The Agency of the Future?

The so called professional service food chain is well documented

It looks like this

Global brand hires global agency who hires 3rd party boutique who hires 3rd party boutique who hires 3rd Party…

Think: Creative dilution to the power of n

Each phase of the industry supply chains adds its mark up

The client pays a premium and the creative crop farm worker at the bottom of the feed chain earns peanuts

>80% of the budget is wasted on ‘management fees’ and markups. Meanwhile the creative work becomes dulled when passed through many hands

The promise of the Creative Digital Marketplaces (e.g. Fiverr, Upwork, Freelance, Freelancer, Clutch, Dribbble, etc) is to streamline this process by displacing the middleman(s) with an online community of clients and creatives

The promise is nothing new. Like the majority of networked (Gig/Sharing/Social/eComm/Crypto) economy startups... It’s basically an arbitrage on trust

Let me explain what that means

Marketplaces are complex adaptive systems

The void between the Client and the Creative doing the work is filled with a number of trust gateways

These gateway nodes act as trusted filters to ensure the integrity of the system

They also function as toll booths. Thereby ensure trust has a price.

The primary trust gateway (Think: Filter) for the client is the global agency

The client hires the agency not as an exercise in creative effectiveness or efficiency but as a risk management exercise. The engagement is an exercise in trust

The buyer is thinking: Nobody gets shot hiring…

The agency is thinking: The client is willing to pay more because they trust us

This negotiation to reach a price:trust equilibrium cascades down through the industry food chain

This is how marketplaces work… regardless of the product or service

Brands like Apple, Accenture and Tesla are basically aggregators of untrusted products, people and services manifest as trusted products and services

Which is to say real world marketplaces… or, what we call supply chain networks, are complicated and messy

The promise of the digital marketplace is to strip away the complexity and put buyers in direct contact with creators

By replacing the inefficiency of navigating the marketplace with a self regulating digital exchange

In essence building a global search database that any data consultants worth their salt would promote as a single version of the truth

The strength of the model is obviously the win:win efficiency narrative. Clients get better work at a better price. Creatives get paid more for their efforts

The weakness of the model is these digital marketplaces are fragile

Basically they can be gamed.

i.e. Trust becomes arbitrary when the rules of truth can be arbitraged

And this gameification inevitably means the platform trends over time towards a Zipf or Pareto Distribution

This manifests in an 80/20 distribution.

ie. 20% of the market takes 80% of the profit share

and of that 20%… 20% of the market takes 80% of the profit share... 20%...

Cascading down to a few very wealthy outliers dominating the premium returns and the overwhelming majority toiling in the dust

So what is the lesson here?

It is this: Digital marketplaces have been around for decades. They mirror the real world they are displacing. If you choose to work in this space you have three distinct choices. You can profit from building the platform by charging tolls. You can toil on the platform bidding for work. Or, you can game the platform

Each approach requires a different mindset and financial/time/creative energy investment. While each one offers very different financial returns to those engaged with the platform

Thanks to the wonders of digital simulacra its never been easier to build or game a digital marketplace. The key is having deep pockets to establish the social proof. One need only look at Bitcoin and the multitude of crypto currencies to see the challenge is establishing and reinforcing the truth narrative/metric that drives adoption by the ‘tribe of champions’ and ultimately the mainstream breakout from niche play to mass market adoption

Obviously the barriers to entry of creatives to participate in the game are negligible. The key challenge they face is the Law of Pareto Distributions.

Deconstructing the promise of a win:win quickly reveals it all depends how you measuring winning.

Participation in the platform opens up the opportunity for any creative to participate in a global opportunity. It also opens them up to global competition…. and all the dynamics of price:performance of competing with the very best and the very cheapest talent in the world

The economics of the Pareto Distribution shifts the middle towards competing at the head of a very long tail.

The rapidly evolving nature of digital simulacra also means life on the long tail is increasing under pressure from automated creative agents that feed off the product generated by the members of the marketplace

Which in turns points to the 3rd option when doing business in the marketplace. Gameification.

Ultimately the winners of the race to establish the ultimate digital marketplace will be the automated CreativeTech startups that emerge over the next decade to service these marketplaces with JIT (Just in time) cost effective digital creative simulacra.

The AI powered creative marketplace

The only thing open to question is who will win the race… The creative tools incumbent (Adobe acquires the future), the digital disruptor (Think: Canva + Fiverr merges into the future), the distribution platform moves down the value chain (Think: Facebook acquires the future) or somebody (Think: a new entrant from the world of Deep Fakes) reinvents the future

What about the incumbents... those global trust gateways... the global ad agencies or consultancies?... TBH, just like the newspapers and electronic media, they probably lack the imagination and the talent to either acquire and integrate or build and manage the future

But, having said that... watch this space because there is money, big money, to be made in the ongoing transition to a global 24/7 digital creative marketplace

The future of trust is up for sale... and, just as with Facebook and Google, a new type of TRUST network will emerge... and radically change our ideas about how we create, exchange and measure trust in the marketplace

Originally Published Summer 2020. What are we talking about today? Follow us on Twitter

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