Ad Agencies Follow the Money for Faster Growth

July 24, 2009

 

Follow the money

 

While we all know that 2009 has turned out to be a dismal year for everyone (advertising spending down 12.1% from 2008), there is some light at the end of the tunnel. On July 8, 2009 Forrester published their latest “US Interactive Advertising Forecast” on their company blog. It contains some great information to help ad agencies plan their future strategies and resource needs.

As expected, internet advertising (wired and mobile) is projected by PriceWaterhouseCoopers (PWC) to grow the most with an estimated CAGR of 7.7% over the next 4 years. Growing from 12% of US advertising spending in 2009 to an amazing 21% by the year 2014. However, internet advertising is a large category with many sub-categories, so let’s now take a deeper look at exactly where the money is being spent.

Take a look at the Forrester Research “US Interactive Advertising Forecast” published July 8, 2009:

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  • Search marketing (SEO/M) currently accounts for over 50% of all interactive dollars spent. According to the forecast, it will remain the largest channel through 2014 growing at an impressive 15% CAGR.
  • Social media is expected to be one of the fastest growth areas in the category. Coming off a fairly small base in 2009, Forrester expects it to grow by 35% CAGR over the next 5 years. Currently accounting for less than 3% of total category spend, it will double to 5.8% by 2014.
  • Mobile marketing is another fast growth category. Forrester expects mobile advertising to grow at 27% CAGR over the next 5 years.
  • While E-mail Marketing is expected to grow at about 9% CAGR by 2014, it’s expected to have dropped over a full percentage point from 4.9% of the total current interactive category spend to 3.8%.
  • Online Display advertising remains a big player. Holding its position at just over 30% of all interactive spend it is predicted to grow at about 9% CAGR. Although the actual costs may well continue to fall. Recently Google announced that it’s average cost per click had decreased 13% during the first six months of the year.

So, what does all this mean to ad agency leadership? I believe it provides a great roadmap to help you plan where to look for growth, and what resources will be required to support your initiatives.

Clearly interactive remains a growth opportunity as we see dollars shifting away from traditional media and into the interactive category. Within the category, social media and mobile marketing are the growth leaders. Agencies who are early adopters and are able to help clients successfully navigate this space out will win big. However don’t forget display and e-mail. They continue to account for large amounts of money and are ripe for innovative approaches and integrated efforts.

 

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Building New Ad Agency Capabilities Quickly and Inexpensively

July 22, 2009

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Are you looking to add new capabilities to your agency roster? Are you are finding that it is proving to be too costly to build or buy a separate dedicated group with a specific new capability? The answer to your problem may well be a…Virtual Special Team (VST)!

The groups of eclectic individuals, who make up an agency team, normally possess a broad and diverse set of individual skills and experiences. Quite often when they are hired, it is for a particular skill or for a particular client position.  For example an outstanding client service director who has years of experience in the wireless category, may be hired to work on financial client primarily because of their client service skills. In this case, certainly not because of their wireless category experience.

This can result in an agency actually having significant experience in a certain category/segment when you consider the combined capability of all the staff. The reality however, is that it is currently dissipated across the agency and all the other client accounts. This is where the VST approach can be very useful.

The fundamental structure of a Virtual Special Team is as follows:

  • A group of individuals who have a common set of expertise. Whether by category, target segment, or channel/technology etc.
  • One or maximum two individuals within the agency with leadership responsibility for the VST.
  •  The agency leverages both current client experience/work in the category, as well as the past experience of the special team members. The focus is on the collective brains trust that exists by bringing together this group.
  • The team members continue in their current roles, and come together as needed when the VST is assembled. Current client responsibilities of VST members are temporarily shared or supported by freelance help.
  • The team is supported by specific PR, speaking engagements, whitepapers, capabilities materials, micro site within agency website etc.

An excellent example of this approach made its appearance a few years ago. Leo Burnett launched a VST called “KidLeo”. (I think I have the spelling right). According to reports from both inside and outside the company, this approach turned out to be very successful.

Whether its retail marketing, automotive, marketing to over 50’s, or marketing to women, you can often launch your agency capability and get some traction for a very small investment. Think about the possibility of using a Virtual Special Teams approach.

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Mobile Media, Can Advertising Agencies Keep Up?

July 1, 2009

mobilemarketingpanelAs technology continues to push media and communication boundaries, do advertising agencies have even a chance of keeping up? With the recent exponential growth in Mobile Media, will agencies be able to get ahead of it or will it roll over them?

The last six to eight years have been characterized by traditional agencies and agency groups rushing to acquire or build digital, direct marketing and database/analytics capabilities. Having done so, they immediately tout the fact that they are a fully integrated agency.  “A one stop shop with the ability to deliver campaigns that run across the full media spectrum.” “Really, the full media spectrum?” How many agencies can really claim be competent across the “full media spectrum”?

Let’s take a look at mobile media for example. The Washington Post reported today that YouTube has seen a 1700% increase in video uploads from mobile devices. 400% of the increase occurred in the six days following the recent release of the new Apple 3G iPhone. They also predict that video sharing via a mobile device will continue to skyrocket over the next few months.

While some may say that this will just increase the amount of silly user-generated content, it could alternatively very well spur the “iReporter” movement, as consumers upload video taken at the scene of a newsworthy event. Can you just imagine the applications from an advertising and brand/product promotion perspective? The ability to document and share brand experiences in real time, be they positive or negative? Or enhanced consumer brand involvement and shared experiences? The possibilities are mind boggling.

The question this raises is how can clients expect their agencies to successfully integrate innovative mobile marketing technologies and ideas into their work, if the agency teams working on the assignments very often do not have a true understanding of the media and what is and is not possible? This may well end up being another case of the client taking the leadership role and finding their own solutions outside of the agency relationship.

 

The bottom line is that most agencies currently have little to no true mobile marketing expertise! The bulk of the current know how rests with a few specialist agencies and wireless vendors. In my opinion, Mobile Marketing is going to continue to grow in importance and scale in the foreseeable future, and the agency world either needs to embrace it and get ahead of it, or have it roll right over them.

So, what can an agency do to avoid being left behind?

  • You start by doing something as simple as engaging various experts in the field to help your client and creative teams understand what it available and how to leverage it.
  • The next step might be to set up a formal strategic alliance with a partner who’s competent in the space and include them in agency ideation sessions.
  • Another alternative is to hire an expert who can work within the agency to evangelize the media and help identify some key client opportunities.

Whatever you do, I suggest that you at least avoid doing nothing. Mobile marketing not going away and ignorance is not bliss. Now is the ideal opportunity to strategically add this capability to your agency repertoire.

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