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“It’s a digital tsunami…are agencies ready?"
Gaston Legorburu , Chief Creative Officer, Sapient The online advertising industry is in a frenzy with companies shifting more and more of their advertising dollars from traditional to interactive media. The change has sparked acquisitions with ridiculous valuations, talent wars, agency consolidations and agency transformations among the service companies, media outlets and technology vendors, all of which stand to gain from this shift. The online advertising industry is in a frenzy with companies shifting more and more of their advertising dollars from traditional to interactive media. The change has sparked acquisitions with ridiculous valuations, talent wars, agency consolidations and agency transformations among the service companies, media outlets and technology vendors, all of which stand to gain from this shift. What many don’t realize however, is that behind this online pilgrimage rests a tsunami of work which the interactive industry and infrastructure is not prepared to handle.
Let’s put this into perspective. Over the past three years a company with an annual media budget of $200m increased its interactive advertising spend from 2 per cent to 4.5 per cent. Now with good results pouring in, they are debating whether it should represent 11-13 per cent of their budget in 2008. For this company, this shift is not a big deal as they are just moving 5 per cent of their budget to something that’s proven and is delivering valuable results. However when you take into consideration that hundreds of thousands of other companies are undergoing this same shift, the numbers become quite staggering.
The initial reaction to agencies folks is “Hey, this is great news!” Not so fast, the reality is that for many, when the tidal wave hits, two things will happen. First, you may drown. Second, you may float and rise with the tide. The question you have to ask is, “Am I ready?” Today’s reality is that clients want more of a digital focus and are looking to work with the big agencies to get it done.
Today’s reality is that clients want more of a digital focus and are looking to work with the big agencies to get it done. Why? First they don’t want to manage multiple interactive shops on top of already managing traditional advertising agencies, PR firms and specialty players. Second, smaller shops don't have a "farm system" in place to train young talent or the management infrastructure, methodologies and systems to drive quality delivery.
So the answer to who survives is the big firms, right? Believe it or not, there will be a huge amount of business that these big players cannot handle, which will create great opportunities for the second tier of firms. The question is, can they handle the load? In most cases the answer is no. These companies have talented and creative minds (that is, the one-dimensional creative folks) working but it might not matter if they don’t have the manpower to handle their business. These agencies need to fair well in the talent wars while also perfecting and automating the operational aspects of online marketing. This means they will need technology skills, delivery process expertise, and global distributed delivery capabilities and experience that they simply don’t have at this time.
So again, it comes back to size, with the big business leads going to the big players. However, if the top firms cannot handle this entire wave of business and the smaller firms are just too small, what gives? The answer is scalability. The smaller firms that are able to scale while simultaneously continuing to evolve and improve the level of creativity and technical skills clients demand will make the transition. Those firms which stand pat will be squashed or gobbled up by holding companies looking to “create” the illusion of scale, the latter of which is destined to happen and certain to fail.
For those which make the commitment to scale and in their mind have taken the needed steps, how do they know they are ready to commit to big business opportunity? Here is a quick test, comprised of a few questions that the big business will be asking.
• “Those are very creative ideas, but could you show me what you have actually produced?”
• “Did you do that yourself?”
• “How long did it take, and how much did it cost”
• “Have you handled 20 or more of those projects per month for any one client, and can I talk to them to
see if they are happy with your agency?”
The question for you will be, do you have the right answers? For those that do, they will be in a great position to take market share from the remaining agencies that show the slightest hint of hesitation.
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