Death of the Agency? Not So Fast …

The last season of “Mad Men” is approaching, but let’s not be so fast to bury the ad agency with it. Media outlets are reading trends and are raising questions. The Economist has a special report on digital disruption in the advertising supply chain, and is quite taken by how “Big Digital’s”

The last season of “Mad Men” is approaching, but let’s not be so fast to bury the ad agency with it.

Media outlets are reading trends and are raising questions.

The Economist has a special report on digital disruption in the advertising supply chain, and is quite taken by how “Big Digital’s” profit margins and programmatic media buying have come to dominate advertising and audience selection. In one article, “Leaner and Meaner,” they’re saying:

The ad-tech firms are gleefully forecasting the imminent demise of Madison Avenue’s middlemen, but they may be wrong, for two reasons. First, ad tech has introduced so much complexity into the business that clients may want to hold on to agencies for advice, and agencies’ creative services are likely to remain in demand when brands are having to churn out so many different pieces of content.

Second, the prediction that technology companies like Google will start to compete head-on with the agencies is likely to prove wrong. To provide full client services they would need to hire thousands of new employees, for limited gains. Google’s margins this year are expected to be around 50%, whereas WPP’s are forecast at just 17%-and that is for the largest and one of the most successful advertising agencies. Perversely, the agencies’ mediocre returns may protect them from being wiped out by nimbler competitors. Their tents in Cannes may no longer have the best views, but the admen will still be there.

Mobile Marketing Watch had its own agency pity-party headline last week, “Are Yesterday’s Advertising Agencies Finally Dying?” reporting on a UK opinion piece:

As the challenges marketers face increase, the solutions from agencies shrink. It’s time for them to step up.

That’s the opinion of Tom Goodwin, founder and CEO of the Tomorrow Group, in a recent post at The Guardian.

“There is a curious tension in the current agency landscape—a vast mismatch between what clients’ needs are and what agencies are working on, and this gap seems to be widening,” Goodwin explains.

True, Goodwin admits, the Internet has been both a blessing (new opportunities) and a curse (change is always hard).

“The internet has been a mixed blessing, a volatile combination of incredible, new possibilities, rampant change and some of the most destructive forces the marketplace has ever seen,” Goodwin contends. “On a communications level, we have a plethora of new media channels, memes circling the world in seconds, the app of the moment bursting onto the scene, and trends like content marketing, native advertising and influencer marketing to navigate and leverage. The options seem more bewildering than ever and more abruptly changing, all in a context where attention is moving onto platforms which become even harder to connect with people.”

What’s to be done? Goodwin believes agencies need to up their games.

What does raising their game look like? Yes multiple screens and a crush of data are inflicting huge demands for content—some of it targeted to a few eyeballs. The scramble for creative, analytics and insight talent must be accomplished as agencies seek to keep their historic role as strategic counsel, with built-in expertise to deliver that counsel all under the same shingle.

That won’t be easy—The Economist says advertising is not the first choice for math students, for one—but skills matching must be a priority of agencies, because brands need guidance through the technology maze, and they need break-through content that engages wherever the consumer may be—something ad tech cannot or will not generate on its own.

By the way, Big Digital has its own death predictors, too.

Are DMA Conference Exhibitors Reinventing, Too?

From 1987 to 2008, I had attended every DMA conference, always enjoying the experience of reconnecting with long-time associates, hearing presentations to continually learn, and meeting with vendors who might be good resources for clients. Last week I found myself looking at the conference through a different lens as I walked the exhibit hall to learn from the exhibitors.

It had been five years since I last attended a DMA annual conference. I decided to return last week. If there were a score card of how direct marketing service providers are reinventing what they sell to end-user companies, one measure of that could be taken from the exhibit hall.

From 1987 to 2008, I had attended every DMA conference, always enjoying the experience of reconnecting with long-time associates, hearing presentations to continually learn, and meeting with vendors who might be good resources for clients.

Last week I found myself looking at the conference through a different lens as I walked the exhibit hall to learn from the exhibitors.

The first thing that astounded me was the shrinkage of the exhibit hall. The program listed 241 exhibitors. While I don’t have access to the number of exhibitors from, say, a decade ago, it feels like it was about one-third the size that it used to be.

