SK Swamy on agency mergers and the rise of boutiques over bloated creative cos

Just as the advertising world was warming to the merger of Leo Burnett and Publicis Worldwide to form Leo, a report from Ad Age revealed that WPP had shifted Grey, a legacy agency, under the leadership of Ogilvy, moving it away from AKQA. This followed weeks of discussions about Omnicom’s acquisition of IPG, which dominated industry conversations through much of the second half of 2024.

The advertising industry is no longer the force it once was. Technology giants such as Meta, Google, and Amazon continue to draw brands’ marketing budgets toward performance-driven advertising, thereby sidelining creative brand building. At the same time, artificial intelligence is fast becoming a preferred tool for marketers. 

In this environment, consolidation may be the agency world’s only viable response to the multifaceted challenges posed by digital disruption.

“Consolidation occurs because agencies prioritise market profitability, and without mergers, they struggle to remain viable,” says Srinivasan K Swamy, executive group chairman of R K SWAMY Ltd, a 52-year-old Indian integrated marketing services provider. Having spent more than four decades in the business, he has witnessed many of the industry's cycles firsthand.

The lack of significant progress by many large agencies has fuelled the rise of boutique firms, notes Swamy. “Most are offshoots of the bigger networks and are managing to take away a fair share of business. They produce a campaign, bring in a media agency to place it, and move on.” For brands, the appeal is rooted in cost. Project-based work spares them the expense of retaining an agency year-round.

Swamy is no admirer of this model. “Companies need a long-term perspective on their brands and, therefore, a partner who works with them continuously,” he says. In his view, many modern, entrepreneurial firms shy away from such enduring relationships. “They do not want collaborators who think in terms of long-term brand vision,” he adds.

When asked if the decline in value of the agency-of-record (AOR) model is due to the failure of larger agencies to persuade major brands and younger marketing chiefs, Swamy is unequivocal: “Many of these so-called young professionals view creativity as a generic product rather than one that demands specialisation.”