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Your Dose of the Future of Work

Advertising Agencies Hiring 1,000,000 Freelancers. Are You Onboard?

Posted by Henrik Dillman on Jan 4, 2016 4:31:16 PM
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The move to a more freelance-driven workforce is one that is an inevitability in the advertising agency world, and there are huge cost and efficiency savings, not to mention competitive advantages, to be had for first-movers into the on-demand economy.

The move towards recruiting freelancers is a natural reaction to many of the problems facing large agencies. As the pace of change in creative and technical disciplines accelerates recruitment is becoming harder and harder - the competition for the hottest talent is driving asking prices ever higher.

These high wages contribute to another major problem in the industry - fixed costs are once again starting to bloat as the economy recovers and businesses look to aggressively expand. Many shareholders and investors, wary of being burned again after the financial crisis, are looking for agencies to keep their fixed costs under control.

Two birds with one stone

Moving to a freelance workforce solves both these problems by allowing access to the very best talent within a global market, and only paying that talent for the time it takes to complete the job. Less recruitment, less commitment, less expenditure.

The shift towards increasing use of freelancers could well be a seismic one. Currently agency usage of on-demand workers sits at around 6% of their total workforce, but we estimate an optimum level of freelance usage within the industry is around 20%. WPP currently boasts the highest penetration of freelancers at around 12%*. (*Variable staffing costs according to 2014 Anual Report, may not be identical to freelancers)

With some 400,000 people on staff at the six largest agency networks, if WPP’s competitors were to match their level of freelance hiring it would create gigs for over 150,000 freelancers overnight.

However if those six large agency networks were to increase their use of freelancers to the optimum 20% level there would be demand for an additional 300,000 freelancers in the agency world. Considering the largest agency networks make up around a quarter of all agency billing, when you combine these numbers with the long tail of medium and small agencies, demand for freelancers would easily top 1 million.

Big 6 hiring +300,000

Based on current freelancer use we expect the big 6 to have the following hiring needs closing in on 2020.

  • WPP 70,000
  • IPG 50,000
  • Publicis 50,000
  • Omnicom 120,000
  • Dentsu/Aegis 12,000
  • Havas 12,000

The solution is already out there

And here’s where the early-movers can really take advantage - those freelancers are already out there, waiting to be hired. There are 53 million freelance workers in the United States alone, and that number is predicted to rise to 62.5 million by 2020 - that’s an extra 1.9 million freelancers per year looking for work. Put another way, someone goes freelance in America every 17 seconds.

When you engage freelance workers the USA is just one piece of the global puzzle. Work can be sourced from France, Australia, Singapore, Russia - wherever you find the right person for the job, they can be hired at the right rate. The on-demand workforce is an international marketplace, and it’s easy to find talent that would have been inaccessible in a traditional jobs market.

All the building blocks for this shift are in place - agencies want to reduce their fixed costs and solve the increasingly complex recruitment puzzle, and more freelancers than ever are out there hunting for work. It’s worth noting that WPP, with the highest freelancer usage amongst large agency networks, also has the highest profit margins.

We expect the agency world at large to embrace this change fully within the next five years, meaning the time to score the early-mover advantage is rapidly running out. Organizations which have the agility to reorganize and engage the new economy are best placed to take advantage, and we predict they’ll lead the way over the next few years using systems like Coworks to manage their freelancers.

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