The advertising agency. Maligned and mocked. Its obituary has been written countless times. Its sheen of mid-century cachet long diminished. Brands are taking business and talent in-house. Ad-tech platforms and vendors line up to tell CMOs that they don’t need to spend money on agencies anymore; that they can move the funds they used to spend on Friday night beer carts and hip offices for agencies of record on more working media to help them achieve their ever more aggressive objectives and hold on to their jobs. What’s more, it now looks like many major agencies have been pocketing commissions in return for booking media without telling their clients. Yikes. And yet, in spite all these pressures, I believe that there is a future for advertising agencies, and that future is based on the work of the digital strategist.

In the context of this podcast and blog, I see two different types of agencies, the digital agencies and the traditional agencies. They are distinct from each other and come with their own set of challenges. The digital agencies started that way relatively recently, usually in the last decade or so. They’re typically founded by partners with particular technical skills, usually web development or digital media experience. On the surface, they should be thriving as marketing becomes increasingly digital. And to be sure, many are. But they are under pressure from two particular forces. The first is the force of commoditization. As advertisers become more familiar with digital media and marketing, and ad tech platforms become increasingly easy to use, there is a general drift towards either looking for the cheapest provider, or simply taking these functions in-house. The second pressure to challenge the digital agencies is that traditional agencies are moving more forcefully into digital media and are able to provide an end to end solution that incorporates online and offline initiatives. The solution to both these challenges is to provide long-term strategic vision and value in addition to the day to day execution.

Traditional agencies have the dual advantages of longevity and being regarded as strategic partners since they have combined multi-channel marketing with branding and strategy development. Where they struggle is to change in the face of digital disruption. Their response is typically to import digital talent and create a ‘digital department’. This is problematic for a number of reasons. First, digital is not given its full due, often relegated to budgetary leftovers. This is due to the fact that many senior decision makers in traditional agencies simply don’t understand it. The second issue is that as we have seen, digital transformation of an organization is not about bringing in digital capabilities, but about rebuilding the entire business around digital. A key driver of this is the rhythm of the business in digital is simply faster, with always on campaigns and real time optimization. These challenges, when not properly addressed make traditional agencies cumbersome and unwieldy and unable to keep up and compete. The solution to these challenges is to bring in a digital strategist who can speak in bits and bytes as well as dollars and cents.

CMOs have looked at this landscape and concluded that all too often, agencies are either too expensive, too slow, too tactical and not connected enough to the rhythms and pressures of their business. They are told every day by technology vendors and advertising platforms that they don’t need the agencies any more. And they are responding by building up in-house teams, raiding agencies for talent to power these teams. The cachet has now shifted to working with the brand directly as opposed to the agency with its long hours and stressful environments. That is a very attractive mix for top tier talent.

Yet there is a role for the agency. Any CMO worth their salt knows better than to trust the entirety of their brand and their results to a media partner. Yet that is essentially what the social networks and search engines are saying. You don’t need a website! Just build your content on our platform. Sure thing Facebook, I’ll happily do that. I’m sure you’ll alert me ahead of time when you are going to radically change your interface and user experience, cutting off all ability for a brand to drive unpaid traffic, just like you did the last time. Wait, what? Never mind.

Audiences shift in their expectations and media consumption habits. A few years ago Google was all conquering. Today Facebook rules the roost in mobile advertising revenues. Tomorrow, who knows? But the person best placed to understand this, to look at all things from the perspective of the consumer, and to be ready for what comes next is the digital strategist. It’s the strategists, with their hands on technical experience and their ability to translate this into a business context that can help organizations keep pace with the the dizzying rate of change in digital. And the best strategists don’t work in-house for brands, but at agencies. This is simply because the strategist in an agency has a much broader perspective, working with clients from a wide variety of industries. This gives them a much better ability to see and understand trends and best practices as well as how to capitalize on them. It is this ability, rather than the mechanical manipulation of increasingly automated systems and platforms that will allow agencies to show value, to differentiate themselves, to stay relevant, and ultimately to survive, and even thrive.

Next week on octopus, we will continue to explore the role of the digital strategist. Please be sure to comment below. I’d love to hear from you. Please subscribe for alerts about new episodes and content. Thank you for listening to octopus. I’m Nasser Sahlool.

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