Dive Brief:

• Droga5 laid off about 7% of its U.S. staff this week, a spokesperson for the agency confirmed to Business Insider.
• The cuts, representing about 40 people, impacted all departments and levels of seniority, people close to the company told Business Insider. They were centered on the firm's New York City headquarters.
• Accenture, which acquired Droga5 for an estimated $475 million last April, plans to trim 5% of its global workforce, per media reports. A source told Business Insider that the Droga5 layoffs were driven by struggles particular to the agency, not performance pressures impacting Accenture more broadly.

Dive Insight:

Droga5 reportedly shedding U.S. staff across departments and levels suggests that pressures stemming from the coronavirus pandemic are extending well beyond the traditional ad holding groups.

As noted in Business Insider, all of the major agency conglomerates, including WPP, Publicis Groupe, Omnicom and Interpublic Group, have recently enacted wide-spanning layoffs, as falling client demand and barriers to commercial production add to longstanding struggles with growth. One of the benefits of Droga5 joining Accenture last year was the consultancy's presumably sturdier infrastructure, which could act as safeguard against headwinds that previously rattled the creative shop. Before getting acquired, Droga5 went through several rounds of layoffs.

But the pandemic has posed problems for advertisers and agencies that even deeper-pocketed companies might not have the resources to combat in the near term. Accenture appears to be experiencing its own disruptions during the health crisis, as it looks to cut about 25,000 staff, according to details first reported in The Australian Financial Review, although Business Insider's sources indicate the Droga5 layoffs are unrelated.

While Accenture is highly acquisitive, and has bought dozens of agencies in recent years to round out its digital marketing services division, Accenture Interactive, Droga5 stood out from the pack due to its square focus on the creative side of the industry versus the technological capabilities and management services in which consultancies tend to specialize. The agency, whose clients include companies like HBO, The New York Times and IHOP, is highly decorated for its work, but producing large campaigns has proved difficult with the shuttering of production studios and other health and safety measures intended to combat the spread of the virus.

At the same time, Accenture Interactive has continued to buy up smaller shops during the pandemic, and they could signal where the group is trying to align its focus as lockdowns continue. Last month, it snapped up CreativeDrive, a startup that leverages a network of on-premise studios and a proprietary tech platform to help brands automate the production of video, photography, CGI and augmented reality content.

Accenture's revenue dropped 1% year-over-year to $11 billion in the most recently completed quarter, with the losses largely attributed to the pandemic.