AdWorld Features

Dinosaurs or Digital Darwins?

While smaller specialist digital agencies have paved the digital path over the past few years, is it a matter of time before the bigger agencies start to take hold of a sector they feel is rightly theirs? Not on your nelly, says Ciaran O'Reilly.

Anthropologists have speculated about the fate of Neanderthal Man for decades. Did they inter-breed with modern humans, or were they possibly hunted to extinction by humans? The recent discovery that no mitochondrial DNA sequences from Neanderthals have been encountered in modern humans makes it less likely that there was some genetic interchange with Neanderthals. Furthermore, modern humans had weapons that could be thrown and Neanderthals didn't. It seems that rather than a slow and continuous evolution from Neanderthal origins, humans were simply a different species that adapted better to their environment and killed off their weaker foe.

Is the same fate about to befall the classic creative ad agency?

We really believe we are on the verge of a new era in marketing and we don't believe the traditional creative ad agencies of today will come out of it in anything like the position of power they have enjoyed since the emergence of branding in the 1950's.

The modern consumer has actively begun to ignore advertising as we have known it, media is in a state of flux and technology is driving the rate of change and ways that brands interact with consumers. Ad agencies are struggling badly with digital and are simply not equipped to meet the future demands as a result. By the time they catch up, it is very likely they will be facing a new status quo with spend on digital outpacing all other forms of advertising.

A new type of agency concept will emerge with digital in its DNA. So will the big ad agencies of today win out? None of the evidence points to this being the likely scenario.

We don't see that new breed of agency as being an evolved version of the existing ad agency model for a few of reasons:

Current Cost structure

Ad agencies have been paying inflated salaries for over a decade, to the extent that they are bloated with overhead and a cost structure that will be difficult to change. They need to keep clients in a system where they develop new, high end campaigns every 2 years at a minimum to cover this cost, with ongoing retained fees in the interim. Therefore, when pricing time out to clients it is at vastly inflated cost higher cost than a digital agency would charge. This militates against an industry that now demands less budget going on big one off ideas but numerous reactive and continuously changing real-time solutions.

Current Creative Skill Set

Right across the board, the skill set in ad agencies is too limited. Let's take the example of an art director. In an ad agency, Art Directors spend much of their time on concept development, a small number are half decent at print artwork, but in the main, their production skills are low. This results in a ‘doubling up' of creative time as they brief these third parties and sit in production suites watching them do the production. Digital requires creative staff to be multi-disciplined - part concept, part flash animator & coder, with real skills in video production, post production, photography, web design and development. This results in cheaper, faster solutions for clients.

Production capability

Once a campaign idea is sold to a client and because Ad agencies have little or no production capabilities, virtually all of the production is handed to 3^rd party companies. Much of clients marketing budget is sucked up in the growing chain of suppliers. Digital agencies on the other hand are set up so that about 90% of their output is created in-house. This militates against the entire structure of a traditional ad agency. It also means production happens at a fraction of the time ad agencies require.

Technological understanding

Perhaps the most fundamental Achilles heel for traditional ad agencies. Digital agencies put technologists right at the start of the idea generation process. This is fundamentally different to ad agencies who at best see technology as something someone does at the end of the production process and who likely dismiss ‘techies' as geeks who have no place in the creative process. The reality is that technology can deliver creative advantage in the digital world. As Tom Bedecarré, chief executive of AKQA so eloquently put it "Software engineers are the new rock stars of marketing".

That is not to say that digital agencies don't have weaknesses too - strategic planning, stronger concept based creative staff and client relationship skills often being the most quoted. We believe that as digital agencies match traditional agencies in these areas, it is more than likely that the agency of the future will come from a digital background. And, it is already happening in the UK and USA.

For so long, the traditional creative agency's ‘Cloak of Invincibility' was ownership of consumer insight, this is no longer the case. There is now clear evidence that the current branding ad agency model is outdated and what is more, the clients are beginning to notice. In a presentation to ad agencies at this year's Cannes Advertising Festival, Mary Beth West, chief marketing officer, Kraft Foods declared "In the old world, agencies were way out in front of clients, Now . . . clients are ahead of the agencies - and the consumer is ahead of all of us."

What is likely is that the agency of the future will lock technology and consumer insight in a warm embrace and have significant production capabilities - far beyond anything traditional agencies currently provide. While digital at heart, it will be able to seamlessly manage all other forms of advertising. What we don't know yet is how many of the current top 20 ad agencies will survive in this radically changing environment.

Ciaran O'Reilly is Managing Director & Head of Consumer Planning at Refresh, a digitally led advertising agency.