It was bound to happen, and now it has. A big-time digital agency (R/GA) has opened up a full-fledged brand development arm.
And whom do you think they will be competing against with this new branding department? Other digital agencies? Nope. They are aiming for traditional agencies and the branding, media placement, and creative budgets they enjoy. The division is headed up by an ex Wieden & Kennedy executive.
To quote from AdAge:
Branding is a logical progression for R/GA, an agency that focuses on digital design for clients — for example, its Nike Plus work. It’s also another example of R/GA’s aggressive expansion into other marketing disciplines; the shop was originally known for its web work but has added TV production and media planning in the past few years.
Digital marketing is going to grow. That’s unquestioned (see blog post about growth rate). But the smart digital agencies aren’t satisfied with consuming that piece of the marketing pie. They figure that if they can master the digital component – widely recognized as the most complicated aspect of marketing – surely they can handle traditional branding and advertising. I see a horse. His name is Trojan.
As social media (see blog post on social media’s role) becomes a more important part of public relations, this argument becomes more valid. It’s further supported by the increasing ties between online and offline media, with traditional media tactics driving traffic to landing pages (see blog post about landing page testing) and campaign microsites.
This is not just a national, big agency trend. In every market in the country, digital agencies are adding PR 2.0 divisions to specialize in social media, and are trying to deliver traditional services. With the digital marketing DNA being firmly rooted in measurement and analytics, digital shops are using tracking reports and low cost new media tactics to convince advertisers that they know a better way.
Forty Agency in Chandler, Arizona is a good example. Formerly a Web design and application development firm, they have branched out into branding and social media PR. They’re not doing broadcast production or traditional media buying, but that’s a logical next step.
Agencies, the time is now
This is the official call to arms. Traditional agencies have to get serious about digital marketing now (see blog post about how to embrace digital). Not only are you not tapping into your clients’ digital budget, but you run the risk of those clients beginning to think that their beloved advertising and PR agencies just haven’t kept up with the times.
Agencies that want to do the “easy” digital stuff like building Web sites, but don’t want to get their hands dirty with SEO, analytics, or other numbers and process intensive services just perpetuate clients’ thinking that digital shops understand the future better than traditional firms.
It’s not too late. Is digital marketing complicated? Absolutely. Is it out of reach for advertising and PR firms that want to commit to it? Absolutely not. But you have to take the plunge pretty soon, or the curve to catch up will be exceedingly steep.
Comments? Any digital agencies want to admit to their master plan? Any traditional shops feeling threatened and ready to do something about it?
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Fantastic points, all. So many traditional agencies are still in the toe-dipping phase with digital. The more complex elements such as SEO will be the proving ground for traditional agencies, just as the more subtle and complex elements of branding will be the biggest test for digital.
Having worked in both environments–a digital agency that was moving into social media/PR 2.0 and branding, as well as a traditional agency that is growing their digital capabilities–it’s really a race to the other side of the pool for both groups.
But the truth is, those on both sides who already get this and are already acting on it will be the big winners, at all levels, locally and nationally.
[...] Jason Baer, digital marketing consultant to advertising agencies says that agencies need to wake up, “Digital Shops are a Trojan Horse.“ [...]
I agree with what you are saying in the short-term. However, BOTH digital and traditional agencies must be aware of the larger threat that big media companies pose in the longer-term. Strategy is based on information, and many smaller shops can only afford so many subscriptions that make them informed enough to really help clients. Think about the cost of Hitwise, Claritas data, Yankelovich Studes, etc. Large media companies are armed to the teeth with this information and are making it a point to KNOW more about their customers’ industries. Media companies are waking up to the fact that they aren’t just selling media space, but the EFFECTIVE USE of media. If they can help their customers improve the use of the space they sell, both parties win. Planning work is a potential revenue stream on the services side. Firms we think of as agencies (digital and traditional) could then be relegated to design and smaller specialty projects. This gobbles up a lot of work that small and mid-sized shops enjoy. Sure, giant agencies will still exist that support really large clients needing the whole enchilada. But a whole lot of folks earn their income in that small and mid-tier space.
