Digital Agencies: Here’s Your Wake-Up Call

It seems like things are going pretty well for digital agencies these days. While “these tough economic times” have been particularly tough for a lot of industries, digital agencies seem to be weathering the economic difficulties well. In fact, according to a recent McKinsey survey focusing on digital business, 52 percent of the 1,500 C-level executives surveyed put digital marketing and social tools in their “top 10” lists of corporate priorities. It’s a trend echoed by a number of other surveys including one by the CMO Council released in May, which reported that “digital marketing has become a key topic of conversation and strategic agenda item with C-level executives and line-of-business (LOB) leaders.”

Good news, right? It gets even better when you look at how these intentions are being followed up by actions as more and more companies shift budgets away from traditional media and over to digital. A recent study by RSW/US found that a mere 4 percent of companies have not changed their marketing and that at least two in three have made significant shifts in the spending priorities. And it’s a big shift, too…44 percent are allocating at least half their budgets to social and digital.

So yes, folks…after years of hemming and hawing, fumbling and “experimentation,” it seems like the word from the top is a resounding “go digital!” Life is good, right?

Wrong. It turns out that this silver lining might have a significant cloud looming over it. And this cloud’s called “strategy and service.”

A closer look at that RSW/US survey reveals some numbers that should have digital agency chiefs shaking in their Converse. It turns out that even though advertisers might be shifting to digital, they don’t have a lot of faith in digital agencies to deliver for them over the long haul. In fact, less than half of the marketers surveyed thought that digital agencies can survive as purely digital shops.

What’s going on? On the one hand we’ve got a huge shift in budgets away from traditional toward digital accompanied by (and obviously influenced by) a huge shift in C-level mindset toward digital. These changes have been good to digital agencies so far, but it seems that confidence in digital-only agencies is slipping. According to the same RSW/US study, digital agencies aren’t seen as any better than traditional agencies, with 47 percent of respondents predicting that full-service agencies will beat digital-only agencies when they go head-to-head on a pitch (only 31 percent thought digital agencies would come out on top).

But while these are scary numbers, perhaps the scariest is the discrepancy between digital agencies that offer strategic services (76 percent) and the percentage of clients who say they take advantage of those services (16 percent). And while it’s possible to argue about why this is happening, a recent study by DataXu might provide a clue: twice as many marketers (37 percent vs. 18 percent) felt that their agency of record didn’t help their digital marketing efforts than did help them.

Taken together, the message offered by all these studies seems pretty clear: clients aren’t getting the kind of strategic counsel from their digital agencies that they’ve become accustomed to from their “traditional” agencies. Sure, the digital agencies might be great when it comes to the technology, understanding the intricacies of social media, or being able to create some nifty digital creative, but when it comes to the strategic “why” behind the creative “wow,” it appears that digital agencies aren’t delivering.

Is this a fair perception? Perhaps…it seems that the clients think so. And even if it’s not “fair,” it’s something that digital agencies better pay attention to if they’re going to survive. In fact, I’d go so far as to say that it’s the most important thing to concentrate on.

Technology changes. Online fads come and go. Even more “established” digital marketing channels such as search engines and display ads are in a continual process of improvement and change. New platforms with new capabilities can pop up amazingly fast (witness the iPad). Knowing what’s coming next is almost impossible…if you can predict that, you’d be better off hanging up your marketing shingle and finding a desk at a private equity firm.

But even though technology changes quickly, people change slowly. Tried-and-true strategies for influencing potential customers haven’t changed all that much over the years. Sure, maybe your spots are now delivered via online video rather than TV, or you’re now changing attitudes through social media rather than old-school PR channels, but people still are people and what influenced them now is going to influence them today. They may be getting the message through entirely new channels, but messaging still matters.

Don’t forget: at one time TV was on the “cutting edge” and agencies with the foresight to hitch their wagons to the then “new” media were able to prosper. But they didn’t prosper because they knew more about the technology…they prospered because they knew how to reach people using the capabilities of the new technology. Rather than “pooh-poohing” the past or looking down on “traditional” agencies, digital marketers and digital agencies should take some lessons from the past and concentrate on strategy, not technology. Trust me: one day the hip digital agencies of today will look as quaint as the agencies on “Mad Men”…though with a lot less booze and smoking.

Related reading

Overhead view of a row of four business people interviewing a young male applicant.