We are in changing times; marketing and advertising agencies are scrambling to become more digital while digital agencies are trying to elbow their way into the strategic and creative roles played by more traditional agencies. In the end it seems the whole top end of the creative and strategic industry is becoming homogenised; with all big independent agencies, and certainly agency groups, offering a bit of everything. All things to all men, or a jack of all trades?
But before examining how we got here and what the future holds, we should be clear about one thing: the survivors in this market will be those who actually make something and the losers will continue to tout strategic hot air until they simply run out of puff, something quite easy to do in this low oxygen, crisis economy.
Over the last 5 years, the digital agency, that started out as the poor relation, is now (in many client meetings) sitting near the head of the table. This has not escaped the notice of the smart men and women who lead the major agencies across the UK and they have spent the last three or four years peddling hard to catch up with the group of trail blazers emerging from the dot-com era who were cool, creative, innovative and successful.
If the established marketing and advertising agencies lacked direct digital knowledge, they had buying power, scale and major blue-chip clients. They have used this to tempt thought-leaders, creative geniuses and technical gurus away from pure digital shops to offer a serious, credible digital offering. They’ve absorbed the knowledge behind building websites, communities, digital applications, campaigns and other digital media and added their traditional marketing, advertising, strategic or brand knowledge to the mix. This movement is putting serious pressure on the digital agencies . But it is also creating a raft of mega agencies that all offer a very similar range of skills but with no real USP. All very good at what they do, but all the same.
We believe there is one discipline that can allow a savvy agency to avoid falling prey to this conformity and that’s developing the ability to create content and specifically broadcast and video content. Very few agencies (digital, traditional or otherwise) want to go to the expense of investing in the infrastructure of studios or production companies with all the film-making hardware and software that comes with it. This is despite the sea-change in the way we are consuming video-based content online. It makes this a unique arena: critical (like digital), but expensive to do (unlike digital). Branded Content is on everyone’s lips. If the industry (brands, agencies, broadcasters and media owners) can make it work, there is no denying that TV-type budgets currently allocated to the 30 second spot are going to be moved into this space.
Why isn’t it happening right now? Audience fragmentation means the industry has yet to find a comfortable model which delivers enough money to fund production and agency fees, to allow the creation of credible, engaging content, but that also offers real value and ROI for the client. Once we crack this (and we will) it will be a huge growth area for those businesses who are creative and financially stable enough to take advantage.
Part of solving the problem is working out how we make this type of content creation more measurable for clients and brands. If we can do that, then more of the money goes into the bit that the audience really engages with (the content itself and associated calls to action), and less in the process of getting it there. Given the unique position of companies in the content creation business, one simple answer is to give the other parts of the mix away for free: specifically the digital element.
Free, surely that is madness? In the current economic climate there are many stories of digital agencies offering up their time for free, just to be associated with a brand. This is a false economy. Not only does this devalue the product in the client and agency’s minds, it causes a nightmare in cash-flow for smaller businesses. However, giving this development away for free when you have already made a healthy margin from content creation offers fantastic value for the client and a sustainable model for the prodco/agency. With a one-stop shop, there are fewer agencies for the client to brief on the project and it’s easier to provide a stronger tie in across different parts of the client business. In addition, now that these companies can attract the best ex digital agency employees, there is no loss in quality, creativity or technical expertise.
The smarter agencies out there are looking into how revenue sharing models can be brought into the mix. For example, with over 15,000 iPhone applications already on the market, and android, blackberry and other OEMs following suit, these little devices present great opportunities for agencies to create something genuinely useful and innovative. They not only pay for their own development but also generate their own revenue streams.
One day in the not-so-distant future, these revenue sharing opportunities will push the digital agencies who have spent many years charging by the hour, or by the day, or in some cases by the ’studio day’, to giving time and effort away for free. The digital agencies that face a very bleak future are those who remain focussed on ringing every last hour of chargeable time from a client.
This method of billing is less true in content creation. Yes it has a line item cost, but these are usually based on an agreed fixed percentage. In addition, the budgets for producing TV quality content which actually delivers (we are not talking about wedding videos on a handy-cam), is much higher than your average digital build. This means that as a percentage of the project value, the digital part is relatively small. The same is true of big media spend or indeed large hosting contracts. Any company which has a high-value, content creation function with measurable and defined percentage profits could take this approach and potentially increase their market share and client portfolio even during these tough economic times.
This thinking would not be good news for pure digital agencies, however we are all used to the ‘freemium’ model online, where base features are free but we are happy to pay for the higher functions; so why not with agency services?
