October 29, 2008. The New Role of the Digital Agency
The new digital landscape and modern consumers are dramatically different
The new “digital landscape” is dramatically different from the environment into which TV, print, and radio ads were launched no more than two decades ago. Even today’s Web 2.0 environment is different than the Web 1.0 environment of a decade ago. As the Internet led to the more facile accumulation and dissemination of information and as social networks brought even mainstream consumers online, the power of consumers has increased significantly relative to advertisers. For example, they will search for information when they want it and ignore all other forms of interruption media pushed at them. They will look for independent and objective reviews of products or services and distrust brand messages put out by advertisers touting their own virtues. And they will rely on the actions of the community to help them filter and prioritize the best “stuff” from the ocean of available content.
Audience fragmentation caused by the proliferation of niche cable channels (e.g. the fly fishing channel) and abundant online video channels means that “mass media” is not so “mass” any more — there are no longer massive audiences tuned into a single television program at the same time. “Media” is now two-way or many-to-many — i.e. consumers tend to talk amongst themselves. But many advertisers and their agencies still rely heavily on one-way tactics – pushing a carefully crafted message out at target customers.
Globalization, information proliferation, and socialization have irreversibly changed industries
Other macro forces are also re-shaping the industries, in particular the advertising, marketing, and communications industries.
Globalization means that, for example, coding can be outsourced to India, graphic design to Australia, or television production to Asia, all at a fraction of the cost of “in-house” resources. The wide availability of tools like online photo editing tools (picnic.com), video editing sites (motionbox.com), and even high-end 3D and special effects software (Blender.org) — all of which are open source and free — fuel the perception that such digital capabilities and services should be lower cost, if not free. These trends mean that agencies whose revenues were derived from these services are facing constant downward pricing pressure.
The proliferation of information has also irreversibly changed the perceptions, behaviors, and habits of consumers. The abundance of information online conditions users to search for information and form their own opinions through research. They also expect more detailed information than can be typically delivered through TV, print, or radio ads — e.g. they want to see the product brochure online, do price comparison shopping across dozens of retailers, and read peer and expert reviews before buying. And they will do the above on their own time (e.g. planning a family cruise vacation at 1 am when the kids are asleep), which destroys the concept of targeting using day-part or show content.
The socialization of consumers online means that the conversations that used to happen among a few people around the watercooler are now happening online for all to see. The collective complaints or praises of products and services now become inputs to many other users doing research online before their next purchase. Furthermore not only is the spread of information much faster online, but the impact could also be dramatically larger — for example, 1) by the end of opening weekend, hundreds of user reviews of a movie can immediately determine its fate — a mega hit or a “straight-to-DVD” movie, and 2) the action of a single person who found an unsavory clause in AT&T’s Wireless’ “fine print” and posted it online caused such a community uproar that AT&T made a public statement that it would be removed.
Traditional agencies rely on old business models (and other challenges for traditional agencies)
Despite the new landscape conditions of no more mass media and consumers doing their own research online, many advertisers are still doing traditional advertising. And many of their agencies are still relying on old business models (agency of record) and being paid for production. Creative ideas are still being given away for free during the pitch process; if the pitch is won the agency then gets to bill against production of assets. But freely available tools or production and abundant lower cost producers are causing clients to question costs.
Other challenges plague traditional agencies. All clients want to “go digital;” but digital is seen to be a “bolt on” capability among big agencies and smaller agencies are perceived to be more digitally savvy. Further, “clients find it hard to know how much digital stuff costs,” says Peter Cowie, Managing Partner of Oyster Catchers, a search consultancy based in London. “Many clients are using in house capability to save costs and retain control.” Cowie continues, “many clients are deeply insecure about digital marketing” partly because of its novelty, but also, practically because of the wide array of new disciplines, including for example, social networking, mobile, gaming, search, analytics, user interface, Flash, AJAX, e-commerce, online ad networks and media buying, etc.
The new digital agency plays the role of a strategic advisor and subject matter expert
So what is the role an agency can and should play in this new landscape? We believe, the role of a strategic advisor to calm clients’ insecurities and ensure a cogent and smooth incorporation of digital. Smaller agencies that grew up in digital may not have the expertise in traditional disciplines nor a global footprint and enough staff to handle large global clients. However, large traditional agencies, with a few key changes to business model, organizational structure, and internal processes will be able to guide clients through the shift towards digital, by changing the marketing mix and ensuring that all channels are integrated, working together, and reinforcing to each other.
These changes may include 1) managing a network of independent specialists (who serve on SWAT teams for client projects) instead of in-house FTEs, to account for the wide variety of new skills and disciplines 2) shifting away from the business model of being paid for production to being paid for managing a network of geographically disperse low-cost providers, and 3) providing thought leadership as subject matter expert in digital disciplines, strategies, and tactics.
Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
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