It has been a while since I've updated my "who's winning" table on agency performance, but I think the real prediction is to say before we know the winner, it won't matter.  Everyone is running to the middle and soon enough all of the big agencies will quickly resemble one another in an integrated heaven!
That said competition runs deep in humans and there will be plenty more news bulletins of battles won and lost, and strategic analysis of how the war is progressing.
This opinion piece from Ad Age by Barry Wacksman, Chief Growth Officer from R/GA (of course), is a really well written argument.  No question the best way to win a war is to have the best army. 
If we can get our teams focusing on being a strategic advisor to clients with a big dose of innovation, solid delivery and passion for analytics on peformance we'll get out of being commoditized creative brokers and back into being non-procurable consultants and all win.  Bring on the new age of the strategic agency partner.
 

Forget Being a 'Lead' Agency; Strive to Be a Dream Agency
And It All Starts With Innovation

by Barry Wacksman
Published: January 11, 2010

Three recent articles in Ad Age have spurred a furious online debate about whether digital agencies are ready to "lead" and whether the industry even needs big digital agencies anymore. All three suffer from multiple misconceptions about the agency business, so it's time to offer another point of view.

The very idea of a lead agency as the center of command-and-control for other agencies has outlived its usefulness. The model was appropriate for the mass-media age, when the most important thing a brand could do was tell its story through paid media. Long ago, clients separated agencies from the "lead" and formed direct relationships with a mix of different firms. They may have spent more time (and money) with their traditional ad agency, but even this has changed. In some cases, so-called digital agencies have larger budgets and better access to senior client decision-makers, and this trend is growing.

We should worry less about being a "lead" agency and more about being a "dream" agency. We should ask: What do clients need today, and who is best equipped to deliver? This is what all agencies must consider as they create new business models appropriate for the digital age. So, if a client could build the dream agency today, what would it look like?

It would have a thorough understanding of how consumers think and feel, but also how they seek and make and share and transact. It would recognize that the lives of consumers have dramatically transformed in the past 10 years. In an era where Facebook has 350 million members and Google is the world's most valuable media company, the idea that consumers lead increasingly digital lives isn't debatable.

It wouldn't be wedded to a specific craft such as TV or print. Nor would it only think about designing a website. It would do all of those things without bias toward any strategic or tactical solution.

This agency would have innovation at its core and the ability to craft campaigns to promote these innovations. But it would start with the innovation — not the other way around, as most traditional agencies reflexively deliver campaign ideas as the first step.

Data would be its guiding light. It would have the right people to mine the data, interpret it and, based on the results, provide direction on whether and how to proceed to achieve the best ROI.

It would produce things with efficiency and fidelity, recognizing that brilliant ideas can fall apart with poor execution (a bad user interface, for example). It would understand that clients have an unprecedented opportunity to deliver massive amounts of content via free media channels such as YouTube and Facebook, as well as owned media channels, such as their own websites, mobile apps and Twitter feeds.

Whichever agency gets to this state of Nirvana first is likely to be the most important strategic and creative partner for clients — even if it's no longer called a "lead" agency. So, who will get there first?

I'd bet on the current crop of large, independent digital-age agencies. The most evolved have the skills to formulate and execute ideas that are digital but extend far beyond it. These agencies have had the advantage of evolving alongside the biggest consumer trend of the 21st century, the digital revolution, just as their predecessors had evolved alongside the biggest consumer trend of the 20th century, the mass adoption of TV.

The question — "Are these agencies ready to lead?" — has already been answered by the many clients who have appointed them as their primary strategic agency partners.

ABOUT THE AUTHOR
Barry Wacksman is exec VP-chief growth officer, R/GA.

1 Comment
Subscribe to comments on: Forget Being a 'Lead' Agency; Strive to Be a Dream Agency
  By JMorganBaker | London January 11, 2010 06:42:35 am:
This is a really well written piece and having been in digital market for 10 years now, it isn't a surprise that I agree completely. One thing to remember though — "execution" which you use as an example poor user interface, is also client management. Traditional agencies have real skills in gaining consensus around creative ideas that digital agencies–because we work with such complexity–often miss. Also if you replace "innovation" with "creativity," you have the argument all of the integrated agencies are making in the market today. It really is a rush to the center — is it easier to teach print to digital creative than vice-versa? Probably. Will digital agencies continue to see big growth, definitely. But the scale difference between big traditional agencies and big digital agencies means the big agencies will have time to learn how to be consultative, integrated and innovative.

