Wednesday, April 1, 2009

Beyond Advertising - A New Direction for Ad Agencies?

In 2007, the IBM Institute for Business Value issued an insightful report titled The End of Advertising As We Know It in which they predicted that the next five years will hold more change for the advertising industry than the previous 50. Their study concluded that the accelerating shift of media experience and control to consumers and more self-reliant advertisers who are seeking more interactive, measurable formats will redefine how advertising is sold, created, consumed and tracked. As a result, traditional agencies run the risk of becoming irrelevant without a major shift in their approach and services offering.

The IBM study asks us to imagine and consider the consequences to traditional agencies in an advertising world where:
  • Interactive advertising surpasses traditional mass media vehicles as the preferred advertising format.
  • Ad space is sold through auctions and exchanges.
  • An advertiser can know who viewed and acted on an ad, and pay based on real impact rather than estimated "impressions."
  • Consumers self-select which ads they watch and share preferred ads with peers.
  • User-generated advertising is as prevalent (and appealing) as agency-created spots.

Last month, IBM issued a follow-up report based on their conclusion that major advertising trends identified in the previous study are happening at a faster rate than anticipated, while agencies, content owners and distributors have not responded sufficiently to these changes. This 2008 study, titled Beyond Advertising. Choosing a Strategic Path to the Digital Consumer, addresses these changes in more depth and from a very pragmatic perspective. Importantly, this report offers some practical advice to agencies on how to leverage their strengths in the creative area in the near term while they look for ways to adapt their business model and services offering to address the new environment.

Some of their suggested areas for immediate focus are:

  • Look for ways to broaden capabilities that can be integrated with traditional services offered by the agency as a way to diversify revenue and build a stronger client relationship at the strategic level.
  • Begin to proactively experiment with new tools and services that can deliver and automate ways to analyze ROI.
  • Restructure the organization to promote more collaboration by breaking down self-created silos across disciplines.
  • Consider partnerships to complement services and expertise that may be lacking today.
  • Look for ways to operate more efficiently through workflow automation, automated creative development tools and alternative media buying scenarios or partnerships.

One of their more intriguing suggestions is to redefine the agency role to be that of an "insights broker" that can analyze and integrate cross-platform sets of data to generate actionable solutions that better profile, target and measure ad campaigns. This represents a dramatic change from the traditional mass-oriented approach to analysis and measurement based on reach and impressions-based measures like cost-per-thousand.

The overall conclusion of the study is that agencies will need to adapt to this new environment in order to survive. Even while we must navigate the current economic environment that suggests a limitation on investment, agencies must start to experiment with and build these new capabilities now. The future will not just be the "end of advertising as we know it", it will be the end of the advertising agency as we know it.

To read the complete IBM study, go to this link:

http://www-935.ibm.com/services/us/index.wss/ibvstudy/gbs/a1031045?cntxt=a1000062