Digital

Digital agencies: what shape will they take?

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Specialists digital agencies have been around for about a decade now. Many of them started off ad specialist web design agencies creating web properties for brands. They expanded their services to offer interactive ads, microsites (when they were a rage) and online media planning and buying. Then came social media campaigns which set off a slew of specialist agencies themselves. Some agencies focused only on delivering social media campaigns while claiming to offer everything from mobile applications to Facebook campaigns. And then the big holding companies got into the act either acquiring such agencies or setting up specialist units. Today we have a combination of agency structures: independent digital agencies, small agencies or freelancers offering social media campaigns, the big boys with their ‘all-encompassing’ services either as stand alone units or under the parent agency brand. And then traditional media planning agencies have stepped up their act to offer not just media investment planning & buying but content collaboration, ‘digital’ campaign creation and such like.

Is there room for all? Will stand alone digital agencies survive or continue to be bought over by the big network agencies or simply shut down? My two bits going by the trends and what clients are likely to look for in their creative partners:

Firstly lets look at the slew of services which constitute ‘digital’ nowadays:

‘digital’ strategy (not sure if such a service makes sense; a brand cannot have a stand alone digital strategy as separated from regular brand strategy)
website design & development
banner & interactive ads
media planning & buying
search & SEO
UI/UX ervices
Video content creation (including long-format ads for YouTube) & video collaboration
social media campaigns
mobile ads (mostly traditional banner ads)
mobile search
mobile website design
mobile application design and development

Such services call for a diverse set of specialists: developers, business analysts, UI/UX, search and so on. Hiring such a team may not be a viable proposition for a traditional agency as ensuring high capacity utilisation is impossible in *their* environment. An iOS or Android developer on the employee rolls may not work out if the agency only gets a handful of projects in a year, which utilise their skills. Hence traditional agency staffing reflects traditional requirements: copywriters & art directors mostly.

Specialist digital agencies can afford to put together a team comprising all of the above skills if the business has scale. Even with them, some skills are hired from outside on a need basis – for example, mobile app design & development is outsourced to specialist mobile app development companies who are strong on tech and requisite design skills.

Even among digital agencies, some sort of separation of ‘men from the boys’ has occurred with some agencies at the top focusing on high-end, high-margin, high-stakes approach while a majority offer social media, search & media buying services. The agencies at the top have tasted success in digital product development (e.g Nike Fuelband) which calls for huge investments and risk appetite. In this scenario it is heartening to see a few shops who have not made the forced distinction between ‘advertising’ and ‘digital’ – the likes of W+K, Droga5 and CPB come to mind. They’ve created some great work in the ’new media’ space without having to hive off any specialist agency or unit.

In the short term, I feel the ‘digital landscape’ will look like this:

– handful of agencies not making the forced distinction between ‘traditional’ and ‘new’ advertising, offering an integrated communication solution to clients (all too rare already). They may outsource some specialist work (like mobile app development) to specialist partners
– digital agencies which focus on product development & services for the connected world. So it could mean specialist products (like R/GA’s hands-free navigation device for bikers) and the regular digital campaigns but pitching premium services
– big network agencies and their specialist units (acquired or otherwise). I guess the focus will be on offering digital as a tag along service to ensure their network clients stay within the fold. A lot of the tech-related services which do not warranty full-time employees likely to be outsourced
– the small players who focus on social media campaigns and the ‘low tech’ services’. I feel these will be hard hit as clients either choose to have in-house social media teams or align themselves with a full-service shop. There could be a market for such agencies among SME’s, retail and such like but the margins and competition will be make life difficult from a business perspective.

But what the long term future really holds is anybody’s guess. Any thoughts or comments?

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A marketing communications professional with a keen interest in all things advertising. I share creative ads and views on the ad industry here. Views are personal. See Disclaimer for more.

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