It is funny how you consume media in the internet age. 

Some of us call it “information snacking,”  some call it “managing feeds.”  What is amazing is how we do still end up reading what we want to read and are able to keep up with significant stories or trends — even if they aren’t defined in a few media players editorial calendar as they were before.

I believe this is because the ease of publishing means strong ideas get enough coverage to still have a significant share of voice, regardless of the media fragmentation.

It is also because as humans we tend to build off of each other’s ideas.  A more cynical view would be to say we herd around themes. 

This WARC article does a great summary of the key themes I see frequently.

The changing art of persuasion in a downturn

Laura James

There were a number of recurring themes throughout the day, but three were most prominent. First, the traditional “persuasion” model of advertising is broken. Second, the industry is becoming data rich but insight poor. Third, the structure and process of creating advertising has changed little since the days of Mad Men (while the customer, in the real world, has moved on dramatically).

Interesting note in the press from the US about Ogilvy North America. 

A lot of bigger agencies have been experimenting with mixing up teams, de-accentuating or eliminating P&Ls, and cross-training up people so they can deliver integrated solutions.

The question is does it work?  At Ogilvy in NY the decision has been made to have separate MDs running DM and Advertising — which means perhaps not.

“We were trying to get people not to worry about a P&L and to think in a more holistic way about [client] solutions,” said John Seifert, North American chairman of The Ogilvy Group. “The effect that it had — which we discovered pretty quickly — is that it started to create a kind of grayness to what each discipline stood for.”

And, it must be assumed, that must have impacted on how the teams reacted to client requests and the quality of the work.  Otherwise the agency — which is one of the most mature and best run of the big established agencies — wouldn’t change course.

They’ll run their divisions, but then they’ll have an accountability on her [Carla Hendra's] leadership team to make the whole greater than the sum of the parts.”

“There should be a common culture and philosophy of our promise to clients,” said Seifert. “But … we don’t want that to be lost in a mushed-up ‘we’re all one’ kind of model.”

Interesting to see — and equally interesting that DM and Advertising are seen as requiring separate management, but Digital is not.  Like a lot of established agencies, the management of DM, Advertising, Media, Heathcare Marketing, and PR have proven their case that their disciplines have a complexity and special skills that require nurturing and dedicated management. 

But poor OgilvyInteractive – despite being the oldest interactive agency brands and having a good case to celebrate turning 25 this year — languishes in integration without dedicated management. 

Be interesting to see how that works out as the year progresses.

Ogilvy Team: Separate but Equal

A restructuring in New York results in two new managing directors

March 8, 2009

-By Andrew McMains

NEW YORK When Ogilvy & Mather named separate managing directors for advertising and direct marketing at its New York headquarters last week, it was a tacit acknowledgment that having co-leaders across all disciplines bred confusion among staffers and a lack of accountability among bosses.

“We were trying to get people not to worry about a P&L and to think in a more holistic way about [client] solutions,” said John Seifert, North American chairman of The Ogilvy Group. “The effect that it had — which we discovered pretty quickly — is that it started to create a kind of grayness to what each discipline stood for.”

more

After all of these years the “worldwide network” of Proximity will have a US office.  It will also give Proximity’s digital team a major boast which I’m sure the teams in London and elsewhere will look forward to as they try to develop more digital work in the DM-centric offices.

So two questions to watch –

1) will Atmosphere add DM skills to become more like the original Digitas (Simon Hall’s original vision)?

2) will Proximity follow Atmosphere’s approach of building digital around display advertising not websites and applications?

Being focused on display advertising as Atmosphere is makes it a lot easier to integrate with BBDO’s traditional approach and creative structure, but makes it harder to be do advanced digital marketing — the transformational kind that requires good consulting, technical and deep creative skills.

Then again this may be smart — just as the management consultancies have said ad agencies shouldn’t bother to try to get a seat next to the CEO, perhaps they shouldn’t try to do complex digital work like R/GA either. 

There is plenty of work out there doing advertising and campaigns.

