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June 27, 2016
Is the traditional advertising agency extinct?
By: Mark Sherwin

Whilst the demise of the traditional advertising agency has been widely predicted and exaggerated for decades, the voices arguing for a different type of solution are very vocal at present.

I recently joined the Drum’s roundtable debate and research on cross-platform marketing. Whilst I was reassured by some agencies reinventing themselves at pace, I was surprised how many organisations were trying to reorganise for the digital world as if it were a rather recent revelation.

The Drum Market Insight Report states.

‘Most of us know cross-platform marketing is becoming an essential part of modern day marketing, and most of us know the answer lies in the data, the only common language across all of the platforms, networks and tech and therefore the customer.’

Over 40% of campaigns still run on a single channel according to the Drum’s research and 37% of agencies are struggling to employ talent with the skills required to effectively manage cross-platform campaigns.

An article from Harvard Business Review– 6 Reasons Marketing is Moving In-House, antagonises that ‘Agencies are stuck on advertising’. In the article author Mark W. Shaefer quotes a brand manager at a fortune 100 company’s deep frustration:

‘We want to connect to our customers in a new way. We want to leverage social media, content marketing, and integrated models but every time we ask our agency for a proposal, it comes back as advertising. I’m sick of it.’

HBR goes on to recognise that agency employees are stretched thin and their ideas are too. Analytics have improved and Big Data is giving way to real insights in Little Data, which offers the opportunity to drive our efforts down to the individuals with a laser like focus on the most active customers driving our business. However, many agency executives are still simply looking to create award winning broadcast creative.

This frustration with the inability for agencies to understand and leverage digital as anything other than a sideshow to their TV Ads was played out by Mr Jakeman, the president of PesiCo’s global beverage group, at a keynote address to the Association of National Advertisers:

‘Digital marketing is the most ridiculous term I’ve ever heard. There is no such thing as digital marketing. There is marketing – most of which happens to be digital. We ‘ghettoize’ digital as though it’s the life raft tethered to the big ocean liner. And we have to move on from that’

CMOs are voting with their feet. Dana Anderson, Mondolez Chief Marketing Officer states that by 2018 30% of Mondolez media spend will be on digital channels globally, and already it accounts for 45% in North America. However this isn’t lifting the old TV formats and frustrating the customer by placing these as pre-roll. Jakeman of Pepsico has a particular pet hate for this:

‘My particular peeve is pre-roll. I hate it. What is even worse is that I know the people who are making it know that I’m going to hate it. Why do I know that? Because they tell me how long I am going to have to endure it — 30 seconds, 20 seconds, 15 seconds. You only have to watch this crap for another 10 seconds and then you are going to get to the content that you really wanted to see.

That is a model of polluting content that is not sustainable.’

Mondelez is instead investing in serious relationships with technology providers including Google and Facebook.

Google is working with Mondelez on new product innovations, including access to unprecedented consumer insights and feedback, with a panel of two million people created by Google.

Facebook has brought a scalable solution to drive impulse buying to the table, replicating the impulse-purchase behaviours in store but on the Facebook platform.

What does this all mean for the traditional Ad Agency model?

Well it certainly doesn’t predict its early demise, nor does it suggest that there isn’t still huge value to be attained through world class, above the line campaigns.

It does suggest the need for brands to think about marketing in a more holistic way, that blends the great creative idea of the ad agency and appropriate levels of awareness advertising, but that also creates new capabilities and partnerships that are able to drive real innovation in how to build enduring and personalised relationships with consumers through content, data, personalisation and true multi-platform approaches.

I believe few agencies are equipped to provide true cross-platform, blended marketing strategies; few of the innovative start-ups have the breadth of experience to weave their ideas into relevant customer experiences that can sustain; and whilst technology and platform providers have the technical know how to manage the complex data and channel mix needed for success they lack creative bite.

We have reached the tipping point in the old ad agency model. No longer will brands engage with a single retained provider, instead they will manage an increasingly complex marketing ecosystem that to be successful, continues to get the best creative ideas from ideas factories, the best and latest innovations from start-ups, and the right sustainable technology platforms and execution capabilities from strategic marketing technology providers.

In the foreword of the recent Drum report it states:

‘It’s about being human. Imagine if we spoke to our friends by phone but ignored them in the street. Imagine if we replied to emails but ignored texts. What if we recommended a restaurant highly but always went somewhere else? Odd.’

If brands are to build enduring relevance and resonance with their customers they must drive the pace of change, renegotiate their relationships with agency partners and demand a better more connected approach to future marketing.

Traditional Advertising Agencies who cannot respond to the pace of change, may well face extinction as their margin and revenue is eroded from all sides by more creative, more technically savvy and more innovative players able to work together for client success.

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