Mat Baxter at Huge: 'Agencies face more hurdles'

Advertising agencies are facing a series of issues, including hesitant clients in an uncertain economic climate and a broken model of doing business.

And Mat Baxter, the global CEO of IPG's Huge, sees agencies being increasingly commoditised and will face further threat as AI takes hold. 

Huge opened in Australia in February, bringing with it Creative Growth Acceleration which is built on the premise that the world is on the cusp of a new business and economic era where the traditional approaches to growth are no longer fit for purpose.

AdNews sat down with Baxter to discuss the state of the advertising industry which he describes as tough at the moment. 

What is the biggest hurdle at the moment for agencies?

"Agencies face more hurdles today than ever before. Whether it's client in-housing, continued downward pressure on fees or increased competition from management consultancies. However, I believe the single biggest hurdle for agencies remains their broken business models. Most agencies have service based business models that rely on charging for people and hours to generate a profit. These models have experienced significant challenges thanks largely to sustained commoditisation from procurement departments. As AI takes hold in the industry, service based models will prove highly vulnerable. That's because AI will result in agencies needing fewer people and hours to get work done. And that presents a fundamental problem for agencies with business models that depend on charging for those things to make a profit. That’s why Huge has reinvented its business model - moving away from selling services (people and hours) to selling products (value and outcomes)."

Where is commercial creativity heading?

"I think there's a significant opportunity for commercial creativity to be the key differentiator for agencies when compared to management consultancies. However, for commercial creativity to realise its full potential we must establish a clear causational link between creativity and client growth. Historically, this link has been tenuous at best. But today, with all the strides we've made in data and analytics, we can demonstrate the true power of commercial creativity. Provided we do this, I think commercial creativity is heading in a very exciting direction."

We’re seeing a slowing in hiring among agencies and redundancies across media platforms in contrast to the post lockdown frenzy to hire. Is talent available?

"There's definitely been a slowing of hiring and sadly a number of redundancies. That means there's plenty of great talent out there."

The market is said to be slow, with brands cautious in an uncertain economic climate. What are you seeing out there?

"It's tough out there right now. Clients are a little spooked and that's led to them taking their time to sign things off. We're seeing budget cuts, projects being delayed or cancelled altogether and a general aversion to any sort of risk. I think things have improved in the past few months when compared to the beginning of the year, but there's still a way to go for the market to fully recover."

The WFH revolution. What are the pressures from staff on this? Is there an ideal hybrid working model (days in office Vs home)?

"This is still very much a work in progress. Plenty of companies, including Huge, continue to experiment to find the optimal blend between remote and in-person working. What’s abundantly clear is that staff want the best of both worlds - the freedom to work remotely and the social and cultural benefits that come through sharing a workplace with colleagues. Because of this I think hybrid working models will prove most successful in the long term. However, the optimal split between at home and in office days will vary greatly depending on industry and individual company. For us, we've lent into hybrid and remote working as an organisation. We have re-organised ourselves away from a geographic structure to a globally connected model, where we cast the right talent for the client regardless of where they are in the world."

AI is the big buzzword. Will it really have an impact on advertising?

"Unlike the metaverse, AI will prove to be more than just a buzzword. It will have a significant impact on advertising. Generative AI will democratise creativity - putting the power of advertising in the hands of more people and companies. AI will help realise advertising personalisation at scale in a way not previously possible. Ultimately, AI should result in advertising driving better outcomes and growth for clients. However, a potential negative effect could be the homogenisation of advertising over time. To avoid this, I think it’s essential that human creativity remain a key ingredient in advertising for the foreseeable future."