Thursday, Feb 19

Breaking: Atmosphere BBDO To Be Absorbed by Proximity Worldwide

AgencySpy has learned that Atmosphere BBDO will be absorbed by Proximity Worldwide. Roy Elvove, EVP director of corporate communications confirmed the news moments ago.

More

Another digital agency is “integrated.” 

Not uncommon in a downturn. By integrating agency units holding companies save on management costs (one MD, one CD), are able to maintain team size (two smaller teams become one bigger one) and consolidate overheads across more revenue.

But do we think Beyond is closing because none of Mediacom’s clients are asking for digital services?  Not likely. 

This is integration because of the political need and justified by the feeling clients want a single integrated partner, as is commonly reported in the industry press.   The strategy makes sense.  Taking digital-trained teams and distributing them amongst the traditionally-trained ones should end up with both being stronger.  Clients can call on a single account director and get all of their questions answered and needs met.  Unfortunately that isn’t what generally happens.

The question to watch will be what happens to Sloan Broderick and the digital leadership team.  More often then not when the smaller team (the digital one) is assimilated into the bigger shop, the digital team doesn’t end up in the leadership posts.  Or only one or two become part of a management team of 7 to 10 — which doesn’t allow them to make policy changes and quickly leaves the digital leaders disillusioned at the thought of trying to fight to change the course of the supertanker.  Consider Colleen DeCourcy’s moves through JWT (now focused primarily on RIOT, a digital-led agency), Don Scales leaving Agency.com when it was “aligned” with TBWA (now running iCrossing) and Eric Wheeler at Ogilvy (now running 33across, a digital business).

For the team trying to deliver the work the situation is even worse.  Being integrated often means being surrounded by people that don’t have the same passion you do for digital marketing — and think the term geek has negative not positive connotations.  And this in an industry that changes so quickly you can’t keep up alone.  You need your digital colleagues. 

It also frequently means you are reporting to someone that doesn’t understand the issues of trafficking a complex rich media campaign and can’t field an issue that is escalated. 

The classic case is the manager saying, “I don’t see what you are so concerned the client wants 3 extra variants on the creative.” When the digital account person knows that with 5 markets and 5 typical online ad layouts plus 5 or so resizes for each, the boss has just agreed to 375 new ad units — all that need to be optimised, tagged, uploaded and trafficked…for tomorrow. 

Or perhaps a more fundemental issue like proposing the need for a media plan template change to accommodte behavioural targeting, in-campaign optimisation or templated creative.  On the creative agency side consider our isolated account manager being caught by the big agency creative director (with all the ego this position requires) trying to break up the creative black box asking the solutions be developed collaboratively rather then in isolation by the art director-copy writer  teams.

In the Revolution article linked to above, Kevin Murphy, joint-MD of Zed Media, comments that

It’s clear that many traditional agencies still have some catching up to
do, but they’re doing it fast. Digital specialists will no doubt be
looking at selling up while they still have some real value, or
concentrate on forming close strategic partnerships with larger agency
networks.

I’ve got a slightly different opinion.  Being part of an integrated group has huge benefits, but being an “integrated” team is a disaster.  And I think the next year will prove it when I update the headcount figures.

WPP Moves Beyond, Beyond: Digital Brand Will Cease To Interact

by Joe Mandese, 1 hour ago

As part of a reorganization that will more seamlessly integrate its traditional and digital media services brands, WPP’s MediaCom Worldwide unit next month will drop its Beyond Interaction brand, and will consolidate all its digital operations under the MediaCom Interaction name, Online Media Daily has learned. The move marks an end to one of Madison Avenue’s seminal digital media brands, and one which WPP acquired in 2005 as part of its acquisition of then Beyond parent Grey Advertising.

http://www.mediapost.com/publications/?fa=Articles.san&s=98769&Nid=51393&p=929055

There has been lot’s of discussion in the creative agency world about the impact of digital marketing and how agencies should respond.  It appears every agency from advertising networks like BBH to traditional DM shops like OgilvyOne to creative hotshops have put “Digital at the Heart of the Agency.”

Only this past May Alastair Reid reported in Campaign a reasonably balanced article about the increase in digital awards being won by traditional agencies, and brought out the classic Goodby turnaround in the US a few years ago.

