A SORRY TALE: WHY AD SHOPS PLAY CATCH-UP IN NEW MEDIA

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The fact that traditional advertising agencies are only now marshaling a response to the interactive challenge is a truly pathetic commentary on the state of the agency business today.

These agencies are watching new-media specialists grow fat on budgets they feel should be pouring down their own throats, as we reporterd last week. They have no one to blame but themselves.

As far back as 1993, when Advertising Age made the commitment to publish a weekly section on interactive marketing, it was clear emerging media technologies were transforming marketing communications. The common thread running through all new media even then -- whether two-way TV or online services -- was that they put the consumer in control of the flow of information, turning the traditional advertising model, which "pushes" messages at consumers, on its head.

Full-service ad agencies, with their deep pockets, understanding of consumer behavior, entrenched client relationships and decades of marketing experience, were in a prime position to exploit the new technologies. Those new-media shops that existed in the early '90s (Modem Media, CKS, Redgate) had plenty of technical know-how but zero marketing expertise.

The new-media shops moved eagerly along the marketing learning curve, but the goliaths simply snored. Some had valid business reasons for not investing aggressively; the economics in those days didn't make much sense. Others were unable to separate the hype (and there was a lot of it) from reality, and feared that, when the smoke cleared, there would be no there there. Big agencies also failed to realize that the technology -- which they didn't understand -- was not as important as what it enabled them to accomplish.

But the real reason many big agencies didn't adopt an early leadership role is simpler and sillier: They didn't get it. CEOs scoffed, media buyers kept their eyes firmly glued to the TV set and creatives didn't even bother to stifle their yawns. Every new-media salesman can tell stories about walking into the offices of so-called new-media executives at agencies who didn't even have computers on their desks.

After all, mainstream marketers weren't yet clamoring very loudly for interactive expertise, and they certainly weren't putting up significant amounts of money. When that time came -- if it came -- agencies reasoned they would have plenty of time to learn new skills or acquire the necessary capabilities.

They were wrong. In the Information Age, change comes at cable-modem speed. The new-media specialists had been expanding their skill base all along, and suddenly loomed as the ruling giants of Internet advertising, this year a $2 billion business.

Even today, many agencies sadly don't get it. They blather incessantly about the need to provide clients with integrated marketing solutions, yet continue to treat new media as a sideshow. As a new report card issued by Forrester Research reveals, few major agencies have successfully integrated their new-media operations and some have simply handed off the business to holding company siblings.

Yet big-agency CEOs remain confident their shops' brand-building skills will still win the day. They're probably wrong again. New-media agencies are attracting top talent and blue-chip clients. They've married marketing savvy to their technical abilities and represent formidable foes at a time when new media is beginning to be integrated into the overall advertising mix. The true danger may still not be apparent to the big guys, but it will be soon enough.

"If you believe digital media will eventually merge with analog media," one veteran observer of the agency world told me last week, "the question becomes who will be the dominant agencies not two years from now but 10 years from now. I don't think that expertise is native inside big agencies at this point. Digital agencies have all the momentum and are ultimately going to take over."

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