The Future of Advertising Agencies
The Ad Business Must Restructure Itself for the Digital Revolution
Feb 16, 2009
Even with their faults, the "Mad Men" and "Trust Me" television programs may be creating perceptions of advertising agencies that can shock business people accustomed to high efficiency and production standards. The resulting cynicism, plus the unknowns in the post-recession economy, may be the straws that force the ad industry to reinvent itself.
However, there are so many conflicting factors demanding change that there are few indications of what the new business model will be.
As John Hagel writes on his blog "Seismic shifts are shaking up the world of advertising big time. But which shift is most relevant?"
Video Commercial Functions
A few of the obvious shifts:
- The digital revolution is changing video commercial functions and expanding their horizons.
- Newspapers and newspaper advertising have declined, downsizing a major source of agency business.
- Network television must now share the market with cable.
- The Internet and mobile media command a growing share of the ad market.
- Television advertising has been changed forever by Tivo, VCRs and fast- forward buttons.
- Traditional billboards must now share revenue with digital boards.
New Business Models
How will the industry, particularly ad agencies, work all this into new business models? Some possibilities:
Boutique agencies may flourish when credit becomes available. The Internet and digital revolutions give people more freedom to open small agencies that specialize in digital functions and develop closer client relations. Recent massive layoffs in big companies makes ownership more appealing.
The agency commission and retainer systems may be reevaluated. Recession-bitten advertisers will probably be wary of a compensation model that rewards agencies for spending, rather than saving, client money. In 2009 Anheuser-Busch canceled its agency retainer arrangements, opting to pay by project.
Advertising awards. "Trust Me" may have already convinced some business people that agencies focus more on awards than on producing effective ads for clients, an impression that may not be far from the truth in some agencies. Contest criteria could be tilted more toward client results than artistic excellence.
Creative Process
Connor, "Trust Me’s" creative writer (played by Tom Cavanagh) reinforces the perception that ad development depends more on inspiration than research, in effect a discipline without much discipline. The Chicago agency’s casual work regimen and the outburst that "clients are idiots" won’t improve agency images among business people unfamiliar with advertising
Targeting may replace creativity as top priority as more ads move from television to the tighter confines of the Internet and mobile media. The rise of social networks may place more emphais on writing effective 140-character messages for Twitter and producing videos that wow folks on Utube.
The ability to measure and test online and mobile ads may lessen the dependence on focus groups.
Media-buying whizzes may become the agency stars, a development that could trickle down to university curricula.
Media Ad Development
Media companies may expand operations to increase revenue from ad development. A blogger wrote in 2008 that agencies are no longer needed because media can better combine research and creativity. It was just one young man’s opinion, but Ad Age gave him prime exposure.
CEO Maurice Levy told AdWeek in 2009 that the Publicis Group is already changing its business model.
"We've reinvented our agencies and changed the way we're working. In rough times, advertisers are in need of creative agencies with new, bold ideas and the imagination to connect and reach consumers," Levy said.
References:
- Anheuser-Busch whacks retainers," by Jeremy Mullman, Ad Age.com 2-16-09
- Edge Perspectives: The Future of Advertising, by John Hagel
- TNT "Trust Me".com
- Interview with Maurice Levy, by Norman O’Leary, AdWeek.com 2-16-09
TNT's Trust Me Advertising Show
Toning Down $3 Million Super Bowl Commercials
 |
