Story in development – Why ad agencies will never 'get' digital

I'm working on a feature for the AFR's Boss magazine looking at some of the more significant trends in digital marketing. Its a big ask for a small article, and it would take a book to do the topic justice. One of the topics that I am keen to explore though is whether or not digital agencies can every truly 'get' digital.

Take this scenario. Let's say I run a big agency that has been around for a decade or two. My most profitable activity is most likely making television ads. I'm good at it, and I make a nice big margin. So too does the media buying agency that books the airtime. Lovely big revenue and lovely big margins.

Now along comes online interactive advertising. Big market penetration (something like 15% of Australian media attention now is directed online). It is also a highly measurable medium for advertising - both in terms of knowing exactly how many people have viewed an advertisement, and how many have performed some kind of action as a result. Certainly more so than TV - who really knows whether someone is in the room when the ad is on, and how often do Australians call or send a text as a result of a call-to-action?

So what is an agency going to recommend that its clients spend money on? Television. Why? Possibly because it does still have a great reach. But really because it will make them the most money.

Traditional agencies have a strong vested interest in ensuring that the status quo is maintained forever, because they cannot make as much money out of online. Online campaigns are much cheaper, and (here is where I need assistance) increasingly proving to be just as effective in terms of generating real outcomes.

Yes, traditional agencies have been buying up and recruiting digital marketing specialists. They need to be able to talk the talk when clients call them in. But given the stories of disillusionment and attrition rates  of these acquisitions, it seems in many cases these acquisitions are lip service, or incremental revenue boosters at best.

Traditional ad and media agencies also have a vested interest in the continuing muddying of the waters around measurabilty. So what if there are several different ways of measuring the effectiveness of an online campaign. Perhaps that just means that it is highly measurable. How many ways are there to measure a TV audience? And who really thinks that is bulletproof?

I've also recently been surprised by just how conservative so many agencies are when it comes to trying anything new in interactive marketing or digital media. I'm finding more and more that the most innovative digital campaigns are coming from the smaller digital agencies working directly with the clients - not via the bigger agencies. Bigger agencies have a lot to lose - including their reputations - so are understandably loathe to put forward ideas that will potentially jeopardise them. Smaller digital agencies have more to gain and a lot less to lose.

OK, so my argument is not yet rock solid, and there are examples of bigger agencies that 'get' it more than others. But I think my general premise around profitability still stands.

If you agree or disagree, please let me know by posting a comment or sending me an email ASAP - I'll be writing this one up this week.

This request-for-information expires on April 9 2008

Comments

[Geoff McQueen]

For what its worth, I think the issue here is a mix of the innovators dilemma - you're good at something that pays you well, something new comes along you're well positioned to drive, but pushing it will kill off your cash cow which you know isn't going to grow into the future but it is still paying you well - and more conflict based agency theory where the agency is charged/entrusted by their client to do the best for the customer, and the agency has an increasing conflict between what's best for the customer and what's best for the agency...

Good luck writing that one up! Since we concentrate entirely on digital, we're not well positioned to help canvas the comparisons with offline mass media, however, as one of only a couple of Google Analytics partners, we're pretty well plugged into the various measurement metrics you can apply to online - and how the waters can still be muddied a lot with digital if you're not careful, especially when integrated with offline media to drive traffic/interest to a call to action digital play.

[Fran Lefroy]

Have to agree with your basic premise. Talking to an Account Director with one of the big agencies in Melbourne recently, I asked about what they were doing in digital because online is my background. She agreed that her agency would always "tack on" some digital stuff because clients now "expected" it but that no one in the agency enjoyed doing it much. I was flabbergasted

[CHRIS SIMON]

Only just picked up on this story in development and too late to make the deadline for sending you any email insights. Also, why don’t the companies or individuals who comment in your published features, also comment to the same blog feature?

I don’t think being a Google Analytic partner ‘unmuddies’ the water of this age old dilemma. ‘Tacking on’ digital is more the problem and its measurement should not just be online!

I also think AFR’s Boss should let you write ‘the book’ about whether or not agencies can ever truly ‘get digital’. Big, around for a decade or two, digital or traditional, specializing in media, or digital acquisitions-the measurement has always been AUDIENCE!

And business has only ever been about money and, sadly, a lot of the agencies have only ever been about talking the talk. Also, the smaller digital agencies with more to gain and a lot less to lose seem to all be part of the same agency landscape anyway?

I think your general premise around profitability is exactly what it’s all about.

But the problem with ‘the talkers’ is they wait to see who starts making the money, before they start ‘talking more talk’ and making changes.

By the time they all really get the online INTEGRATED space, m-commerce will have set in and then they will go off on their acquisition shopping sprees again, (something they know almost as much about as TV Buying).

Most mobile phone users with mobile internet access use their phones to buy goods and services online with a credit card, and most if not all will be using their phone’s as mobile wallets in the not too distant future, where charges will be billed directly to their mobile accounts.

Profitability is still about the AUDIENCE. I seem to recall that agencies have always said that this is their business?