Changing The Advertising Agency Model

Spring 2006 and I’m fresh out of MBA school – landing my first business analyst role for a Madison Avenue advertising agency. Digital marketing and the Internet remain a hot sector – sure people were overhyped from the .com bust a few years earlier, but everyone still wants in.

The problem remains — tying actions and activities to results and ROI.

I’m sitting on the 45th floor of a downtown Chicago office with some of the smartest people I’ve ever met. We’re talking about a new website design and online digital marketing program – the client is asking how is this website going to drive ROI? The agency responds – don’t worry about that – check out this great design. There’s a disconnect and problem. Flash forward eight years and we’re still having the same conversations.

The web is specific and specialized. 30 years ago, brands had about five different things they could do for marketing (direct mail, print, radio, billboard, and TV). Today – over 1,000 different tactics exist with new opportunities on an almost daily basis.

The problem is that we (the agencies) are not looking at the right problem. It’s impossible for anyone (or any agency) to be a master in everything (creative, development, analytics, mobile, content, social, video, email, etc.). The one-stop digital shop is a dying breed – the overhyped 500+ employee agency is falling apart.

Intrigued? We thought so. Read on to learn what exactly you should consider when finding the right agency, and why niche specialization is the next big thing for marketing.

The advertising industry is changing in ways businesses never expected. Boutique agencies with their niche, yet flexible and fresh ideas are out performing the top agencies despite their worldwide networks and dominant role in the industry for decades. The large advertising agencies are the ones most caught off guard because they have prided themselves for years on pioneering ideas with more than 200 offices and employing 10,000+ professionals. However, the paradigm has shifted and small agencies are successfully hiring experts with more skills that can be applied to a variety of projects. One person at the agency may play a role in social strategy as well as art direction for a project and then assist with content strategy on another one. Rather than quantity and large, impressive employee counts, boutique agencies are discovering quality individuals are what matter most to their overall success. The clients are seeing their goals met faster and their challenges are being overcome quicker because of the broad array of tactics that the multifaceted teams in a smaller agencies require and bring to the table.

Additionally, there are more ways than ever for brands to spend their money. As I stated earlier – 30 years ago brands may have placed all their efforts on hitting markets through limited media sources such as radio, TV, billboard, or print media, now there are over 1,000 feasible places for them to spend money in a more cost effective and logistical manner.

As marketing is being redefined constantly, every day, in fact, it is becoming more obvious that flexibility is the key to success.  Every outlet from social media to print to mobile is an avenue to expand a company’s brand further, farther, and faster. Mobile technology with its global outreach is quickly becoming the most flexible and measurable advertising source and is on the forefront of those avenues now. While the bigger advertising agencies are trying to learn the newest advances in media marketing, smaller agencies are surpassing them with highly experienced and more authentic creative marketing professionals. After all, from the agency’s conception flexibility is in the fibers of every boutique.

As more and more brands are moving towards using small agencies for everything from social media marketing to TV spots there will be a greater emphasis on immersive experiences and less on interruptive messages. Brands and advertisers will continue to see a shift in what works now and no longer is considered acceptable in the fast paced, ever changing marketing industry. Companies will begin to make full integration of social media across the entire customer experience. Social CRM will grow substantially while simultaneously removing silos. Furthermore, content and authorship will make significant strides with the merging of search and social. Because of this, there will be much greater media security, compliance and government.

Rather than relying on legacy and minimum net margins for every quarter as large agencies so frequently due, more resolute concepts, innovative ideas and what benefits the clients’ brand is determining the bottom line. Ironically, as large brands experience these new and avant-garde marketing approaches of the small agencies, the large agencies they are used to hiring are beginning to look amateurish.  Smaller agencies tend to house younger professionals who are not stuck to traditional structure. They thrive on the challenge of integrating new concepts and thinking fresh every day. The small, niche agencies are not bound to a legacy system and think of social media as a form of business intelligence.

With the toughest decisions being the top priority of marketing executives, groundbreaking concepts and premium creativity is needed more than ever to take brands past the mundane and to the next level beyond their competition. For this reason, the advertising agency will be seeing small advertising agencies develop and continue to surpass their physically colossal competition.