Defining The "Digital Agency"

This week AdAge released their annual Agency Report.  In it they once again ranked the top “digital agencies” in the US.  This is a valuable report to many marketers (and to Forrester, as we often use it to report agency revenue in our Wave report).  I tip my cap to the AdAge team as I know first hand how hard it is to compile this type of information. However, the list itself also reflects how the agency world is changing. For instance, while stalwarts like Razorfish and Digitas top the list, there are many unconventional names throughout the list such as Meredith, IBM, Acxiom, GSI and Acquity Group. It includes traditional agencies such as Ogilvy, Goodby & Silverstein and DraftFCB and beyond that it even includes contest company ePrize and GroupM’s search division. And while this list has always had a mix of players, the emergence of these firms as “digital agencies” continues to show how the old agency walls are fading and how agencies and marketing services firms are entering a “Great Race” for relevance as they see opportunities to enter the interactive/digital market.

Yet this ultimately creates a challenge for interactive marketers as it is becoming increasingly difficult to determine who does what and when you should decide to work with them. Not all digital agencies are created equal, in fact they are very much apples and oranges (or at least all citrus fruit). Applying the word “digital” or “interactive” to all of them is a deadly mistake too many marketers and their search consultants make. At Forrester we recommend starting this process with one simple step – identifying the services you need to outsource and build your criteria from there. Then go out and determine which agencies/firms fit the bill best rather than the other way around. This may be a simple step, but it’s a crucial one that is too often overlooked. And you can expect Forrester to continue to expand our agency coverage to include more agency landscape research to help determine the ideal situation to hire specific agencies.

Comments

Changing roles of agencies

I am in the process of revamping my companies web presence and have found that I may end up with 3 different vendors - each of whom excel at one, but not all facets I am looking for. Gone are the days of hiring one umbrella agency that does it all. You point about "identifying the services you need to outsource and build your criteria from there. Then go out and determine which agencies/firms fit the bill best rather than the other way around" is very true. Good article.

"Great Race Towards Interactive" or "the Middle"?

Sean has a solid point that we've passed the tipping point where agencies can no longer afford to simply say they are "digital" or "interactive". In fact we're nearing the time when traditional agencies can no longer "i-wash" their image by releasing a headline announcing the hiring of a digital guru or chief social media web celeb (remember those?).

However, I disagree with Sean that the sudden appearance of these firms on the Ad Age Digital list represents these agencies seeing the "opportunities to enter the interactive/digital market". I would agree that they are racing toward relevance, but most out of self preservation and not opportunistically. Of the many studies on the subject, Duke Fuqua recently released it's study on Fortune 1000 CMOs and not surprisingly the vast majority said that they do not trust their general agency with interactive responsibilities. So what would you do if you were in charge of your agency's for the digital list as an agency marketing manager?--put your company on the list if you know what's good for your job that's what.

Unfortunately, as a result the validity of the Ad Age list is degrading. Look at the reported revenues as digital revenues of some of these agencies and then ask yourself if they really developed these interactive revenues overnight or if these numbers are really a compromise of reporting ethics. Are you thinking that at least the list is better than nothing? Well wait until next year when you have PR firms, Apple, and Conde Naste on the list too...it's coming...just ask ePrize who apparently can now run your interactive marketing (according to this Ad Age list).

As one of the principals of one of the only agencies on this list with a digital heritage and no holding company or VC master to which I answer, I am committed to recommendations that best serve my clients in this new world of marketing. We call it The Relationship Era (www.relationshipera.com). It means that we're leaving the days of pushing one-way persuasive messages at people to interrupt and persuade. We have the opportunity to dig into the other P's of marketing and provide unparalleled value to consumers and the brands we serve.

Here is the catch. It's easy to make money/profit as an agency in the old world of advertising. It's very difficult to do so in the new world of marketing (again, speaking from one of the only agencies on this list that isn't funded by outside money or part of a public roll-up). The folks in the old CPM world are mainly the ones making the recommendations on how to spend brand budgets. Those recommendations are inevitably influenced by the need to deliver earnings to agency shareholders. This ultimately puts these agencies in a position to recommend a significant amount of execution that allows them to maintain their margins...in other words TV.

So look back at the list and ask yourself, which of these agencies could endorse a 50-100% move to an integrated (and fragmented) interactive marketing plan this year if that was the right thing for the brand. Not many can afford that sort of recommendation because of the profit bias mentioned earlier.

At the end of the day, financial incentives are powerful forces and the reason that next year you'll see even more "agencies" calling themselves "digital" to Ad Age and anyone else who will listen. So welcome to the 2011 Ad Age Digital Agency List Conde Naste, Accenture, Apple, Google, any other company that sees the "opportunity" that digital presents (that is, if you know what's good for you).

Race towards the middle? I think not, I like Sean's "race towards relevance" a bit better.

i.m. wolfman, chief marketing officer, imc² www.imc2.com
follow me on twitter @imwolfman

Great article. As part of a

Great article. As part of a UK digital agency, i find it fascinating to see how the US market compares and whether the demand for an agency such as this across the waters is different. You mention digital agencies as 'apples and oranges' - you know, that really is spot on and how i have felt for many years!

Keep up the great posts...