Multicultural Agencies Must Beef Up Their Digital Offerings

We're Giving General-Market Agencies Another Opening

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José Villa
José Villa
A trend is starting to sweep across new account awards as digital agencies continue to win agency-of-record advertising contracts. This trend has been building for a few years. Starting in 2007 with Ikea U.K.'s decision to make interactive shop Agency.com its AOR, it heated up in late 2009 with a string of big AOR assignments for digital shops such as R/GA, Tribal DDB and others. While there is a great debate taking place in the industry as to whether digital shops should take the lead, the existence of the trend cannot be denied.

But what does that mean for multicultural advertising agencies?

Multicultural advertising has historically been a few years behind the general market. That three-to-five-year lag is lessening with the growth of technology in advertising and media. However, it would likely still take one or two years for the digital AOR trend to make an impact.

For instance, it has been reported that JetBlue is switching agencies. As a company that spends the majority of its marketing expenditures on digital advertising, it is natural to think that if JetBlue wanted to hire a multicultural agency, it would need to be a digital shop. But, if JetBlue looked at multicultural agencies right now, it would have a hard time finding one that could claim leadership in digital advertising.

Should multicultural shops be worried? Yes, for a couple of reasons.

First, a significant amount of Hispanic advertising is direct response in nature. Hispanic ad spending for the telecom, retail, automotive and insurance industries represents more than 50% percent of all Hispanic media ad spend.

Direct-response advertisers have historically been the most likely to shift ad budgets from traditional to digital, making a digital multicultural agency highly appealing.

Second, clients are driving the shift to digital, and study after study (including multiple Forrester Wave reports) indicates that clients are looking for more digital capabilities. I have already started to see more requests for proposals and reviews for Hispanic digital in the past 12 months than I've seen in the previous four years combined.

While demand is clearly shifting, is there a supply of agencies capable of meeting clients' new multicultural digital needs?

Unfortunately not right now.

In fact, if you look at the roughly 80 Hispanic, 20 African-American and 20 Asian ad agencies in the U.S., only a handful can be described as digital specialists (and most of them are Hispanic shops).

While there are clearly full-service multicultural shops that have embraced digital more effectively than others, they do not possess the digital capabilities you would find at a general- market interactive agency such as AKQA or Razorfish.

So do clients even have the luxury of shifting their multicultural work to digital?

As with all efficient markets, eventually supply and demand reach equilibrium. I don't think demand will be altered -- when advertisers start moving in a direction, it's hard to stop the momentum. Smart and nimble agencies will ultimately meet the need.

The question is will the need be met by some of the established full-service multicultural agencies or new digital shops?

Or will increasingly "tradigital" general-market agencies see this as their biggest opportunity to deal a mortal blow to multicultural ad agencies?

Of course, challenges create opportunity and this could be a good time for eager upstarts with a mind for multicultural marketing and a talent for digital thinking to make their way into the market.

Only time will tell.

ABOUT THE AUTHOR
José Villa is president of interactive advertising agency Sensis, which has offices in Los Angeles and Washington. Clients include the U.S. Army, United Healthcare and Sempra Energy. José also blogs at ThinkMulticultural.com and can be followed on Twitter at @jrvilla.
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