THE DECLINE AND FALL OF THE ADVERTISING AGENCY (AS WE’VE KNOWN IT)

I’ve spent the last week worrying about the affairs of the industry I love—and to which I’ve devoted the last 25 years of my working life.

As we enter budget-planning season, management of some mid-sized and some very large agencies are currently going through the excruciating exercise of trying to envision what 2010 will look like. Just about everyone in this business knows how to get through a bad year. What they are not trained to do is to hang on for four or five years, waiting for the Great Ship to right itself.

I was moved by what General Electric CEO Jeffrey Immelt had to say, in a recent issue of Fortune (Aug. 31), about what he’s doing to drag his brand out of the muck. Immelt has put out the word to managers, when they come in to forecast 2010, not to start by explaining what caused the decline in 2009. He said he wanted the presentations to go from “The market’s slow” to “There’s an 80-locomotive order in Egypt—let’s go get it.”

I think we have to be quite brutal about continuing to pare down costs and jettison slow-moving efforts. There may not be a great demand in the near- to middle distant-future for copywriters who know how to construct a great magazine ad. But there is no doubt a continuing demand for creatives who understand the new world of fragmented media and who enjoy doing something unusual in the digital space. I’m thinking about the Toy’s “Elf Yourself” work for Office Max (now getting ready to go into its third year), and Pereira & O’Dell’s “Go Miniman Go” blog for Lego.

But the larger issue continues to be the koan sent me last week by “Hal” about how our great creative agencies should re-engineer themselves to deal with this ever-changing, media- and brand-reality. It’s going to take some very brave, deep-pocketed managers to plan and fund such a transformation.

Essentially agency owners are going to have to forego profit participation for a year or two, while they rebuild their agencies from the ground up. Either that or go out and acquire a strong, young digital partner and then quickly meld the two cultures in an agnostic way that does not force the digital agency into a submissive, inferior role that snuffs out its value. The last time we re-engineered like this was back in 1991 to 1992. I know because Stuart Sanders and I ran conferences on the subject—and we were always sold out. But it’s painful and scary.

Can mid-sized creative agencies muddle through? Perhaps, at least for a while.

I’ve been reading about the decline and fall of the Roman Empire. Rome reached its zenith, Wikipedia tells us, in the second century. Then its fortunes slowly declined for another 200 years, ending on September 4, 476 when Romulus Augustus was deposed by Odacer, the Visigoth king, who led a band of German mercenaries into Rome and sacked the city. (Others would quibble that this is only the fall of the Western Roman Empire, and the so-called Eastern Empire didn’t collapse until the fall of Constantinople in 1453). Was that how sausages made their way into Italian cooking? I wonder.

I remember in 1990 when Ken Fadner took me to breakfast to tell me that he and his partners had sold Adweek to something called Boston Ventures, later to become BPI, then VNU and now Nielsen. I was pretty bummed out. “This is the end of the dream, Ken,” I told him. “No, not necessarily,” said Fadner. “Maybe the conquered will conquer the conquerors.”

Hey, I love contrarian theories. And, sure, it’s always possible that a company like Citibank would acquire or merge with a company like Travelers Group and that Sandy Weill of Travelers would work gradually, as a “co-CEO” with Citibank’s John Reed to reform Citibank and turn it into Citigroup. But that isn’t what happened. After an interim period, Sandy Weill overthrew John Reed and pushed him into retirement.

You get bought, you’re toast.

So we’re all going to have to tread lightly here. This, by my reckoning, is the fourth inning of at least a nine inning game. I would say the Romans are losing to the Goths right now. And a lot of great agency brands are going to disappear in the next two years. But it’s not all bad. We’re going to see some exciting new agencies –- call them strategists, widget makers, creative planners, or what you will—take their place.

“Hey, waiter! Bring me an 80-locomotive order.”