New technology and the new economy are creating turmoil in advertising, challenging ad agencies to rethink the way they do business. Some industry observers predict agencies will disappear. Others say the new economy and technology will provide greater opportunities for agencies to grow and prosper.
In April 2008, Stefan Poaster wrote that its time "to officially bury the term ‘ad agency’ in favor of advertising "networks," which he identified as "a conglomeration of marketing services companies."´ Poaster, the chairman of Euro RSCG Chicago, said half of his own network "doesn’t even make, buy or sell anything like ads." To illustrate, he said one of them creates and sells lists.
Gavin Heaton, the noted Australian ad blogger, was more pessimistic. He wrote: "The art of advertising is dying in our hands, and along with it, the business models around which agencies have flourished."
Agencies Must Compete with Media
One real challenge that agencies face is competition from media. Jack Neff reported in AdAge in November 2008 that Proctor & Gamble, Johnson & Johnson, Kimberly-Clark Corp., Clorox Co., Hewlett-Packard and Verizon have called upon media to serve as "co-creators of programs" to reach consumers. "They sometimes bypass their usual media and creative agencies in the process."
Becky Saeger, chief marketing officer for Charles Schwab added that "if I were an agency, I would be really worried about being disintermediated," a financial industry term meaning eliminate the middle man. More worrisome, Saeger said: "More and more, agencies are almost in the way sometimes."
Earlier in 2008, Brian Reich, of Echo Ditto in Washington, D.C., argued in an AdAge video that "marketers as well as consumers would be better served if TV networks took over the full functions of advertising agencies."
Gary Elliot, vice president for corporate marketing at Hewlett-Packard said in 2008 that HP wants to work directly with some media companies "because they have relationships with customers and can build that quickly and immediately and give us feedback."
Despite all that, Neff said "there doesn't seem to be any real danger, at least at P&G, that media companies will supplant ad agencies." It’s more likely media companies will handle agency functions on occasion, he said.
Advertising vs. Public Relations
In the new economy and culture spawned by the 21st Century recession, public relations presents a serious challenge to ad agencies without strong PR departments. The rise of cauism, social media, digital media and authentic marketing have given PR new value. In her examination of new social trends, Sheryl Swanson of toniq.com said cause marketing "will move from niche status to a more central place in brand communications," replacing consumerism.
Strategic Partners With Advertisers
Companies must open "a sincere dialogue with customers, inviting them into the innovation process and treating them as meaningful contributors," Swanson wrote. That means more PR. Observers say that to survive, agencies must serve as "strategic partners" in helping advertisers to promote that dialogue.
Agencies in the future must "provide high-level strategic guidance that clients need in a media-chaotic environment," said Sean Carton of ClickZ.com, a digital marketing website. Agencies "will expand or contract as needed" and "will explore radical solutions such as crowdsourcing to get work done for less money," he said."
In January 2008, David Kershaw wrote in Creative Choices, a British website, that it was premature to announce the death of ad agencies. He said the growing complexity of the new media will increase the need for agencies that can handle the media planning, buying and creative challenges of the future.
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