As online marketing grows in budget size and business importance, interactive agency reviews are growing beyond in-house searches and word-of-mouth recommendations. Traditional consultants are seeing a burgeoning business in handling searches for marketers' interactive needs.
Boston Consulting Group, for example, is said to be handling an estimated $30 million interactive agency review for an unnamed electronic-commerce client.
MOVING INTO INTERACTIVE
Select Resources International, West Hollywood, Calif., one of the nation's powerhouse agency consultancies, also is making its move into the interactive arena.
"Very few marketers coming to us do not have needs in this area," said Mike Agate, president of Select Resources. Of one-to-one relationships with consumers, which include interactive, direct marketing and e-commerce, "everybody's got to have it," said Mr. Agate, who spent three months surveying interactive agency capabilities nationwide.
At the same time, he noted, some of the nation's leading creative shops do not handle interactive assignments.
Fees for interactive projects also have jumped into the range of $500,000 to $5 million, Mr. Agate said, putting them on a level playing field with traditional media billings of major accounts of as much as $30 million.
A REVIEW OF 40 SHOPS
Mr. Agate's company, which conducts as many as 30 traditional ad agency reviews annually for marketers with accounts up to $60 million, recently has conducted two searches for interactive agencies. After visiting about 40 interactive shops nationwide, Select conducted a search for Hewlett-Packard Co.'s Hardcopy Products Groups, a $2 million account that Strategic Interactive Group, Boston, won (AA, July 27), and one for The Gap, which is expected to be completed this month.
Analysts said while interactive work for consultants has just started, a strong business will develop, especially for experienced consultants.
"As the interactive strategy becomes more core to businesses, then when you're spending that much money and it's a high-profile account, you want to go with someone who at least has a track record of conducting agency reviews," said Drew Ianni, analyst with Jupiter Communications. Mr. Ianni, who worked for CKS Group before going to Jupiter, said he considered starting his own consultancy
to guide marketers through the interactive agency selection process.
Paul Sonderegger, analyst with Forrester Research, said although there may be consultants with traditional agency review experience, he hasn't seen any that have the specific skills to evaluate interactive agencies.
"No one knows what these Internet architects or agencies are supposed to do, and sometimes the agencies themselves don't know. These [interactive] agencies are run by excellent entrepreneurs and technologists, but they have no, or little, traditional media experience," Mr. Sonderegger said. "I'd call it a ground-floor opportunity [to handle interactive agency reviews], which will grow into something very significant within the next 18 months or so."
ONLY BIG AGENCIES INVITED
So far only the biggest agencies have been able to participate in consultant-handled searches since most consultants charge agencies to have their services listed.
"We are a small agency and don't necessarily have a few thousand dollars to hand out to be involved in more pitches," said Will Ackerlof, director of advertising for interActive Agency, Los Angeles, who worked with Select Resources when he was an account exec at traditional agency Kalis & Savage.
"There are a lot of agencies like us with less than $1 million [annually] in media buying [billings]," Mr. Ackerlof added.
"The only question is, do [search consultants] have a big enough database of online advertising agencies and have they developed a separate price structure for interactive agencies, which are often less funded than traditional agencies?"
WEB SHOPS EXEMPT FROM FEES
Select Resources, which Mr. Agate said plans to build a separate library of interactive resources and "utilize the same disciplines and procedures" as traditional searches, has not asked interactive agencies to pay a fee to be included in its list. Traditional agencies pay annual fees of $3,500 to $5,000 to be on a consultant's list, he said.
Jane Bedford, president of Bedford Group, Atlanta, said while her consultancy has not done interactive agency-only searches, she sees the need growing.
INTERACTIVE NEEDS GROWING
"I think that as part of a general-market agency search, if you don't look at the interactive needs of the client as part of that, you're really failing the client," Ms. Bedford said. "What's happening now is interactive is becoming part of the whole mass media search. You look at specialty agencies, but you also look at the interactive competencies within traditional agencies."
Other consultants are taking a talent agency approach to reviews.
Two veterans of Red Sky Interactive founded Digital Talent Agency, a 16-month-old company with offices in San Francisco and New York. Paul D. Smith is partner-CEO and Steve Kirsh is partner-director of sales and marketing.
"Interactive agencies were selected by word-of-mouth," said Mr. Smith, who said that budgets tended to be small and programs were viewed as experimental.
Now interactive advertising and marketing are playing a major role in the branding mix, Mr. Smith said.
OPEN TO THE IDEA
Interactive agencies, while not yet dealing with many consultants for agency reviews, seem open to the idea.
Eric Heneghan, CEO of Giant Step, Chicago, said his agency has had quite a bit of experience with consultants on interactive pitches recently.
"I certainly welcome it, because one of the frustrations we used to have was. . . there was not a great criteria or even a methodology for determining who was doing good work--very little of it was even being judged on the work," Mr. Heneghan said.
"I've seen people hire agencies because of scale or proximity and not even looking into what that company does," he said.
GOOD AND BAD
However, Mr. Heneghan cautioned that while good consultants are helpful, bad ones are detrimental.
Agreeing was Peter Drakoulias, who is partner-director of business development for Deutsch and its interactive unit, iDeutsch.
"Just like on traditional reviews, there are good consultants and bad consultants, Mr. Drakoulias said.
"The good ones bring value and the bad ones don't."
Contributing: Kate Maddox
Copyright September 1998, Crain Communications Inc.