The Evolution of the Digital Agency: Integrated vs. Pure Play (Part I)

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Having spent time at both a pure play digital agency and in a digital role within an integrated ad agency (and also on the client side), I am often asked about the merits of each agency model.

Distinguishing both agency models solely by their capability differences can be difficult. For the record, both have provided me with valuable (albeit different) skill sets and experiences to become a better digital evangelist and marketer.

To answer this question, let's examine the evolution of the digital agency: Digital as a platform has existed well over the last decade, mostly in the form of the creation and deployment of digital assets such as banner advertising, email marketing and website/microsite development. Then came along the other more ROI driven aspects, such as e-commerce and search. At this point, digital was just another marketing channel that brands could use to reach out to and communicate with consumers. There was no big comparative advantage beside the fact that it was more accountable (through analytics) and could be optimised on the fly.

I will be so bold as to say that digital only truly came to prominence in the age of social media along with the big onslaught of social (and now mobile) platforms. This changed the landscape of traditional advertising. With disintermediation and the democratisation of content publishing, consumers begun rejecting advertising messages for meaningful dialogue with brands. They now expect relevancy and context in all communications: because you know who I am and where I am (with location-based services), you can customise your interactions with me and give me the right products and services at the right place and time.

At the same time, with the economic crisis, brand marketers facing tightening marketing budgets started to turn to digital and social media as an alternate means to reduce paid media costs and to amplify limited budgets by building owned digital media channels and driving earned media (which is often briefed in as 'I want to generate buzz' or 'Please create something viral').

What happened to the ad agencies and pure play digital shops during this same timeline?

Digital was somewhat of an awkward fit within the traditional advertising model. For one, it required a totally different set of technical skillsets for ad agencies, which meant investment and a foray into a completely new territory beyond their core competencies.

Large ad agencies were initially not interested in getting involved in digital and simply outsourced their digital production capabilities to smaller digital shops. However, with this changing landscape, they found their traditional model slowly getting antiquated and came to realise the importance of digital as a core component in advertising and communications. The advent of web 2.0 now required brands to go beyond pure messaging (which is what traditional advertising was rooted in) and to create and engage in a constant dialogue with consumers through pervasive digital experiences. Rather than just using advertising to tell a story and communicate a point of view, agencies can now use technology to involve consumers into the story; creating a much stronger bond and association with both the brand and product.

They also realised that digital had evolved upstream to involve strategy, consumer insights and analytics; all which were very much part of the traditional (strategic) planning piece used to help agencies develop great creative work in advertising.

The smaller digital shops flourished during the early periods and were able to build their production and technical competencies either by working directly with client side marketers or through larger ad agencies that outsourced digital work to them. They became really good with technology because they did not have room at the ideation and concept development stage (which were left to the ad agency), leaving them usually at the execution and trans-creation stage to adapt print creatives onto the online space.

At the same time, they also developed additional digital competencies such as search, social media and mobile app development. These digital offerings allowed them to further entrench themselves with clients and slowly move up the value chain to offer more upstream digital strategy and planning type services.

(There is a third variable within this equation, which is media and PR agencies also coming into the mix with digital and social media planning services. But we'll leave this discussion for another time).

In summary, you now have digital shops vying to become full-service agencies, while traditional shops are yearning to become more digitally integrated.

I believe the key differences between an integrated and pure play digital agency model lie in their capabilities, agency structure, and client relationship. And this will be shared in the next column.