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September 28, 2007 / Toby Dayton

Buzzwords Alone Won’t Fix Ad Agencies’ Proclivity For Old Media

Speaking on a panel at Advertising Week, Steve Hardwick, the top guy at ad agency Grey, explained how his shop was going to begin dedicating itself to melding and integrating traditional media with new, digital media. Grey was now and forever going to be a ‘tradigital’ agency. Hardwick actually wants to coin the phrase tradigital. Cute. Arguably a decade late, but cute. And as Spongebob calmly says to Plankton after the little one-eyed green guy declares he’s going to take over the world, “Good luck with that.” (Clearly I have kids…)

One of the most surprising things I’ve seen in the short time I’ve been in the media and advertising business is how resistant to change most ad agencies are. It’s certainly a truism for most businesses and perhaps human nature in general, but I naively thought that ad agencies, for the most part, would constitute one of the more innovative and dynamic sectors of the economy. And while there are certainly agencies that fit my prior assumptions and are doing phenomenally creative work that leverage new technologies and new media platforms, the vast majority are plodding along, fearful of change, and ignorant or even apathetic about new, ‘alternative’ media. Many, too, are greedy and lazy. Despite the fact that new media vehicles can often deliver far better, more tangible results at a lower cost, too many agencies choose to stick to more expensive, less productive strategies and campaigns because they’re easier to manage, require less work, and generate higher fees.

Without question, the web and alternative media still entail risk. Small start-ups, unproven models, and questionable scalability abound. And nascent platforms, a lack of standardization, and sometimes questionable metrics (are they any worse than the standards today?), all create legitimate issues for many advertisers and agencies today. But as Max Kalehoff adroitly points out (here), there is an ‘excessive lag’ between the rapidly growing amount of time consumers are spending on the web and how much share of the nation’s advertising spend the web is capturing. Kalehoff cites fear among client-side marketers themselves (‘no one ever got fired for buying radio, print, or TV’), economics (agencies are unable to figure out how to make web media-buys profitable), and inefficiencies inherent in the online models as the top 3 reasons for this lag. But while Kalehoff claims that the lag is a good thing, as it allows for slow and steady maturation of the whole industry, I would argue that a sufficiently large, enduring lag will obliterate the ad agency model the way the web and new, alternative media are obliterating traditional media in general. The lag serves almost no one – not the advertisers, not the new, innovative companies being formed, and certainly not the consumer who would be better served by more robust economics on the web facilitated by higher advertising spend being directed online. The only winners from the lag are the traditional media companies who continue, at least for now, to capture a disproportionate and unjustifiably large percentage of advertising expenditures. Traditional agencies might be served in the short-term, but as potentially stagnant middle-men in the equation, they’ll eventually lose.

The pace of change is too quick, the traction of new models is too substantial, and the formation of new companies that deliver more compelling value propositions is too daunting. The longer agencies wait for new media to fit neatly and conveniently into their antiquated ways of doing business, the higher the risk is that they’ll become entirely obsolete. There are too many examples to list even a handful, but new entrants into the market are increasingly making it easier for advertisers to design and manage their own campaigns, buy creative and media directly from suppliers, and generate a more concrete, valuable ROI. Unless agencies quickly find their way in the new media landscape and begin strengthening their value proposition instead of watching it whither away, they will suffer from forced obsolescence, or what I call fobsolescence.

[tags]Fobsolescence, Grey, Steve Hardwick, Spongebob Squarepants, Plankton, Advertising, Advertising Agencies, Old Meedia, Traditional Media, New Media, Digital Media[/tags]

One Comment

  1. gl hoffman / Oct 1 2007 9:18 am

    Spot on. And I see now, that actor/director Ed Burns is getting his new ‘little’ movie distributed exlusively on iTunes. Given the impact that Steve Jobs has had on music is now the time to short movie theater stocks?

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