Content Marketing, Digital Marketing, Social Media Strategy

Wake Up Agencies – Digital Shops = Trojan Horse

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.
google image result for http   wwwarmchairgeneralcom wordpress wp content moviereviews troy 07 mr 11 d c81 4 Wake Up Agencies   Digital Shops = Trojan Horse

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?

 

How I help ad agencies & PR firms get better at digital marketing>>
Get my blog posts in your email>>

  • http://www.internet-bard.com/ KatFrench

    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.

  • http://www.internet-bard.com KatFrench

    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.

  • Sean Rogers

    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 Rogers

    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.

  • Jason Baer

    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.

  • Jason Baer

    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.

  • Sean Rogers

    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.

  • Sean Rogers

    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.

  • http://www.gaumina.co.uk/ Darius

    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.

  • http://www.gaumina.co.uk Darius

    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.

  • http://twitter.com/andismit/status/924482902 Andrew Smith

    Google Shared: Wake Up Agencies – Digital Shops = Trojan Horse | Agency Promotion | Digita.. http://tinyurl.com/5jzfen

  • http://www.IdeaDrivenMarketing.com/ Patrick Di Chiro

    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.

  • http://www.IdeaDrivenMarketing.com Patrick Di Chiro

    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.

  • Jason Baer

    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

  • Jason Baer

    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

  • David Sanchez

    At least for me, all major advertising agency and marketing services conglomerated are quite awake already. The move from R/GA is not a surprise but a logical moved signal by IPG’s (Interpublic Group is R/GA Parent Company) competitors like Digitas and Publicis, WPP + Blast Radius and Schematic among others.

    Only if…

    If you are talking about independent Agencies that have not jumped into a full fledge digital way… Is obvious to think their days are over and they will fade on a more accelerated with hard economic times like these.

    If I was on the client side, I will not hire any agency or service provider that doesn’t bring to the table any Social MediaEngagementMetrics Strategy – the lack of it will automatically discard them.

    The R/GA move feels somewhat like an experiment knowing that McCann, Draftfcb and Lowe belong to the same conglomerate without mentioning they will be tutor by the very best from FutureBrand.

    Is an astounding trend where only those willing to understand and adapt will thrive.

  • David Sanchez

    At least for me, all major advertising agency and marketing services conglomerated are quite awake already. The move from R/GA is not a surprise but a logical moved signal by IPG’s (Interpublic Group is R/GA Parent Company) competitors like Digitas and Publicis, WPP + Blast Radius and Schematic among others.

    Only if…

    If you are talking about independent Agencies that have not jumped into a full fledge digital way… Is obvious to think their days are over and they will fade on a more accelerated with hard economic times like these.

    If I was on the client side, I will not hire any agency or service provider that doesn’t bring to the table any Social Media\Engagement\Metrics Strategy – the lack of it will automatically discard them.

    The R/GA move feels somewhat like an experiment knowing that McCann, Draftfcb and Lowe belong to the same conglomerate without mentioning they will be tutor by the very best from FutureBrand.

    Is an astounding trend where only those willing to understand and adapt will thrive.

  • Cory Hendrickson

    Combine this with the Sapient study – “Top 10 Wish List for Agencies of the Future” and there is little doubt left where this is moving.

  • Cory Hendrickson

    Combine this with the Sapient study – “Top 10 Wish List for Agencies of the Future” and there is little doubt left where this is moving.

  • http://www.IdeaDrivenMarketing.com/ Patrick Di Chiro

    Jason, I totally agree with all of your points! And, as you say, the cultural shift is hugely important — probably the biggest problem for the big agencies.

    Regarding the revenue streams for these agencies, it has been a long time since they have earned commissions. It is all fee-based these days (the media buying firms still get commissions, and consulting fees as well). But, those fees can be pretty hefty for, let’s say, a $50M TV campaign (a creative agency typically earns in fees up to about 10 percent of the campaign’s media buy…those fees are not commissions per se, but are negotiated upfront).

    As I noted in my post, that big agency is going to find it very challenging to replace that $5 million revenue stream with just digitally focused work. Of course, that is assuming they could even do all of that work in the first place.

    And, if a big agency persists in having a “digital department,” then they deserve to go extinct — like the dinosaurs a few million years ago!

    Thanks again for your thoughtful post!

    PDC

  • http://www.IdeaDrivenMarketing.com Patrick Di Chiro

    Jason, I totally agree with all of your points! And, as you say, the cultural shift is hugely important — probably the biggest problem for the big agencies.

    Regarding the revenue streams for these agencies, it has been a long time since they have earned commissions. It is all fee-based these days (the media buying firms still get commissions, and consulting fees as well). But, those fees can be pretty hefty for, let’s say, a $50M TV campaign (a creative agency typically earns in fees up to about 10 percent of the campaign’s media buy…those fees are not commissions per se, but are negotiated upfront).

    As I noted in my post, that big agency is going to find it very challenging to replace that $5 million revenue stream with just digitally focused work. Of course, that is assuming they could even do all of that work in the first place.

