Many agencies have focused on bolstering their strategic credentials, recruiting planners and traditional advertising experts to help them gain the trust of clients and provide intelligent solutions. Alongside this, agencies are also thinking more carefully about how to evaluate and measure what they do in order to prove ROI, something that is ever-more crucial as budgets are squeezed and financial directors demand greater accountability to justify marketing spend. There is going to be a far greater emphasis on return on investment and strategy, rather than just creative.
However, this raises questions about how best to quantify effectiveness online. While there are myriad ways to measure clicks and page impressions, there are still some variables that are not so well evaluated, and the industry must create strategies to address this. The fact that digital agencies, by their nature, can prove their worth more easily than traditional outfits will make them invaluable in the current climate and many agencies are investing in measurement strategies.
The Group, an online corporate communications consultancy, is one agency planning to focus on developing its web metrics services and extending its online corporate reporting, while TBG London launched TBG Analytics. iCrossing, meanwhile, has developed a prototype concept for measuring online behavior.
Clients are likely to spend less on marketing overall, but invest more in online because of its accountability. Digital agencies already have the capabilities to evaluate effectiveness, which puts them in a secure position and is one of the biggest reasons why an economic downturn is likely to favor pure-play digital agencies over traditional agencies.
Digital agencies are taking on more people with insight, data analysis and one-to-one skills, thereby increasing their ROI capabilities. A shift in spend away from other media also means that digital agencies can benefit from organic growth. A traditional marketing services agency has its ad business alongside digital, media buying, sales promotion, experiential and so on. If clients switch their spend from traditional advertising to digital within this set up, they are effectively stealing budget from the advertising team that is part of the same company.
Pure-play digital agencies have traditionally had to fight for work, which will equip them well for competing in a downturn. Specialist agencies will find themselves working harder and smarter, but probably not less. Digital agencies’ in-house production capabilities, which allow their solutions to involve engineers, creatives and strategists all working together, means clients receive a more integrated digital experience.
Digital agencies have the advantage of a more specialist team that might encompass digital planners, viral specialists, technical architects, and digital architects with highly specific skills that do not exist in traditional ad agencies. Due to this wealth of digital-specific expertise, this year has brought increased recognition among brands that they are better off talking to a digital agency about digital work.
Before, clients would just ask their agency to handle online advertising, and brief separate agencies for search, analytics, online planning and buying. Now they can get all that from one good digital agency.
Nonetheless, traditional agencies are providing sturdy competition. Traditional agencies that have made digital intrinsic to their culture will have the edge in the long term. This is because of the breadth and depth of their experience and capability, which remains embedded in their DNA.
All agencies in about 10 years time will effortlessly and fluently use digital within their creative and strategic thinking. Right now, we have a mixed bag. Specialist agencies are great for execution, but traditional above and below the line agencies are stronger at strategy, insight, planning and conceptual creative.
Many agencies have noted a rise in clients requesting campaigns using social media to engage consumers, but as social networking has come of age and the flurry of excitement has died down, brands are realising that they need to think carefully about their activity and question whether the platform is right for them. Mobile phones are another medium likely to become more important to marketers seeking to expand their digital presence, and this market has been fuelled by the 3G Apple iPhone and 3G handsets from other manufacturers.
As ads become locally targeted, games can feature real-time promotions, which gamers love because it makes their play feel more real.
The growth of online spend is slowing from the 40%-60% of recent years to about 20% a year. The reason for this is that, having boosted their online spend allocation from 5%-6% of their budget to 10%-15%, it is unlikely that big brands will increase this share significantly. Those agencies that have concentrated on top-line growth, but not profit, will therefore find themselves in testing circumstances. One option to help bolster revenues, already being exploited by agencies including Coast Digital, i-level and Web Liquid, is to offer consultancy services.
While digital remains an innovative sector, against the gloomy backdrop of an economic downturn, agencies will need to work harder to prove their value and create top-notch, joined-up activity, rooted in outstanding ideas.
Those companies that can fuse measurement and creativity with digital strategy will have an extremely powerful, offering, which will go a long way toward propelling them through financially testing times.