True Integration is Key to Agency Relevance, Says Forrester

Big agency fish may be gobbling up smaller emerging media guppies, but according to a recent Forrester Research report, they need to truly integrate to remain relevant. The “Help Wanted: 21st Century Agency” report shows marketers not only internalizing work they used to give to outside agencies, but finding it necessary to go beyond their traditional agencies to handle digital media — or to see beyond media silos at all.

While M&A activity by traditional agencies, like Publicis Groupe’s recent acquisition of interactive shop Digitas, will continue this year, such partnerships won’t necessarily benefit agency clients, said Forrester Senior Analyst Peter Kim.

These acquisitions may be “good for a stock valuation,” he continued, but agency holding companies and other multi-pronged outfits must share and incorporate skill sets in order to be successful, rather than simply referring business to their partners. Forrester surveyed 141 marketing and agency execs late last year for the report, from companies including Ammo Marketing, JWT, Kia Motors, H&R Block, Xerox and others.

Agencies have always been media-driven, said Daniel Stein, CEO of agency EVB, who said the company is planning to re-launch soon as a “digital content marketing company.” Concepts rather than media should guide campaign development, he added.

More than 90 percent of agencies surveyed for the report said they are well-equipped to deal with shifts in Internet advertising, but just 50 percent of marketers said the same of their agencies. The disparity in perception was even greater when it came to consumer generated media. More than 70 percent of agencies said they had the know-how to deal with it; 35 percent of marketers said their agencies did.

It’s no wonder the report shows marketers subbing out work to experts in specific disciplines, including digital (70 percent do) and social media (about 12 percent do).

That’s not to say the old AOR model as we know it is obsolete, believes Kim, who said marketers “still need a strong strategic partner” with an outsider’s perspective, and agencies of record fulfill this need. According to the report, agencies will continue to influence almost 60 percent of clients’ marketing budgets this year, and can expect to increase billings by between 11 and 25 percent.

Traditional agencies understand emerging and interactive media since “they are not only marketers but consumers of the digital world,” said Sacha Xavier, regional lead, advanced marketing solutions at Avenue A/Razorfish, a company included in the report’s survey. “However, agencies like Avenue A/Razorfish know how to analyze the opportunity and in many cases track it, and evaluate its worth,” she continued.

Digital agencies like hers will find themselves in increasing demand, not only for specialty work, but as AORs, said Kim. Because marketers need agencies with a solid understanding of digital and emerging media, he expects more digital agencies to “start to win those agency of record contracts…. It would certainly reflect where consumer behavior is going.”

Indeed, EVB’s Stein said his agency is increasingly battling traditional agencies for both work and employees. “Our agency competes more for resources and projects with traditional agencies than we do with other digital agencies,” added Stein.

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