a transition period. We have to get through that. Basically, you want to do more sales so you can pay people better. Then you have to invest in new things."
"Who are determining where the industry is going?
Summary
- The Dutch agency market is overcrowded, leaving externally funded marketing agencies without growth rates in particular and consolidation inevitable.
- Generative AI is fundamentally disrupting the advertising industry by automating production processes, making many functions redundant.
- Marketing groups must transform themselves into AI-driven directors of processes, with a sharper focus on value creation and strategic collaboration with tech giants such as
Passage on agency world starts in at 17:55:
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