This is no surprise to me. I left the agency world two years ago for a small, but established technology firm. And I say good riddance to agencies. I was at mine for 5 years and rose quickly through the ranks. I worked as everything from account manager, to web developer, designer and finally project manager. I managed to double my salary before I left and was still under paid. I will also say with no hyperbole that I was DISGUSTED when, in the last two weeks, I accidentally found out what a few of my peers were making. "Talent Crunch" my foot. The agencies don't or won't pay for talent, so it goes elsewhere.
My opinion is this is a symptom of agencies getting squeezed by three big forces:
One: The world is becoming flatter. Freelancers are easier to search for and easier to filter and compare on an individual basis, as well as en masse on websites dedicated to finding this kind of work/talent. Agency talent leaves and goes freelance for freedom and the chance to own something. The money isn't great, but it's certainly not worse. The article quoted some agencies trying to hire fresh college grads at 25-35k/year. Let's be generous and use the 35k number, add 15% for bennies (haha - being even more generous now) even with that, you're talking about ~$19/hour in a typical work year. Raise your hand if you can more than that for freelance work. (My freelance rate is 4 times that and even when I was new it was 1.5 times that.)
Two: EVERYTHING is becoming tech driven. Tech is HARD and it's getting HARDER. You need tight integration between business, design, and development to make stuff that doesn't suck. Stuff that does suck is getting harder to sell. The design/technology climate has changed dramatically in the last decade. There's a few hundred million people out there walking around with iPhones in their pocket. If your stuff sucks they WILL notice and your sales will plummet. Agencies are awful at the sort of deep integration good tech products demand. Big companies are waking up to this and laying down serious cash to bring design and tech in house, because it's worth the investment. Agency talent leaves and goes here (big tech) for money and to simply do better work (this was my case, I do very little freelance anymore).
Three: Startups are becoming the norm and not an outlier. It's easy to start a company now. It's easy to build a tech product fast and see if it's going to work. It's becoming easier to do this with hardware as well. Sites like AliBaba.com are opening up the big Asian manufacturers to everyone. 3D printing advances are coming fast and hard now on both the technology and business model fronts. The point is, startups are interesting. They're offering people new opportunities that didn't exist a few decades ago. Sure, the money probably still sucks, but it sucks at the agencies too. Much like going freelance, startup work offers psychic income you don't get at an agency. ownership, a sense of real contribution, plus the equity lottery ticket.
Agencies can't afford to compete monetarily in that environment. So, unless they offer something extraordinary (culture, image, interesting projects, etc...) they're dead in the water when it comes to the talent search.
I didn't even read the linked article, I just read your post. Thanks for your insight.
This may be why I've been getting emails on a regular basis lately from recruiters (even though my LinkedIn bio states that I will ignore them).
Agencies are middleman, and like every other middlemen out there the Internet are slowly making them less and less useful (here's a good article on why you don't want to be at the bottom of the “smiling curve”).
10 years ago you would've hired an agency to build your app, now you can assemble a team of developers on oDesk and hire a designer on 99designs.
Add to that the fact that agencies are extremely expensive to hire, and that in the age of apps and websites a company's design needs are constantly evolving (apps are never “done”), and the agency model becomes even harder to defend.
Aside from wages that are not competitive, perhaps some of the top talent sees the writing on the wall.
Ad agencies have been poorly equipped for a long time to compete in today's digital environment.
The world they exist for and the need for their output in that world is dying.
The world is evolving beyond "slick campaigns" and their approach to that world - fails. Time and again.
Businesses need/ want more impact and ROI on their spends. Measurement and quantifying the efforts of ad agencies is further weakening them.
Now it's finally catching up with them.
They're not competitive.
Why would you opt to station yourself on the sinking ship of a weakening incumbent?