“Are Ad Agencies Keeping Pace with the Marketing’s (sic) Massive Digital Uptake? (Hint: Maybe Not)”
Melnick posits his question largely on the basis of IDC research that shows the rate of growth in digital marketing spend amongst technology companies significantly outpacing the equivalent growth of digital marketing as a percentage of agency revenue. Specifically:
• IDC reports that digital marketing spend by technology companies will surpass non-digital spend by the end of 2016. (Five years ago, those same companies were only spending 16% of their marketing budgets on digital.)
• In contrast, Ad Age reports that even though five years ago, agencies were already earning 25% of their revenues through digital, the rate at which that percentage is climbing is significantly slower than the equivalent growth of digital marketing budgets within their tech clients.
As a partner in a B2B marketing agency that 1) serves high-tech clients exclusively and 2) whose work is 90% digital, I found these reports somewhat surprising. Where I really started to pay attention, however, is when Melnick asks whether the numbers foretell a time where all or most digital marketing moves in-house:
“Does the agencies slower digital revenue growth give us a glimpse into the future where in-house marketers are the digital experts?”
Personal experience aside, I fear he may have a point. Like so many other industries, the agency business is changing radically:
• the old school commission structure is being replaced by fee-for-service, or even pay-for-performance, leaving agencies to scramble for new, value-added services
• marketing automation and related technologies make it easier than ever for clients to produce campaigns and generate demand using in-house resources
• clients increasingly work directly with publishers and ad networks directly, aided by developments in technology that allow for programmatic ad buying
• in B2B circles, the emergence of content marketing as the dominant form of demand generation leads some clients to question the value of “big idea” creative (agencies’ traditional calling card)
So what does an agency need to survive, compete, and prosper, in an era when marketing technology is increasingly putting more and more sophisticated capability in the hands of the client? What will be the “value-add” that a modern agency brings to the table over and above what a company can accomplish with in-house staff, and how does an agency avoid falling behind the digital curve?
Here’s where I think today’s B2B marketing agency can best compete:
• Helping clients get the most out of marketing technology. It’s not enough for agencies to simply know how to use systems like marketing automation. If an agency’s sole function is to simply manage that technology on behalf of the client, we’re only ever one new hire away from being booted to the curb. Agencies need to deliver strategic thinking and new ideas for how clients can more fully integrate marketing technology into their demand generation strategy.
• Helping clients achieve closed-loop demand generation. In theory, today’s marketing technology enables B2B companies to move prospects seamlessly from raw inquiry to qualified opportunity to paying customer, and then attribute that sale to the associated campaign. In practice, however, achieving a true, closed-loop demand generation engine requires a high degree of planning and experience. Agencies can provide that experience if they demonstrate proficiency at every stage of the demand generation lifecycle: lead generation, lead nurturing, and customer marketing, not just at the very front end of the buying process.
• Providing fresh ideas, new insights, and proven best practices. Marketing technology can do a lot of things well. And the right solution makes any marketing department more efficient, more effective, and more scalable. But what marketing technology doesn’t do – at least not today – is provide strategic advice, or make choices on tactical questions such as content, frequency, tone, call to action, etc. The one area where the best agencies have always offered an advantage, namely that we bring a cumulative set of experience that few in-house teams can match (or hire), remains one of our strongest selling points.
• Redefining what makes great creative. There will always be value in good creative. But increasingly, in an era of content marketing, 140-character tweets, and 3-line search ads, traditional ad-style creative a la Don Draper doesn’t have the cachet, or demand the premium, that it once did. However, that doesn’t mean creativity doesn’t have value. Today, that value may be in the form of a winning subject line, the title for a blog post, or an inventive way to repurpose old content. It may not be as sexy, but it’s measurable, and it can prove the worth of a talented agency partner.
What do you think? Can agencies morph to compete in today’s digital marketplace?