What you need to know:

• Bastion Collective CEO Jack Watts says now is the time for the indie sector to "get its shit together" and capitalise on the structural challenges facing major holding groups.
• Global agencies have already shed thousands of roles, with Omnicom reporting this week over 6000 job losses since the pandemic began.
• Multiple indies claim to have retained the bulk of their staff by sharing in pay cuts, hour reductions and frank conversations - with some even disclosing agency P&Ls.
• Despite the current lockdown in Victoria and the rising threat in NSW, indies are reporting more confidence in clients this time around and expect less "knee-jerk reactions".
• While opportunities are there for homegrown players, new international models such as Martin Sorrell's S4 Capital are making bigger, more aggressive land grabs here.

Denial, panic and realisation

When Bastion Collective CEO Jack Watts went into a 7.30am meeting in Melbourne's South Yarra on Friday March 13, the world was normal.

What he came out an hour later, it was mayhem. The COVID-19 pandemic had become a very real crisis.

"The grand prix had been cancelled and things started moving really quickly. My first priority was to make a call on whether my wife and daughter were going to get on a plane that afternoon," Watts told Mi3.

It became an easy decision as the day progressed as he scrambled to get a flight home.

The leader of one of Australia's largest independent agency groups, with 10 businesses and close to 200 local and 30 US staff, Watts had two clear tasks to complete.

"I spent the day on the phone to our executive team and every client I could get a hold of. I watched the Prime Minister cancel all events over 500 people as I boarded the plane on Friday night. It was surreal," Watts says.

"By Tuesday lunchtime we had a plan. I had spoken to every client and staff member I could, understood our exposure to the hardest hit industries and knew where every cost lever in the business was."

The impact today has varied from agency to agency, dependent on size and client roster.

According to This is Flow CEO and independent representative on the Media Federation of Australia board, Jimmy Hyett, the client, agency and consumer response can be broken down into three 'phases' - denial, panic and realisation.

"COVID was so new to everyone that the search for answers wasn’t just from an uneducated client, we were learning of the changes in behaviour, government, business at the same rate as everyone else," Hyett told Mi3.

"Media planning and buying is a prediction game, our role is to predict the most efficient and effective ways to reach and connect with our audience – nothing changes during a pandemic, we just have more moving parts to consider and with daily changes, our communication also needs to be daily too."

iNC Digital Media CEO Loan Morris says panic, fear, uncertainty were the top concerns initially both for the agency's internal stakeholders and clients.

As the pandemic became “real” in Australia and the lockdown was announced, her team very quickly moved to a continuity plan to ensure it could still deliver for clients.

Loan says this was made possible by a less constrictive agency model, which provided an advantage over large, holding group-owned, agencies.

"Behind an independent agency, we plan and buy media ourselves therefore we had more control than perhaps some other agencies or holding groups," Morris says.

"When necessary we moved from locked-in trading terms to a more flexible solution with the opportunity to book week-by-week until the situation recovered. We also reached out to our vendors for extra support which they facilitated."

Indies, "get your shit together"

The indie sector has had an eye fixed on the response of major international holding groups.

This week, Omnicom revealed in its Q2 results that, alongside an operating profit decline of 89.1%, over 6000 jobs had been shed by the company in the three months leading up to June 2020.

A recent report by Forrester forecast over 100,000 jobs could be lost in agencies globally as a result of the pandemic.

Locally, holding groups have taken cost-saving measures to ensure staff losses are kept at a minimum. However, IPG, WPP and Publicis Groupe have all been forced to make staff redundant.

Watts says if COVID has done one thing to the agency world in Australia, it has accelerated the "demise" of the multi-national holding groups.

He says most independent agency owners he has spoken to had a plan in place within days of the initial COVID hit, implemented immediately and are now looking at how they come out the other side. The multi-nationals, says Watts, are still tied down in global approvals.

"The demise of the multinationals is not new. However, it's a demise that has been self-inflicted. The rise of great independent agencies hasn't caused this, it has been done by the multinationals to themselves with no-one holding group CEO brave enough to fix the problems once and for all," Watts says.

Watts says that while COVID has accelerated this demise, it will also accelerate their rebirth.

He says things "will get so bad" the global groups will be forced into making hard decisions, which he believes have been "put off for years". Ultimately it will solve the problems they have long faced.

"There will be more pain but they will come out the other side faster now, there is too much money at stake not to," adds Watts.

"And here is my message to indies. Get your shit together because we've got a two-year window. The seas have parted ahead of us and they will close shortly and a select few indies will make it to the other side and form a handful of big, trusted and game changing Australian independent agencies."

Hyett says to this day he has seen indies fare better than the multinationals during COVID.

He says the industry is still seeing the impacts of redundancies, pay freezes and global direction forcing a lack of training and development for the foreseeable future.

In complete contrast, he says indies are able to shift and move, with less overheads and less corporate governance.

