Why So Many Marketing Agencies Are Becoming Irrelevant

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Remember phone booths? Video rental stores? Fax machines?

Digital technology has been the greatest change agent of our time. There’s not much it hasn’t touched, and without question, the new face of marketing is digital through and through.

Digital advertising revenue surged nearly 22% to $72.5 billion for the 2016 calendar year, up from the $59.6 billion reported in 2015, the Interactive Advertising Bureau said in a report prepared by PricewaterhouseCoopers.

Although it marks eight consecutive record breaking years, the IAB’s report represents the first time mobile has overtaken desktop spending, and the first time digital as a whole has passed TV ad spend. Source: AdAge

Just as you may still find a phone booth on some street corners, a video store in some towns, and a fax machine in some offices, it’s not impossible to find some good old-fashioned ad agencies that continue reaping revenues from earning commissions based on placing media.

Those advertising agencies—romanticized in so many movies and television shows—are clearly in decline.

Yes, in the era where television and radio ruled, advertising agencies were exactly that: agents. They collected generous commissions for the media buys made on behalf of their clients, typically 15%.

As you’ve seen in the shows, (in between martinis and smokes) they focused on producing great ads. The audience watched, listened and read them. They had no choice.

Though it sounds crazy now, affirmation of a job well done was often winning industry awards and recognition. Results were nearly impossible to measure. KPIs didn’t threaten the party.

The Internet did.

Then, a new breed of agency came along.

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In late 80s and 90s, as analog media began morphing into digital, ad agencies followed. A new breed of agencies emerged in those two decades and have proliferated in the two since. A massive array of specialty agencies came along including web design, development, SEO, email, PPC, social media, PR, inbound marketing and, of course, content marketing.

The vertical industry specialist thing went crazy too… We specialize in digital marketing for personal injury lawyers in Oklahoma.

But few had sizable media budgets to work with, so they the idea of being “an agent” diminished. How they’d make money?

Payment structures mostly became based on billable hours. Client and agency relationships became project or retainer-based.

Measurement models gradually crept forth—things like media coverage and impressions—but most were ambiguous. Around the turn of the Google, er, century, search engine rankings became a big deal too.

A slew of trends came forth:

  • Agencies dubbed themselves “digital.”
  • In-house marketing departments proliferated.
  • Outsourcing to freelancers went bonkers.
  • Software-as-a-Service (SaaS) offerings took hold.

The list isn’t even close to complete. Digital media had risen and its effect on the agency business was immeasurable.

The advertising and marketing business had to change as consumerism did. Consumers took control. They embraced a new point-of-view. They didn’t want to be marketed to anymore. They wanted to be heard. They wanted to connect.

The billable hours model is now in peril.

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In a post on LinkedIn, Ignition Consulting Group’s Tim Williams, explains why. He says the billable hours model:

  • Misaligns the interests of the agency and client because the agency wants more hours and the client wants less.
  • Doesn’t focus on what clients want: results.
  • Penalizes effective agencies—the faster the firm can solve a problem, the less it earns. Innovation suffers.
  • Fosters a misguided allocation of resources—instead of assigning the best people to solve problems, firms assign people the client can “afford.”
  • Provides no useful information about the quality of the work, the satisfaction of the client, or the effectiveness of the firm.

The agency of the future is metric-minded

“It’s largely about measurability. Connecting with data sources to measure behavior is the goal of the future agency.” ~ Bryan Hamilton, Senior VP of Experience, Razorfish

Legacy models in the advertising and marketing agency business may not be 100% extinct, but going forward, the new breed must focus on producing results that impact the bottom line.

They must build monitoring and reporting into every program and campaign and measure success by outcomes.

“Challenge your agency to move beyond the arbitrary measurements of success used by traditional marketing firms, and push the conversation toward more meaningful outcomes that can be tracked in real time and directly connected to sales.”~ Paul Roetzer, The Marketing Agency Blueprint

Agencies of yesteryear placed a premium on creative output. They considered themselves artists. Agencies of the future are better described as scientists who appreciate art.

To be relevant going forward is to have a digital-first mentality. Agency management must ask themselves, “Are we 100% metric-minded?”

They must shun arbitrary metrics and shine the light on the numbers that most affect their clients’ results, including (but not limited to):

  • Click-through rates
  • Website traffic
  • Downloads
  • Landing page conversion
  • Subscriber growth
  • Leads
  • Trials
  • Sales

The 21st Century agency doesn’t shy away from KPIs or try to save face with mushy ones. And, of course, they don’t just collect data; they bring meaning to it and act on it. Every campaign starts with performance-related benchmarks and has clearly defined success factors.

The agency of the future is customer-focused.

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Agencies able to provide (or guide) a steady stream of customer-focused content will lead the charge. Growth-minded agencies are in tune with the need to create content people want to read, watch, view, listen to, interact with, and share.

The agency of the future is tech savvy.

Winning agencies continuously embrace new technologies—including cloud-based SaaS platforms to optimize processes, but also digital advertising platforms to expand the reach of their campaigns and improve targeting.

Case in point: agencies aiming to drive results for clients employ search, social, native advertising and discovery platforms to drive the new metric mindset.

While search and social reach audiences with high amounts of intent, or content recommended by their friends, native advertising and discovery platforms reach audiences on the open web.

Ad placements are served across a network of thousands of premium publishers, and capture user attention when they are most open to discovering new things.

The agency of the future creates conversations

More than 10 years ago, Forrester claimed the future of agencies would depend on moving from “orchestrating campaigns to facilitating conversations.”

Successful digital agencies get it. They strive to help the brands they serve form real connections with consumers. Consumers, it appears, are eager to oblige—when they can.

Enter the era of user-generated content (UGC). Instead of merely creating content, marketers must now create opportunities for the customers to do so. UGC is becoming one of the most powerful tool digital marketers have at their disposal. It delivers a level of authenticity brands cannot replicate.

What’s next?

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Marketing will never be as static or as simple as it once was. The agency of the future stays on top of “what’s now.”

They’re ready, willing and able to practice data-driven marketing and produce direct response campaigns inspired and guided by analytics.

If you inquire with an agency leader on top of the most prevalent trends in digital marketing today, they’re likely to tell you they’re working to leverage one or more of the following:

  • Native advertising
  • User-generated content
  • Interactive marketing and gamification
  • Visual marketing
  • Video
  • Marketing automation and audience segmentation
  • Lead nurturing with email
  • Personalization
  • Retargeting
  • Social advertising
  • Live streaming
  • Artificial intelligence

The agency of the future is 100% committed to doing things differently because marketing works differently now. Their clients don’t want to win awards. They want to win customers.