Sean -
I absolutely agree with you. There is an information gap between agencies and other agencies and agencies and their clients. However, you and me have both seen that rigorous testing and optimization can outweigh information for less cost. But, it requires a direct marketing and data analytics mindset, and most traditional agencies do not have that today – even if they are providing basic digital services like Web design, etc.
Sadly, you are correct about that. And I believe we’ll see a serious exuviation of those shops from the steam table lines at local marketing luncheons.
Recently I was asked a question what do we do. “Interactive” – I replied. The listener took is as too broad answer and wanted to know in what niche of interactive are we.
I think a lot about this conversation because he might be right. If you want to have a successful business maybe it is better to be best among goldfishes than to be worst among whales.
[...] now. Clients are switching agencies based on digital marketing knowledge. See my post “Wake Up Agencies – Digital Shops = Trojan Horse” for [...]
[...] I’ve been saying (especially in my post “Agencies Wake Up – Digital Shops = Trojan Horse“) digital marketers have a much better handle on ROI, testing and optimization, and audience [...]
Good post with excellent points. Digital media and related marketing-communications technologies have indeed leveled the playing field for smaller firms (including purely digital firms) to compete and win against the larger brand-focused ad agencies.
However, as the founder and CEO of an integrated digital marketing firm myself (www.thunderfactory.com), I am less concerned about the competition of big agencies as they scramble to shift their operating focus to digital. And, it’s not because they can’t learn it…they can and have done so already. If you think the big agencies are not loading up on digital talent left and right, you are kidding yourself.
The fundamental problem for the big, traditional ad agencies successfully making this shift is in their business models. Those business models were built on the backs of big media campaigns — principally TV. Walk into the NY offices of BBDO, Y&R, TBWA or O&M (or the massive media buying firms like OMD or StarCom), and it will become immediate apparent to you that they cannot sustain themselves based on the very different (and frankly smaller) revenue opportunities afforded by the new age of digital media and marketing.
The democratization of information, entertainment and communication enabled by digtial media is an historic boon to consumers and marketers, but anathema to the big agencies and their massive overheads. My long held belief is that as major marketers shift more and more of their media and marketing budgets to digital, there won’t be a 1:1 shift for the agencies and their account budgets and related revenue streams.
If P&G shifts $100M to digtial from traditional TV and print, that does not mean the big P&G agencies will now get $100M to spend on the web. And, that $100M in advertising is certainly not being shifted directly to display advertising online. Far from it. The true power of digital is that so much of the impact happens interactively and virally, without the need for the massive media firepower (and huge budgets) of the traditional marketing industry.
For example: How much did OfficeMax spend on the now famous “Dancing Elves” viral microsite? I would estimate no more than $150K or less. It certainly did not cost what it takes to produce a typical TV ad. And, the media buy was probably miniscule (perhaps a limited banner campaign to drive people to the site). Once the viral effect took over, who needed a media buy? The campaign was a huge success. It was and is totally emblematic of the challenges facing traditional agencies in this new media environment. The dollars are not the same.
I do think the big agencies will get their fair share of the new digital media work, just as digital shops (like R/GA and my firm) will get plenty of branding work. But, digital media has transformed the basic operating model for the agency business, and that is really unsustainable for the traditional agencies that made their bones in the days of MadMen.
Patrick -
Great comment, thank you. No question traditional agencies are hiring or acquiring digital talent. But as someone who ran a digital agency that was acquired and integrated into a traditional shop, I can tell you first-hand that having talent on staff means very little until or unless the agency makes a huge cultural shift (as we were fortunate enough to do).
Certainly you’re right that the business model is a big part of that shift. You cannot run an agency any longer – especially one with serious digital capabilities – based on commissions. It just doesn’t pencil out. It has to be fee for service.
And perhaps more importantly, digital and a spirit of testing has to be part of everything in the agency, not just siloed in the corner. That’s why the very notion of a “digital department” is actually counter-productive in many cases.
If you look as digital as a component of everything, why segment it?
Thanks much for the comment. Good stuff.
Cheers,
j