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There's No Middle Anymore - What Kind of Agency Are You?
It's all Hermes or Dollar General
Tim Kilroy
23 May • Estimated Reading Time: 12 minutes
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Is That A Birkin?
Hermes, for many, defines luxury. And the handmade Birkin bag (cool step by step creation video here,) with its limited supply and old world craftsmanship is sought after the world over. Dollar General, on the other hand, defines something else. Anti-luxury, I’d guess.
There used to be brands that THRIVED in the spectrum between Hermes and Dollar General, but that has thinned quite a bit.
But as macro-economic issues (interest rates, VC pullbacks, consumer economic concerns) bore down, consumers started to have less access to luxury-level spending, and started being more cost conscious - leading to the rise of lower priced offerings (Aldi rather than Whole Foods, for instance).
Today, the best way make money, it seems, is to sell a few things at high margin or lots of things at low margin.
The Same Thing Has Happened In The Agency World
Earlier in the century, lots of “mid-market” agencies were snapped up by holdcos, and then in the teens, private equity jumped in and started consolidating agencies…
Smaller agencies thrived in the pre/pandemic growth boom…via the SBA, there were more SMBs in professional service firms in marketing/advertising (under $50mm in revenue, AFAIK) than in the previous two surveys combined.
But as macro-economic issues (interest rates, VC pullbacks, consumer economic concerns) bore down, many marketers started spending less, or spending dollars differently, and agencies started to feel the squeeze. Anecdotally, amongst the agencies I regularly track, time to close (from “hi!” to contract signed) for agencies has stretched from just under 4 weeks in 2022 to nearly 13 weeks in 2025.
During the boom in growth, there was a healthy market for agencies that weren’t AMAZING - and I don’t mean any disrespect - they were the H&M or TJ Maxx of agencies - good value, decent style - but nothing extraordinary.
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Macroeconomics SOMETIMES Matter
In Agency Inner Circle #28 (Does The President Really Matter To Your Agency,) I talked about how rare it is for macroeconomic issues to deeply impact your micro-enterprise (your agency). But this one is real. Marketers are scared, so they aren’t spending the way that they used to…so they are foregoing “regular” expenditures, or foregoing any changes to their marketing apparatus. As this happens, they put pressure on their vendors (agencies) and they start making cuts.
Agencies respond by either hyper-focusing on the wealthy and successful (let’s call them the Hermes agencies) or by providing more for less (the Dollar General agencies.)
Then There’s The Elephant In The Room
AI is democratizing “good creative” (Canva, AdCreative.ai) and making it easier and easier to find new customers (Go Audience, Apollo). AI is making websites easier to build (Gamma, Perspective) and ChatGPT & Claude have made good content pretty easy to create.
The idea that “we can probably do what you do well enough so that it isn’t worth paying you” has started to creep into businesses who might have otherwise paid you $3K/mo. So agencies either raced to where the money is (enterprise/high-margin business who have enough cash to weather any storm and can afford the best) or where the volume is (businesses who are strapped and opt for lower-cost productized services). So there isn’t a lot left for the “pretty good” agency that does “pretty good work” and drives “pretty good results”.
So What Do You Do?
Some of you are going to absolutely KILL it by leveraging AI & Agents to provide really high-quality data-driven productized solutions at lower prices (but still very good margins). Or you can get ABSURDLY good at something that isn’t easily democratized.
A client of mine does packaging design for CPG companies. That is a kind of service that demands true talent, depth of experience, and flawless processes. I have another client that does high-volume outreach on LinkedIn. Truly, Hermes and Dollar General. And, CPG agency doesn’t use any AI agents that I know of (but they do use to SOME AI tools to do mockups and ideation). LinkedIn outreach agency is elbows deep in ChatGPT, Claude and whatever else every day. Their Zapier and Dripify accounts are crazily tweaked, I am sure.
CPG agency has 10 clients. LinkedIn agency has something like 90. But they aren’t all that different in terms of revenue/profit scale. Each are about $150K/mo in revenue. Profit nets out about the same…CPG has higher talent expenses, but LinkedIn has much higher biz dev & data expenses.
Pick Your Battles
Your “regular client” who hires a “regular agency” isn’t a species that is thriving these days….you need to lean into what suits you. Are you high-expertise & high-ticket? Are you nimble & low cost? You don’t REALLY have to pick - there are some people who will get by being “good enough” in a smaller market - but more likely the market will pick for you…
When you are in that “pretty good” agency rage, the number of at bats you get for high ticket opportunities will start to slow if your work is good, but you are shooting for “we are excellent” dollars, and you will start losing the deals on the bottom of your pricing range because you are too expensive.
It isn’t a good place to be. When you lose your upmarket opportunities AND your downmarket opportunities at the same time all while the middle market is evaporating, you are, as they say in movies as a prisoner is walking towards the death chamber a “dead man walking”. But, unlike the movies, you have time.
1. Hermes Agency
If you want to be an Hermes agency - that is AWESOME. (Most “Hermes” kind of agency owners that I know are really happy. They love the work and they love their clients…). But you have to gin up your business savvy - the real work in an Hermes agency ISN’T the work - it is understanding how to prove that your work makes a difference that technology or more fingers on the keyboard can’t overcome. You are selling expertise, erudition and taste. Basically, this is the equivalent of sending your agency to an East Coast prep school, Princeton for undergrad and then Harvard Business School. It isn’t easy to do, and it can take years to join the club, but when you crack the value proposition, you start getting invited to meetings where you can’t believe that they invited YOU! You start to smell like old money (in a good George Clooney wearing sandalwood cologne way, not a House of Windsor sort…)
2. Dollar General Agency
If you want to be a Dollar General Agency - that is AWESOME. Your world is frenetic, action-packed and you are dialed in on getting better and more efficient with every sales pitch, every client engagement, and likely you become a master at high-volume testing to see what works. You are an AI-enhanced, process-driven profit machine. You are always looking for an edge that matters. You are performance focused and are deeply invested into your team and your tech so that you can keep your clients happy…or not, because you are always testing your value prop so you can grow, regardless of your retention stats.
There are going to be more Dollar General bazillionaires in the next decade than “let’s meet at Cannes Lion” bazillionaires. It isn’t because one path is harder or easier - it’s because the Hermes agency is, by nature, a rarer beast. There are fewer businesses that win through elegant creative, or pristine copy, so the Hermes agency is more elusive and requires a specific set of talents - but significantly less likely to fall apart quickly. But the Dollar General agency has an opportunity to grow fast - and I know that’s where many will flock to…and the issue becomes commoditized competition that will demand huge growth in order to drive larger profits.
What’s Your Path?
What Kind of Agency Are You Going To Build? |
SAVE THE DATE - JULY 17, 2025
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