    And, if a big agency persists in having a “digital department,” then they deserve to go extinct — like the dinosaurs a few million years ago!

    Thanks again for your thoughtful post!

    PDC

  • Jason Baer

    Cory -
    I actually have a post with my spin on that Sapient report. Check it out:

    The 10 Strengths of the Agency of the Future
    http://budurl.com/n4f3

    Cheers,

    j

  • Jason Baer

    Cory -
    I actually have a post with my spin on that Sapient report. Check it out:

    The 10 Strengths of the Agency of the Future
    http://budurl.com/n4f3

    Cheers,

    j

  • http://www.dirkweiss.com/ Matthew White

    Right on –

    Having worked close with an alternative marketing (although they use standard approches) agency recently, I can totally see your point. Now is the make, or break, point for strictly print/offline agencies. even “Alternative” marketing agencies find their edge dulling, without armaments of innovative technology.

    Good work as always.

    Matt

  • http://www.dirkweiss.com Matthew White

    Right on –

    Having worked close with an alternative marketing (although they use standard approches) agency recently, I can totally see your point. Now is the make, or break, point for strictly print/offline agencies. even “Alternative” marketing agencies find their edge dulling, without armaments of innovative technology.

    Good work as always.

    Matt

  • http://www.marketing-consigliere.com/ Joe “Giuseppe” Zuccaro

    Your last section is right on the mark.

    This is were the “artists” of marketing have to reconcile and work with the “scientists” of marketing.

    I’m a little late to the conversation, but the migration to a network-centric marketing world continues and now marketers need to be analysts and linguists too.

    Joe “Giuseppe” Zuccaro’s last blog post..Non-Social Media – Still Youthful, Not Going Away

  • http://www.marketing-consigliere.com Joe “Giuseppe” Zuccaro

    Your last section is right on the mark.

    This is were the “artists” of marketing have to reconcile and work with the “scientists” of marketing.

    I’m a little late to the conversation, but the migration to a network-centric marketing world continues and now marketers need to be analysts and linguists too.

    Joe “Giuseppe” Zuccaro’s last blog post..Non-Social Media – Still Youthful, Not Going Away

  • http://marketinghitch.com/ David Wiggs

    It’ll be interesting to see if traditional agencies who move in a serious way into the digital space are able to increase the median fees typically associated with digital work or if they’ll have to adjust their fees downward to levels digital agencies find themselves having to work within.

    It’s always been a dichotomy that the custom creation of digital development fetches a lower price than what a traditional agency would get for similar work in a different channel.

    What are your thoughts on this, Jason?

    Thanks
    David

    David Wiggs’s last blog post..Small is the new big in marketing

  • http://marketinghitch.com David Wiggs

    It’ll be interesting to see if traditional agencies who move in a serious way into the digital space are able to increase the median fees typically associated with digital work or if they’ll have to adjust their fees downward to levels digital agencies find themselves having to work within.

    It’s always been a dichotomy that the custom creation of digital development fetches a lower price than what a traditional agency would get for similar work in a different channel.

    What are your thoughts on this, Jason?

    Thanks
    David

    David Wiggs’s last blog post..Small is the new big in marketing

  • http://twitter.com/thedavidgroup/status/1464183295 TheDavidGroup

    Facebook RT @seersym I keep telling people, I keep telling people. http://ow.ly/2cvg

  • http://twitter.com/sznq/status/9096127168 Suzan Gray

    Digital Agencies and Traditional Ad Agencies in a Race (via @michaelgass) http://bit.ly/9TUgJX

  • http://twitter.com/wesleylynch/status/9096517102 wesleylynch

    RT @sznq: Digital Agencies and Traditional Ad Agencies in a Race (via @michaelgass) http://bit.ly/9TUgJX – Great Post, so true.

  • http://twitter.com/wesleylynch/status/9096553825 wesleylynch

    @robstokes related to the chat we had the other day: Wake Up Agencies – Digital Shops = Trojan Horse – http://ow.ly/17eED

  • http://twitter.com/leilapan/status/9096923693 Leila Davies

    RT @sznq: Digital Agencies and Traditional Ad Agencies in a Race (via @michaelgass) http://bit.ly/9TUgJX

  • http://twitter.com/donga16/status/9775811659 Gaetano La Rosa

    "Wake Up Agencies – Digital Shops = Trojan Horse | Convince & Convert" – ( http://bit.ly/cPdI28 )

  • http://twitter.com/chyan/status/9828035966 Chyan Phang

    The agency landscape is converging via Jay Baer http://ow.ly/1ptvuM

  • http://security-wire.com/ Remove Spyware

    Yeah, it's time for agencies to wake up now.

  • letstalkandchat

    I just found a great company that builds websites for info products. To keep your costs low, they’ll mentor you on how to create your site, design a marketing funnel (one of the guys works in Hollywood and makes really slick videos), and the other guy programmed Myspace. If you’re looking to have professional web design for your small business and not waste any time or money then check their site out. Check them out: http://www.mikelmurphy.com/easy-info-product-site-system/