They are courageous, creative and agile. So why don’t creative agencies and start-ups work together more effectively? The new Jung von Matt Start-up Report 2020*, featuring contributions from SevenVentures, discusses why both sides have a complicated relationship, and how they can improve collaborations in the future.
There is a deeply rooted cultural conflict between creative agencies and start-ups. Agencies often avoid cooperation with start-ups because it is too much work and they can hardly cover costs. Start-ups find cooperation cumbersome and too expensive. If at first glance the costs seem to be the cause of the failure of the cooperation, the problem is actually somewhat deeper.
The start-up culture is characterised by the need to become profitable quickly. This leads to a recognisable pattern in marketing: a strong performance focus in early phases, with companies trying to generate as many leads as possible as quickly as possible and a shift to branding later on when the marginal utility or efficiency of performance marketing decreases. Traditional offers from creative agencies are usually simply not in demand. Start-ups usually keep the brand work small and assign freelancers, in-house or performance experts.
In addition, the report finds that agencies during the last two decades have simply become too comfortable. The majority of agencies remain stuck in rigid processes and service packages, knowing full well that start-ups are good role models and would be good customers, but too ponderous to question themselves and become agile learning organisations again. Since then they have moved further and further away from the new cultural champions, the start-ups.
However, the truth is that start-ups often simply can’t afford the big agencies. And agencies themselves have been slow to consider new compensation models. Equity deals are increasingly common in other areas of marketing: for example, VCs of the large media companies like SevenVentures, the media investor of the ProSiebenSat.1 Group, offer advertising space in exchange for company shares.
How to bring about change?
Both agencies and start-ups should adapt to get the best from their collaborations in the future.
Start-ups should not direct everything they have towards performance. Directing more budget towards the brand in the earlier days will pay dividends later on. A clear brand vision turns a good story into a great one - and makes start-ups more attractive to new target groups, talents and investors. VCs and business angels can often help to bridge the gap between the start-up and agency worlds.
Agencies, on the other hand, need to be more creative with their products and compensation offers for start-ups, and make a clearer case for brand value. In a world of pure performance budgets, the promise to gain more independence from Google and Facebook through strong brands is worth its weight in gold. A long-term cooperation is attractive and meaningful for both sides – only in this way can both worlds harness their true potential.
* To find out more, read the JvM Start-up Report in full