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What does the future hold for specialist digital agencies?

Author's avatar By Mike Berry 23 Feb, 2012
Essential Essential topic

 Two apparently contradictory reports on UK digital ad spend

Two stories in the marketing press caught my eye recently because they appeared to contradict each other and each is from an impeccable source.

One set of figures comes from the Institute of Practitioners in Advertising (IPA) and the other from the Advertising Agency Register (AAR).

The IPA story states UK digital ad spend is still increasing and senior marketers expect this trend to continue.

Indeed, according to the respected IPA Bellwether report, online display spend forecasts were revised up 13.4% and paid search budgets revised up 14.9% during the last quarter of 2011. And this despite the fact that marketing chiefs are, overall, more pessimistic about the year ahead than they have been in nearly three years.

The second piece of news appears to contradict this picture.

According to the latest AAR research, the number of UK agency new business pitches declined 13% year on year in 2011. More specifically, there were 44% fewer digital pitches.

On the face of it, the decline in new business pitches reported by the AAR is surprising.

Why digital marketing growth isn't always good news for digital specialists

Doesn't the fact that all elements of digital marketing are growing suggest more new projects are being signed off?

Wouldn’t you expect Marketing Directors and CMOs to be looking around for new expert digital agencies to whom they can entrust these important new pieces of business?

Digital marketing growth should be great news for digital creative and media agencies, one would imagine. But, the more I thought about this apparent contradiction, the more the truth dawned on me.

What I believe is happening is more and more ‘Big Brand’ digital assignments (which, of course, have the biggest budgets) are being awarded without a pitch.

These lucrative projects are often going to creative 'ad' agencies, like AMV BBDO, Ogilvy, M&C Saatchi, RKCR/Y&R, or media agencies, such as ZenithOptimedia, Starcom MediaVest, Carat, OMD etc.

Ad and media agencies are increasingly capable of delivering digital work that is naturally integrated with offline; even when digital work is briefed as a ‘stand-alone’ piece of online activity.

Interesting times ahead

Wow: many of us digital specialists have been predicting this. However, I for one hadn’t expected it to happen quite so quickly. So, digital marketing continues to grow but not, apparently, to the benefit of digital agencies

This phenomenon may be of concern to the likes of AKQA, Sapient Nitro, LBi, etc.

Indeed, is there a future for the specialist digital agency or is it now time for them  to either expand into offline or sell out to an ad or media agency? As they say, timing is everything in these matters (just ask Mark Zuckerberg of Facebook).

I would be prepared to bet some specialist digital shops are even now meeting discreetly with M&A consultants for a little chat about their options which, for the most capable and successful, could look very attractive indeed…

"So what does all this mean for smaller brands and SMEs without megabucks to spend?  And what about B2Bs?"  I hear many of you asking......

Smaller brands and SMEs are ahead of the trend

Integration and media neutrality have been a given for smaller agencies and clients with limited budgets for some time now.

When it works well, media neutral planning leads to creative ideas being implemented cross-platform, managed by integrated project managers.

Regardless of the number of zeros on the budget figure, ‘digital’ has grown up and is being increasingly absorbed into the communications mix.

This is evident both in marketing departments and agency-side. That said, there are still significant gaps.

Ad agencies still regularly ask digital agencies 'to build something for one of our clients'. So, it’s not surprising all the digital trainers and consultants I know are very busy right now!

Author's avatar

By Mike Berry

Mike Berry is a UK-based Digital Marketing Blogger, Trainer and Consultant. You can follow Mike on Twitter or connect via LinkedIn. Mike is Course Tutor on the IDM (Institute of Direct and Digital Marketing) Diploma in Digital Marketing and the IDM's Complete Digital Marketing 3-day professional course; author of ‘The New Integrated Direct Marketing’, (Gower) and a Partner at Aprais, a global agency/client relationship management consultancy. View Mike's company blog at http://mikeberryassociates.com.

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