Ad Industry Value: Up or Down?

Last week, while France, I, and indeed nearly the rest of Europe enjoyed long, bank holiday weekends, Ad Age heralded digital as the savior of agencies in their 64th Annual Report.   Sure, digital is a great ride.  And now, with marketing services, drives up to half of the billings in the top 4 groups.

But has digital really been as good as all that for agencies’ business?

Digital requires a different business model, often very different expertise and specialized competencies.  Add to that the complexity of good digital marketing, the blinding innovation of the digital space…and the last minute technical glitches that no one seems impervious to, pushing up time spent and project cost.

But agencies didn’t have a choice, right? 

I had an interesting discussion with a former collegue, the head of an international agency within a large group.  We were speculating as to the overall value of the advertising industry.    Has value been destroyed or created?  Is advertising a more valuable industry than it was 30 years ago? 

And we worried that increasing pressure on costs coupled with the continuing need of lots resources - junior and less expensive - was driving a negative spiral.  Among other things, this spiral makes it hard for agencies to hire people at their just value, often driving the best young graduates elsewhere (as client-side marketers, or to another industry altogether). 

The ad industry has lost its spark. 

Marketing's on the road

I had to cross Paris this morning to speak at a conference.  And in the soft spring weather, I was struck by the number of people on bikes.  It’s nowhere near Amsterdam, but since I only go through the center of Paris very occasionally before 9 in the morning, I noticed the change. 

Many of the cycling commuters were on Paris’ new Vélibe, the essentially free bikes funded as an exchange for the right to an outdoor advertising concession.  No, there aren’t screens on the bikes, nor advertising on the stands where the bikes are rented.  At least, not yet.

But advertising has certainly taken to the road.  There is a growing game of cat and mouse between consumers and advertisers.  Consumers are evading ads and marketers are finding ever more ways to get in contact with them. 

I’m working on a platform called Ubiquitous Marketing, which examines many of these new marketing channels that try to follow consumers where ever they go:  from health clubs and grocery stores, to the strip in Vegas; from shopping malls, to anywhere any of us are, thanks to that mobile phone we all have in our pocket.

What surprising or strange places have you seen advertising crop up?   What have you tried for your brand or recommended to your clients? And how must marketing messages evolve to take into account these new - and often very personal - media? 

Meanwhile, to get away from us all, I’ll be taking a spin on my bike. 

The Conflict of Interest of Change

Both Agencies and clients have asked who and what type of agency will best drive the evolution to a more integrated and ‘connected’ agency.

I recently heard much frustration from one large advertiser who sees his primary agency partner buying - quite largely - into digital, mobile…yet the agency still delivers ad plans to his marketing team which are essentially 100% television-based. A strategic contradiction that hinders his company’s evolution, “don't they understand that they aren’t helping me move to digital?”

Yes, I’d have to answer.  The contradiction hinders evolution… and keeps margins and operations securely in the more profitable old world, which the agency is better staffed and better paid to deliver. 

Hence the conflict of interest. The challenge to agencies is assuring current operations while building the future. Or, perhaps in some cases, just getting the most out of current operations.

Which leads to the question - what type of agency is best equipped to evolve: an agency within a large group with significant resources - keenly important for building consumer intelligence; or an independent player, with perhaps less to lose?

I have my point of view.  What do you think? 

Media Agencies' Content Plays seem One-sided

Media agencies have been moving aggressively into building branded content offers.  The lastest:  WPP’s Mindshare announced a reorganization last week, including the creation of a unit focused on making content. 

Integrating content and marketing messages certainly allows advertisers to sneak under the radar screen of ad-fleeing consumers; and reinforces the value exchange of entertainment for attention. 

But in the rush to create new advertising occasions, the most important piece is missing:  what about the consumer? 

Here’s what I mean: media is becoming more addressable, more interactive, more measurable.  An agency’s challenge in the near future will be moving consumers through their individual marketing funnels.  Yes, reinventing the front end - how to connect with consumers - is important.  But even more critical today is inventing the back end - knowing who to connect with and how. 

Content is just an excuse to interact and build a relationship with consumers.  If the content is not connected with deep consumer intelligence and individualized data, media agencies are missing half the opportunity.

Dell to Agencies: "People are most important"

When I spoke with Casey Jones at our marketing forum, he cited WPP’s ability to recruit as the deciding factor in his choice.  Building - and keeping - the right team on his business is his priority. 

Casey even went so far as to say “What’s important is the talent of your team, not the brand of your agency.”

How many of you advertisers agree? 

Like the proverbial shoemaker and his kids, agencies seem to miss on their own professional advice:  helping their clients experience the value of their brands.  The impact of acquisitions, extensions, staff turnover, the tendency towards ‘juniorizing’agency teams…?

I’d call Casey’s comment good news for talented individuals and a challenge to agencies: How will agencies define and prove value beyond that of a network of talented individuals?  And is gathering these individuals under one roof enough of a differentiating offer when the internet allows talent to network and connect - together and with the client? 

In 2007, Dell went to WPP to pull together their advertising dream team; their choice could be different next time. 