But whose really been winning?

Looking at the 2008 NMA Top 100 that was just released last week, we see that Digital agencies have seen another year of solid growth — averaging 20% across the list.  In his introduction Michael Nutley also makes a balanced argument for the state of the industry.

But maybe we are being too analytical — if one uses the simple measure of headcount over the last 5 years, we can see where the growth has been and inferr that this represents shifts in revenue.

The top digital agencies have had an amazing run since 2003.  I take 2003 because it is 5 years ago and it was solidly after the collapse in 2001-2.  From ad hoc conversations I think that agencies like AKQA have gone from say 120 in 2003 to over 350 today — that is 191% growth in London alone.  Dare was probably about 60 people in 2003, and now reports having 174.

I’ll need to do more digging to get good numbers but here is a basic table I’ve pulled together from industry articles and league tables and rough memory.  It will be interesting to check in another year’s time.

Shops Stand to Lose in Digital Revolution

November 14, 2007 By Brian Morrissey

Agencies have the most to lose in the new digital order, even more than broadcasters, per industry leaders surveyed by Accenture.

NEW YORK Changing consumer habits, driven by the shift from analog to digital media, are revolutionizing the ad industry. But that could spell bad news for agencies, according to a new study by Accenture. According to 70 industry leaders surveyed by Accenture, agencies have the most to lose in the new order, even more than broadcasters. When asked who would fare worst in the transition to digital advertising, 43 percent said agencies, compared to 33 percent who answered broadcasters. Cable operators were third with 10 percent. No respondents chose search companies or digital ad specialists.

The end of advertising as we know it IBM Institute for Business Value study

Imagine an advertising world where… spending on interactive, one-to-one advertising formats surpasses traditional, one-to-many advertising vehicles, and a significant share of ad space is sold through auctions and exchanges. Advertisers know who viewed and acted on an ad, and pay based on real impact rather than estimated “impressions.” Consumers self-select which ads they watch and share preferred ads with peers. User-generated advertising is as prevalent (and appealing) as agency-created spots.Based on IBM global surveys of more than 2,400 consumers and 80 advertising experts, we see four change drivers shifting control within the industry.

It is a common theme in the traditional advertising world, and direct marketing world, and sales promotion world that creatives come in sets of two. Art Director and copywriter. They work as a team, are hired as a team and even move agencies as a team.

This makes sense when the agency’s work is primarily a concept — it would be a tough job if the creative blackbox had only one lone hipster sitting in a dark corner, eyes rolling back in his head, trying to reason out whether it should be “Did somebody say McDonald’s?” or “Hey, sombody say McDonald’s!”

In this traditional world where what is given to a client is often a print ad or a script or mail pack, doubling up the creative team makes perfect sense. The account team scales based on the complexity of the client. The planner is a senior consultant and can work on his or her own. Design is a afterthought handled by “mac operators” that are part of the studio once the big idea has been cracked. Production just happens. The real magic is at the concept and with the account folk tapping their fingers, it is no wonder the creatives insisted on working in pairs.

So is this still relevant when our work is so much more complex?

A great campaign now has multiple channels, contact strategies that have to be delivered and synchronised over time, technical executions with data dependencies that require NASA-level project management and fifteen thousand different client teams that need to give their input.

In this world is it fair to put the weight of the delivery on even a superstar copywriter and art director? Can we expect them to know if a flash movie can branch based on if-then logic? If the layout breaks all of the information architecture rules Jacob Nielsen has so painstakingly taught the industry? Whether when a customer starts a card application, a promotion should be offered based on home address, income or key benefit? Whether an e-mail can come from a the sales team, and which of 15 key messages should be delivered in the opening paragraph? How to organise and edit 30 pages of text to make a good argument?

Mark Kingdon on Organic’s site says:

Great advertising was often created in “pairs” — a copywriter and an art director. In the digital world, the creation process is more complex. Strategists, designers, information architects, media specialists, and technologists must come together to create great experiences.

Organic Threeminds Blog

The next step is to look at how the digital agencies are structuring themselves — does RG/A have creative teams? AKQA? LBi? We know Sapient doesn’t, just as Accenture has never heard of them, so where will advertising move to?