Sunday, February 25, 2007

Nibbling, gnawing and slowly taking the cream....

I was sent a link to this article by a friend of mine and was asked what I thought... so here it is. (apologies about the link requiring that you register before you read it, but the NY Times article is, to my mind worth the effort).

The article describes the arrival of the "virtual ad agency" which, when you get past the fluff of it, describes an innovative business which uses a pile of stock materials (stock TVC footage, stock creative, stock print templates etc) to offer advertisers the ability to "make their own ads."

That itself is not new - desktop computer applications and web hosting companies have been doing this for years (and to be frank, there is a section of the advertising market that this is perfectly adequate for). What is new, is that these guys are explicitly stating that they are trying to commoditise some of traditonally "easy money" activities of the traditional agencies.

Take, for example, a large agency group who does the ad work for, say a car rental company. I am sure that in addition to the topline agency and production fees, there is a nice little earner in paying the studio juniors to localise the TVC ads for every single location - dropping in the branch address and phone numbers 500 times for 500 local TV stations. Well, not any more. The business model of the"virtual ad agency" seems to include the ability to "self-edit" these TVCs on the fly - pushing the effort and cost to the customer and the revenue and margin away from the traditional agencies.

I am sure that this, in itself, is not going to be the straw which breaks the agency camel's back, but it is yet another sign of the "pressure at the margins" that traditional agencies are facing... a torture by a thousand cuts as one more thing after another gets challenged or changed by this exciting Digital Age age we live in.

How agencies respond (evolve??) will be an interesting space to watch over the next couple of years. As many have already proven, it is hard to "race" into the digital services space since it takes a lot of time, effort and experience to build up quality capability in this space (we have been constantly improving for more than a decade!) and simply throwing money at it won't help. It is time for agencies to really get their heads around where they really add value and to get out of all those things which are outside of this.

As I always say, I really enjoy my job because we get to change the world.... the challenge for some others is learning (fast enough) to live in this new world we are creating.

No comments: