I had numerous dinner conversations two weeks ago in NYC with agency friends about the future of advertising and its future role. In the last 24 months the shift to digital has accelerated. We talked about how the consumer has adapted to new technology faster than we can imagine and ad agencies have had big difficulty in keeping up. Here’s briefly the key questions that started the dialogue:
The first question we need to answer is “Can advertising stop interrupting people’s lives with totally irrelevant messages?” When does true “personalization” finally happen in advertising? Will the coming advanced technology means that messaging should finally become more targeted and thus more relevant? There are great brands that are not being relevant by interrupting people. Starbucks is a great example.
The other question is “Does the 30/60sec ad have any future? My answer was "yes", but not the sort of 30 or 60 sec TV ads as in its current shape or form. The creative direction will be set by the agency and they will outsource the idea generation to an open creative circle or specialist creative production shops. The community will be like independent film makers but will focus on mini ads (or we shouldn’t call them ads anymore). These min-ads will have a variety of styles from mini-product demonstration to crazy or cool personal story that carry a strong brand narrative. These creative assets do not reflect the core of the brand and its propositions but it reflects that mini-brand stories are much broader and more relevant. Agencies will create new roles such as brand stewards, brand stories planner and trans-media brand coordinator. The team’s responsibility is to help brands to stake out their territories including credible and authentic brand stories.
As a result of that, we will see a market place for creative ideas and creative content that are not tied into a medium---large screen, mid-sized or mini-screen. This is the fundamental structural shift inherent in advertising 2.0. "Digital is the future for all ad agencies" according to Mark Read, CEO WPP Digital, "the boundaries between digital and everything else will be irrelevant within the next five years." I think he totally gets it.
So how are the holding companies dealing with this shift? For Omnicom, WPP, Publicis and IPG, each has invested in digital companies to strengthen its offerings in both creative and media, yet the amounts of dollars spent and deal structures vary widely. I am not going into the details of those deals here. But generally everyone is buying into the game in small scale with the exception of Publicis who is shelling out billions. Publicis is making a bold statement that it is shifting its business towards automation and centralization of media planning and buying systems, with creative rotations being handled cross-platform to respond to customer behavior. As Publicis foretells, "it is only a matter of time before all advertising is digital." I think this is a likely scenario and that’s the reason why they are willing to put up with that kind of money.
Yes this is an expensive game. Martin Sorrell CEO of WPP is pretty outspoken about valuations of digital companies being rich -- too rich, for the most part, for his liking. But they understand how a few dollars well spent with a startup can open up dialogue. These minority investments help to cement future relationships and that’s their strategy. When Google announced its plans to buy DoubleClick back in April, Mr. Sorrell described the move as "game changing" and said the announcement forced them to accelerate their thinking on the company's digital strategy. I am sure WPP now has a new plan to play this digital game including some acquisition plays in the making. I think WPP's agencies (O&M, JWT) are now sigificantly disadvantaged in their digital capabilties, they will have to make some moves soon.
I think the mid-sized agency business will also thrive based on a best-of-breed model, where outsourced specific roles will be common and partnerships for servicing business will be commonplace—from strategy to digital content creation. The void of talent in the marketplace will get worse and I expect to see a lot of new specialist shops popping up and prospering over the next 2-3 years. I see a big gap in the market for Digital Strategy Architects to help clients navigate these new media landscapes and that’s beyond the capabilities of the typical agency planners. Strategists that truly understand the digital landscape are rare commodities these days.
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