When it comes to interactive marketing, clients are evenly split between using a single shop or multiple agencies to handle their accounts, according to a recent survey by Jupiter Media Metrix Inc.
The report, titled "The Essential Agency," examines the optimal structure of an ad agency to serve the interactive needs of marketing clients. The study tracks the evolution of interactive services offered by both traditional and specialized agencies and recommends strategies based on responses from 45 leading marketing executives.
The survey found that 43% of clients prefer to use multiple agencies to handle their interactive needs, and 43% prefer to use a single agency.
In addition, the responding marketers are ambivalent about their long-term relationships with their ad agencies. Just 34% of the marketing executives said they were optimistic their agency relationship would improve as their agency improves its services. Twenty-one percent said they were unsure how their relationship would evolve; 27% said they want to bring their agency services in-house; 18% said their agency relationship was transient.
One of the results of this ambiguity, Jupiter said, is more reliance on short-term, project-based compensation rather than long-term, retainer-based compensation.
The survey found that 37% of clients compensate their agencies on a per-project basis, while only 23% pay a retainer fee. Fourteen percent use a hybrid project/retainer compensation system, while the rest are split between straight performance, percentage of media billings or some other method.
"The economy is the No. 1 factor [affecting compensation]," said Marissa Gluck, senior analyst at Jupiter and lead author of the report, which was released last month. "A lot of advertisers are uncertain about interactive marketing and their budgets over the next 12 months. It makes sense for them to engage in more short-term relationships."
Models for success
When it comes to offering the optimal mix of interactive service, Gluck said there is no one model. However, the report highlights two examples of agencies that are successful in their niches—R/GA and Ogilvy Interactive.
Jupiter points to R/GA, New York, as an example of an agency in the boutique niche that has succeeded by specializing in interactive creative work. R/GA was founded as a design and production company for film and television in 1977 and is now part of Interpublic Group of Cos. Inc.
"They never fell victim to what happened to other agencies in terms of spreading themselves too thin," said Gluck, pointing to the glut of interactive agencies and traditional agencies that appeared in the late 1990s and offered everything from brand strategy to e-commerce.
Bob Greenberg, founder, chairman and chief creative officer of R/GA, said his agency began specializing in interactive creative in 1995, when it was sold to True North Communications, part of IPG.
At a time when other interactive agencies were starting up, offering a range of services, "I could see where the model of interactive agencies was getting complicated and unfocused," Greenberg said. "I designed R/GA as a midsize agency. We wanted to be big enough to do large, global projects but small enough to be creatively driven."
On the traditional agency side, Jupiter points to Ogilvy Interactive, New York, the online subsidiary of Ogilvy & Mather, as a successful interactive agency with parent agency commitment to the medium, allowing it to build a profitable business.
"Both [agencies] learned how to turn a profit on what’s been seen as an inefficient medium," Gluck said.