Monday, December 14

Predicting Trends: Ad Agencies Brace For 2010


Earlier this month, David Poltrack, chief research officer for CBS, predicted broadcast advertising revenue will increase 5 percent next year. Poltrack made the case that with the exception to some cable networks and NBC paying too much attention to overnight ratings, an increase in broadcast ad buys is good news for agencies.

While this might be good news for advertising agencies, Martin Sorrell, CEO of WPP Group, isn't as excited about incremental improvements. Like Sorrell, several holding company CEOs are pointing to extreme client cost-cutting as the main reason they expect flat organic growth in 2010. Most predict broadcast ad spending to increase less than one percent. Sorell himself said that an economic recovery is the only thing that will reverse the trend.

"I don't understand this degree of optimism. Basically, things are less worse than they were," he summed last week.

So which is it?

Brian Morrissey, writing for Adweek, presented an interesting perspective that finds the balance between marginal growth and no growth for advertising agencies. It might not be the economy. It might be a fundamental shift in the kind of agencies winning accounts.

"Yet the general expectation is that the number of these jobs will increase, particularly as digital initiatives become core not only as marketing channels, but as internal drivers of innovation," he wrote, citing Ameriprise, which was won over in a review that included Publicis & Hal Riney, as an example.

Whether or not you believe digital agencies can take the lead over traditional shops is less important than pinpointing what is happening in traditional shops today. By in large, many are missing a piece of the puzzle for 2010. It's not the economy. It's everything else.

The truth about "traditional" advertising agencies in 2010.

The moniker alone is one challenge. If advertising agencies get stuck with the label that they are traditional, they may be dead in the water within five years. Successful agencies, by their nature, have never been "traditional," a term that now applies to an overemphasis on big budget broadcast creative and ad buys. Unfortunately, that focus will not likely pay the rent next year.

Worse for "traditional" agencies attempting to wait out the economy will be the perfect storm. Despite being well-suited to move into social media, most have been lax in the uptake of the low cost counterpart. The result is three-fold beyond the moniker: agencies have adopted hiring freezes, demoralizing their creative teams; budgets are shifting toward digital, reducing mainstream budgets; and the lack of movement to understand the space at a slower pace than public relations has helped fuel their primary competition, which is generating increased revenue that will allow them to steal away "traditional" talent.

If you need more evidence, think back to the Forrester Research survey that found of 100 global interactive marketers, only 23 percent believed their "traditional brand agency" is capable of planning and managing interactive marketing activities; 46 percent did not believe they were capable. Where the Forrester Research study stops, however, is in adding the economic pressures of marketers over the last two years.

Unlike when advertising agencies were slow to pick up Websites as a viable marketing channel but then recovered by buying up Website design companies, many agencies are struggling too much this time around to repeat the process. So unless Sorrell and other holding company CEOs adjust their thinking beyond the economy, it seems likely digital agencies really will be in a better position to steal seasoned creatives, capture traditional accounts, and reshape the field.

4 comments:

Bea on 12/17/09, 1:31 AM said...

You have very rich posts that really interests to many readers. I really appreciate your post.

Rich on 12/18/09, 7:06 AM said...

Thank you Bea. Happy Holidays.

Braces on 2/4/10, 11:19 AM said...

This is amazing, The truth about "traditional" advertising agencies in 2010 many readers will see this new idea about the advertising in 2010.

Rich on 2/4/10, 12:16 PM said...

Braces,

And by the time they do, they might even know it is the truth. :)

Best,
Rich

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