An Agency's First Step To Getting "Connected"

[Posted by Peter Kim]

Thanks to Mary Beth Kemp, my colleague and co-author of The Connected Agency report, for taking the lead on this new Forrester blog called Agency Futures.  So I'm cross-posting this from our Marketing Team blog.

A lot needs to happen before agencies get Connected.  The clear first step for most shops is building digital acumen.  So I've published a new piece called "Agencies Must Build Digital Skills To Survive" - pretty much to the point, eh?

Here's a [long] excerpt:

Traditional advertising agencies -- marketing services providers that have built global brands through mass media --€” need to prove their digital mettle now more than ever. Although late 90s startups like Scient, Viant, and ZEFER flamed out, firms like Critical Mass, Organic, and Avenue A|Razorfish have risen high above the dot-bomb wreckage and are well-positioned for success today.

Clients are shifting business to digital shops, and consumers have turned away from media channels that built the agency industry and toward emerging Internet media. Ad agencies must build new interactive competencies quickly in order to succeed. How? They must build digital skills with a three-tiered approach of establishing digital commitment at the executive level, retraining existing staffers, and building a pipeline of future talent.

So what's the secret to success?  Hire a chief digital officer?  Tell all your staffers to get on Facebook?  Go 2.0 with your web site?

Maybe all that and more...

[Posted by Peter Kim]

[Posted by Peter Kim]

[Posted by Peter Kim]

What is Dell getting out of their agency consolidation?

After a very long flight, I’m in LA for Forrester’s Marketing Forum, which kicks off on Tuesday.  Where one of my very pleasurable ‘duties’ will be a Q&A of main stage speaker Casey Jones.  Casey Jones is VP of Global Marketing for Dell and mastermind of the recent consolidation of Dell’s agency business with WPP. 

Casey wants to set a new standard for integrated communications.  See his FM interview from before and after taking the Dell job. 

Here’s what I’d like to know:  does consolidation really drive smart marketing integration?    The idea of a client-centric agency - albeit pushed to its extreme here - isn’t new.  Large clients have often been able to command dedicated cross-functional teams; sitting together, much like the O&IBM team I was a member of in Ogilvy’s Paris office.

Does everyone need to sit under the same roof - and in particular, in the same profit center - to align interests?  Dell’s point of view would seem to be yes.  And if the approach is supported by performance-based remuneration based on business results, it would certainly be compelling.

However, does one supplier work better than the ‘market’ and competition to drive efficiency and innovation?  There, I have my doubts.  It's simplistic, but compare that to a client going to its various agencies and asking each ‘how would you spend the whole of my budget and what results could you deliver if you did.’  Then, with that vision, working with the agencies to build a smart, integrated plan.

True, the client has a bit of arbitrage to do in that exercise, but most of the large advertisers I’ve spoken with - at Coke, Nestlé and Procter for example - expect that.  They are more comfortable when not all their eggs are in the same basket. 

The second doubt I have is about one agency’s ability to intimately know and support - from a business perspective - very different and diverse target markets, with only a single client.  If you’ve read the Connected Agency, then you’ll know that I think agencies should evolve to a target-centric model.  But that vision works when the finely targeted consumer/customer groups are mutualized across a number of brands or clients. 

My first question to Casey Jones will be:  is Dell getting better integrated marketing out of the consolidation?   I'll let you know what he says after Tuesday's presentation. 

What question would you ask? 

What is the future of Agencies?

Earlier this year, Pete Kim and I published  “The Connected Agency”, which looked at the future of advertising agencies.  The idea was to get people talking…and that it did. 

Since the piece came out, I’ve hosted a couple of Agency breakfasts, both here in Paris and in London.  And have also been invited to exchange with some agency teams.  Every time, the conversation was lively, interesting. 

Rather than summarize all the discussions in a research report and push it back at you, I thought it would be more pertinent, and certainly more fun, to continue the conversation with you online.  To kick things off, over the next couple of weeks, I’ll post about those offline exchanges we’ve had. 

The bottom line is most people I spoke with believe agencies have to change. The model we proposed might not be quite the right one; perhaps just one model is too limited for different types of agencies and clients; and surely the timing we put forward is too aggressive (agency management hopes). 

What do you think? 

How do agencies change to take advantage of technology?  How do they change to keep in contact with consumers who avoid, block and distrust advertising?  How do they keep being relevant when there are ad exchanges to manage media placement; and creative networks to deliver content?   

What do you think?   I look forward to ‘talking’ with you. 

In case you haven’t read the research yet, here is the executive summary.  And if you’re a Forrester client, you can access the full report here.

Today's agencies fail to help marketers engage with consumers, who, as a result, are becoming less brand-loyal and more trusting of each other. To turn the tide, marketers will move to the Connected Agency — one that shifts: from making messages to nurturing consumer connections; from delivering push to creating pull interactions; and from orchestrating campaigns to facilitating conversations. Over the next five years, traditional agencies will make this shift; they will start by connecting with consumer communities and will eventually become an integral part of them.

Pete captured quite a few of the online comments in a blog post that you can find on his blog.