In late 1995, a start-up online media buying and planning company called i-Traffic opened its doors.
Media executives at traditional ad agencies widened their eyes in curiosity. But figuring their shops could do the same work that an upstart could, these agencies continued to sign clients that wanted World Wide Web design.
Now, two years and millions of dollars in online ad spending later, agencies are increasingly realizing that online media billings are growing faster at independent upstarts such as i-Traffic than at traditional media departments.
This observation is making agencies, including New York shops Saatchi & Saatchi Advertising, Kirshenbaum Bond & Partners and DDB Needham Worldwide, among others, move online media activity from traditional media departments to agency divisions that handle online media or, in some cases, to out-of-house specialists.
"Clearly [handling online media buying and planning] takes special skills and sometimes specialists who do this work don't fit into the agencies," says Gary Arlen, president of interactive marketing consultancy Arlen Communications.
One reason for this move is that online media work needs heavy manpower on small-budget campaigns. As a result, online media-buying services need their own business plan to determine profitability.
That helps explain why Saatchi moved online media business from sister unit Zenith Media, a $1.6 billion service with only $2.2 million in 1996 online buys, to Darwin Digital, an interactive subsidiary of the agency.
Interactive work from Darwin "will be totally integrated [with Zenith] as well as with Saatchi," says Greg Smith, Darwin's director-strategic services.
While Kirshenbaum has its own interactive unit for clients that want multiple interactive services, the agency refers clients seeking media-only interactive work to Iballs Internet Media, in which it has a less-than-30% stake.
The other forces behind this shift out of traditional media departments, not surprisingly, boil down to profits.
Agencies view new media as a future gold mine. Jupiter Communications projected that 1996 online ad spending amounted to $301 million-a significant figure for the young but still-growing medium.
However, there seems to be a belief among clients that interactive media business should be handled by a separate unit.
According to a survey conducted by Advertising Age and Mediamark Research Inc. last spring (AA, March 10), only 3.3% of marketers questioned said online media buying skills were a top priority in selecting an interactive agency. In other words, when clients think about what entity should handle their online media business, they usually don't consider traditional media departments.
As a result, agencies are creating interactive media-buying divisions or affiliations to avoid being dwarfed by upstart online media buying companies when interactive budgets really swell. For instance, i-Traffic during the past 12 months has handled between $15 million and $20 million in online buying for BellSouth, Walt Disney Co. and online music retailer CD-Now.
That's led shops such as DDB Needham to develop such units. Last month, the agency said it would establish a unit tentatively titled Optimum New Media sometime this year to handle online buying and planning. This decision follows the shop's media unbundling strategy, begun with the formation of its Optimum Media division to handle TV buying and planning.