‘No one’s going to bail you out’: Adrian Leppard on reopening an agency and who will win and lose in the pandemic

In March, creative agency Mammal announced it would be closing its doors, but months later it was officially back up and running as 'Mammal 3.0'. Mumbrella's Zoe Wilkinson spoke with managing partner and owner, Adrian Leppard, about the key to the agency's new operation and what's to come for adland.

In the last six months, adland has seen a lot of change. Agencies have closed, made redundancies, bought other agencies, and even launched, despite the financial pressures placed on clients and household budgets.

In the middle of it all, Adrian Leppard has reopened creative agency, Mammal, which he closed in March before the pandemic took hold of Australia.

Mammal 3.0, as Leppard calls it, has embraced the flexibility of virtual working, taking on projects that would previously have been out of reach thanks to a “geo-neutral”, officeless operation.

“You scale up and down according to what work you’ve got on. So if you have a month where you don’t do anything, whereas that would be a real problem if you’re paying five, ten, 20, 30 thousand dollars a month in rent, obviously it’s less of a problem if you’re not. And it allows you to be a bit more focused on what you do,” Leppard says.

“Basically it’s matching your business model to the market… adapting to the market and meeting the market, rather than pushing on regardless and trying desperately to win as much new business as you can.”

This is his advice for smaller agencies in the face of the COVID-economy. Smaller agencies can ride out the storm if they hunker down and cut costs, making their services more attractive for clients and helping out the balance sheet.

With cost-cutting the name of the game now in the media industry, the challenges the traditional agency model has faced over the years are coming to a head, says Leppard.

“I’ve thought for many, many years now that the problem with the advertising industry, certainly in Australia and I believe globally, is that we operate on quite a high fixed cost model because of salaries and offices and all that kind of stuff. But the revenue over the last few years has become lower, and more variable, which obviously doesn’t correlate with having a high fixed cost base. Obviously there are months when your costs will exceed your revenue. And whilst that’s manageable in the short term, if that’s ongoing, it’s a bit of a nightmare to manage,” Leppard explains.

“They’ve been talking about the traditional agency model being dead for a long time, and I think this might be the final realisation of that, certainly in terms of advertising, and it maybe is an opportunity for companies to rethink their whole business model and how they operate in terms of their fixed costs. Unless you’ve got revenue streams that are constant, with clients on retainers, or you’re having a golden period with new business, I don’t know if it’s a very good business to be in anymore, to be frank.”

At one end of the spectrum, you have the small players, more nimble in their approach to clients with lower overheads and focus on projects. On the top end of town, the safety nets of holding groups will prop agencies up in the short term as larger agencies rely on retainers and new business. If you are in the middle, Leppard believes you are in the most danger.

“I think probably the most dangerous place to be right now is in the middle, because if you’re small, you can knuckle down like any small business and survive. In the middle, where you’re paying a lot of those fixed costs in terms of staff, long leases and things like that, no one’s going to bail you out,” Leppard muses.

“If you’ve got 30 or 40, 50 people in staff, that’s a lot of mouths to feed if your revenue’s down 30 or 40%. And if you’ve got no reserves, the only way you’re gonna fund that is through the directors having to chip in… you really are at the mercy of your next month.”

Adrian Leppard is the managing partner and owner of Mammal

However, there is an opportunity for those mid-sized agencies trying to fight their way through the woods, and that is selling to a larger organisation on the hunt for growth.

One of those organisations is Ben Lilley’s McCann. Lilley is another member of adland who made a significant business decision right before the pandemic hit, acquiring the Australian division of McCann Worldgroup in February and announcing his intention to grow it through acquisitions soon after.

“Probably not the most astute business decision, to be honest, buying an independent agency just four weeks before this crisis hit,” Lilley joked on the Mumbrellacast in April.

However, the pandemic has proved beneficial for his strategy, purchasing the assets of creative and content agency Red Engine SCC which entered administration weeks earlier in March, and the more digitally focused Brisbane agency, JSA Creative. Although it’s not his first time – Lilley built his previous agency SMART in the aftermath of the Global Financial Crisis, leading up to its sale to McCann in 2011.

And, Lilley is not alone. WPP AUNZ is charging forth with its business transformation plan despite the uncertain economy and its struggling financials, purchasing Perth-based agency Meerkats, rolling it into the city’s branch of Wunderman Thompson and bringing its top executives across. And this week, independent media agency Hyland sold to Havas Media with founder Virginia Hyland becoming managing director of the new division.

For the bigger players, Leppard says, mergers and acquisitions are a cheap way of acquiring new clients, talent and capabilities which they need to ride out the storm. For the agencies looking for a way out, there’s a payout (although less than it once would have been) and a job at a bigger business. And in this market, the buyers have all the power.

“You’re basically going to be targeting businesses that are struggling and they just want to get out,” he says.

“At that point, if they say you need to get rid of 50% of your staff – we only really want you and a few others and we don’t want your offices and other liabilities – then I think that’s where the buyer can make all the shots right now.

“If someone comes along and says ‘we’ll buy you’ and you can come out of it without having to put your hands in your pockets, and you get employed by that agency, that’s probably not a bad result at the moment.”

Over the next 12 months, there will be winners and losers. The agency landscape will change and Leppard thinks there will be smaller agencies as revenue stays down. Those that exist will need to fill a definitive gap in the market.

“It will filter out agencies who don’t have a reason to exist, other than because they want to. In other words, if you’re not solving a problem in the marketplace, whether you’re a specialist or you’re a large agency that handles big brands, or a geographical specialist or whatever, I would suspect this time next year, there will be considerable fallout in the industry,” Leppard predicts.

“The people who win and lose may not be the people you expect either.

“It’s so dependent now on who your client base is and, to be frank, how well your business has been run because it doesn’t matter how famous your brand is, if you’re losing money you may have no other option but to either disappear or be purchased.”


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.



Sign up to our free daily update to get the latest in media and marketing.