The second thing that struck me was the type of exhibitors who were there. I’d generally divide into one of three camps:

  1. Traditional direct marketing vendors, mostly supporting direct mail. The convention program listed 112 exhibitors self-identified as in the Direct Mail and Print Services category. Add in some of the dozens of firms supporting Data Management (who weren’t already listed under Direct Mail and Print Services) and easily over half—perhaps two-thirds—of the exhibitors supported traditional direct mail marketing channels.
  2. Technology companies offering online services to direct marketers accounted for a significant representation as well. An exact count is difficult to infer because of vendors listing themselves under multiple categories including Affiliate Marketing, Content, E-commerce, Mobile, Online Advertising, Real-Time Automated Technologies, Search and Social, but the representation was strong. These are firms that, in my opinion, generally did a poor job of communicating how they support direct marketers. As I spoke to several of them, they glowed over their technology but didn’t connect their technology to how it would generate response. It feels like they want to attract business from direct marketers, but they don’t speak our language. Many technology companies seem to be in love with their buzz words on their booths, but failed to give the passer-by any clue of what their technology would do for me to build sales. At the expansive exhibit of one of the most recognized software companies in America, I quickly spotted three typographical errors on their big screens. Their exhibit booth staff was also the least friendly and willing to explain what they offer direct marketers.
  3. Vendors that effectively blended offline and online. Only a few exhibitors, it seemed, truly attempted to be a one-stop shop where offline could be linked with online media. Those exhibitors were the ones doing business at the conference. They were the ones who were the most positive about returning next year. In one case, a long-time DMA conference exhibitor who has reinvented his service offerings, said last week’s conference was the best ever for them. This traditional direct mail services provider had teamed up with a technology firm so their booth felt like two spaces, but they seamlessly referred clients to each other. More importantly, they linked online technology with the ability to use direct mail for specialized messaging.

It appears there is work to be done by many vendors to update their services to keep up with what direct marketers must do to survive. And technology companies have a lot of work to do to understand the nuances of direct marketing. For vendors who want to grow and prosper in this field, if they haven’t already, they need to reinvent just like the direct marketing customers who they want to serve.

Melissa Campanelli’s The View From Here: What the IBM/Coremetrics Deal Means for Marketers

Arguably the biggest news of the week in the online marketing world was the announcement that IBM, the granddaddy of technology companies, will acquire Coremetrics, a leader in web analytics software.

Arguably the biggest news of the week in the online marketing world was the announcement that IBM, the granddaddy of technology companies, will acquire Coremetrics, a leader in web analytics software.

The acquisition will enable Big Blue to help its customers gain intelligence into social networks and online media sources through a cloud-based delivery model. Then, they can incorporate this insight into their processes to create smarter, more effective marketing campaigns.

“With this acquisition, we are extending our capabilities to give clients greater insight about customer behavior and sentiment about products and services, and give true foresight into their future buying patterns,” said Craig Hayman, general manager, IBM WebSphere, in a press release.

This isn’t the first time a large technology company catering to enterprises has purchsed a web analytic company in an effort to expand their online marketing offerings. A few years ago, Google bought Urchin, for example. And last year Adobe bought Omniture.

But what does this all mean for marketers? For one, it validates the growing importance of digital channels and online marketing.

“Less than a year after the acquisition of Omniture by Adobe, IBM’s announcement today represents overwhelming testimony to the value of online marketing technology as a core piece of an enterprise strategy,” said Alex Yoder, CEO of Webtrends, a Coremtrics competitor. “In today’s world, the growing importance of data-driven decision making is not a luxury, but a minimum requirement to competing in today’s markets. Businesses, governments and nonprofits all realize that facts and insight let them point their innovation and resources in the proper direction.”

While Yoder went on to say that Webtrends leads the market in open standards and detailed customer information — and that his company has seen a 51 percent increase in new business bookings year over year — he added that it will be interesting to see how the acquisition “ultimately impacts enterprises looking to understand data across the multiple digital channels that comprise today’s marketing landscape.”

Responsys, a partner of Coremetrics, said in a prepared statement that the web analytics firm has taken an innovative approach to managing and leveraging the vast amounts of online customer data that today’s companies generate, and that “IBM, as the largest business technology company in the world, is sending a strong message that these capabilities must be considered part of the core ‘stack’ required to be successful in an increasingly digital world.”

Responsys went on to say that this acquisition is “raising the bar” for the industry by helping make advanced online data and marketing solutions a central and established aspect of running a business.

What do you think about the acquisition? Let me know by posting a comment below.