"The other benefit is the full functionality and close touch to the business that an Indie has in common with SMEs," Hyett says. "We are closer to the action, understanding what levers to pull the whole way through the business so it is easier and more effective to react."

"In a big business, you only control a portion of the full business operation which stifles change and action. SMEs can react the same and we saw that from our clients that play in industries in which they still had some form of control over their decision making."

Another competitor looming

Indies are not alone in the battle against holding groups.

In recent months, local and international businesses have begun to launch their own independent group offerings.

Last month former Dentsu boss Simon Ryan launched his own agency network, with the first business, Ryvalmedia, now in market.

Elsewhere, former IPG-owned agencies McCann and Futurebrand broke away from the holding group, acquired locally by Ben Lilley and Rich Curtis, respectively.

Lilley has also been on an acquisition run, scooping up independent creative agency Red Engine SCC after it entered voluntary administration and, most recently, picked up Brisbane-based shop JSA.

Internationally, one of the major players making aggressive moves in the Australian market has been Sir Martin Sorrell's S4 Capital, and more specifically the group's production and content house, MediaMonks. S4's programmatic media unit, Mighty Hive, has also landed on Sydney as its APAC headquarters.  

With ambitions to take on the major holding groups, S4 also poses a threat to indies.

Offering production, creative, programmatic and martech capabilities, MediaMonks APAC VP of Growth, Tobias Wilson, says its "hub and spoke" model is a key differentiation in market. The idea is not new - many global networks do likewise - but Wilson says the difference is the speed and quality in which MediaMonks and S4 execute.

Tapping a global network of talent from Singapore to Sweden, the MediaMonks team uses centres of excellence throughout the globe to 'off-shore' its work in near-real time, while still having it led and managed by the market which has brifed.

"If we want it to just be an innovation specialist in a market like Australia, we'd hit a glass ceiling from a talent, output and client support perspective very quickly," Wilson says.

"That's why having an unencumbered operating model, that sees us have elements of a brief answered by production teams in Sweden or the US but remains managed out of Australia, gives us the competitive advantages of speed and value."

Wilson says in some instances MediaMonks has been able to complete production briefs in 24 hours, instead of three days, by tapping its international capabilities.

Despite this, he says the group is still grappling with moving perceptions in this market from "mystique to reputation".  Wilson acknowledges S4 and its operating units in Australia remain somewhat of an unknown.

Off-shoring, he says, has also left brands and marketers with scars as many clients' view on the practice is tainted by poor experiences with larger holding groups.

"I can't pinpoint exactly where the issue comes from, some of it in Australia is unfortunately racially charged at times, but there are also examples of businesses on the supply side that have struggled to produce quality through the method," Wilson says.

"Companies have used it in the past because they can certainly drive value as it's cheaper, but then it's slower because you've got to go through six rounds of quality assurance and adaptation, which is ultimately more frustrating for a client.

"We're not doing it for balance sheet optimisation. We know there isn't one country that has the best VR, AR or customer experience talent, for example - that's why we tap into where we're strongest in a discipline and utilise it for clients globally."

SMEs hit hard but not without opportunity

From Federal Government loans, through to JobKeeper incentives, the small to medium enterprise (SME) sector has arguably been one of the hardest hit throughout the pandemic.

Research conducted earlier this year by Quickbooks and YouGov found 63% of small businesses reported being negatively impacted by COVID-19.

Another 12% were cutting costs through staff layoffs and 41% have experienced a 50% or more decline in revenue in the past 1-2 months.

Part of the SME sector themselves, indies are also the primary marketing and advertising consultants for SMEs.

iNC Digital Media’s core client base is made up of those businesses, which from an advertising perspective, Morris says were among the hardest hit by the forced shutdown and plummeting consumer confidence.

"The impact to their revenue and workforce has been catastrophic and they are hanging by a thread. I am not too sure that some of these businesses could survive a second lockdown," Morris says.

Morris says concerns have primarily been around loss of business and activity but many are quickly realising that online consumption is booming and it can be vital in keeping their brand presence alive.

"With a strong ad ops focus to provide tangible updates and optimisation opportunities, we were able to consistently provide touch points to our clients regarding their campaign performances as well as market and consumer behaviours which allowed for constant communication and visibility into their campaigns," Morris says.

"The key for us has been to work very closely with our clients and provide them with the right consumer insights and trends to inform best their decisions and spend allocation."

Sarah Melrose, General Manager for Admatic says SMEs and indies found themselves in very similar positions.

She says both, due to their organisational structure, are able to rapidly adjust their business models when compared to larger companies, adding that those who took advantage of that, found the most success.

"Initially, across e-commerce the reaction was to pull back, but this quickly turned around as people at home started splurging on home workout gear - demand actually increased for most," Melrose says.

"A number of our SME clients saw 300-500% increases in sales, whereas a number of our larger clients were stuck and missed the boat."

*In today's Mi3 newsletter IPG was incorrectly named in this story regarding the 6000 jobs shed - it was correctly listed as Omnicom within the copy.