What Do Advertising Agencies Do?

By Faris Yakob

http://farisyakob.typepad.com/blog/2012/01/what-do-advertising-agencies-do.html

What do agencies do pic

Outside of the industry, it is little recognized that advertising agencies do not actually make television commercials—this is outsourced to production companies.

Agencies germinate, direct and manage the processes of advertising production.

However, the question is more fundamental than what do they do, but rather, what are advertising agencies for?

In 1975 Theodore Levitt wrote one of the classic texts of marketing. “Marketing Myopia” is the “quintessential big hit HBR piece”, to quote a later article about it from the self-same Harvard Business Review.

In it, Levitt points out that every industry was once a growth industry but that never seems to last, not because the market is saturated but rather because companies misinterpret the fundamental question:

“What business are you in?”

One of his key examples is the American railroads—once a mighty growth industry, it declined steeply because it failed to recognize the threat presented by the emergence and eventual affordability of cars and what was once described as:

“100 ton tubes of metal moving smoothly through the air 20,000 feet above the earth, loaded with 100 sane and solid citizens casuallydrinking martinis.”

The railroad tycoons thought they were in the business of railroads when they were really in the business of transport—they were myopically product focusedinstead of being customer focused.

This idea has become an adage of marketing, aphoristically captured by Levitt himself in a later article:

“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”

It’s the same logic that might have prevented Kodak from its ignominious fall from grace. Kodak wasn’t in the “film” business that digital cameras abruptly decimated, it was in the business of capturing memories—it just didn’t realize until [possibly] too late.

Advertising agencies “make” advertisements and this is a surprisingly healthy business considering how often its demise has been trumpeted.

Indeed, television advertising in the USA grew 9.7% in 2010 according to eMarketer, bouncing back after the recession, and growth is projected to continue.

Despite time-shifting ad-skipping digital video recorders, the death of the 30-second spot has been greatly exaggerated.

That said, it’s important to remember that advertising is a drill, not a hole.

Advertising is a means, not an end, a lever designed to effect consumer behavior leading people to pay price premiums and buy more things and more often, due to the dimly understood interactions of persuasive symbols and human cognitive, social and economic behavior.

Thus, should better, more efficient, more effective solutions to the business problem of marketing products to the masses manifest, companies would be well advised to pursue them.

Advertising agencies then, either make advertising, which is a service that can be displaced, or they help corporations solve business problems with creativity, which will remain an ongoing need as long as there are corporations, but puts “advertising” agencies into a much larger competitive set alongside other business consultants, albeit with a specific competitive advantage of being able to effectively house and manage commercially creative people. Large management consultancies struggle with this for the same reason – the environment isn’t usually very palatable to them.

The business of advertising remains robust for now but the business of ideas that drive business growth is evergreen.

The industry is bifurcating along these lines.

It’s a good idea to work out which business you want to be in and act accordingly.

Pure play advertising agencies should defend and leverage their core competencies inside the extant market.

Agencies that want to explore the possibilities outside this definition of the category must be willing to invest in developing new competencies to service emerging needs, increasingly at the intersection of technology and storytelling.

This blurriness is perhaps best evidenced by The One Club awarding Nike+ as one of the Best Campaigns of the Digital Decade despite, or because of the fact that it isn’t a campaign.

A technology driven product/ service extension attracts and earns attention for a brand, solving a problem with something other than “advertising.”

Both strategic routes are sensible to consider, depending on an honest analysis of the business and its strengths and assets, including its key and often overlooked intangible asset, the agency brand.

The danger comes from attempting to be all things to all customers—the essence of strategy is trade-offs, since finite resource requires finite offerings.

Worse than not making decisions is falling symptom to the “Shirky Principle”—an idea established by Clay Shirky in his book, Cognitive Surplus, and elevated to the status of principle by Kevin Kelly, founding editor of Wired.

Shirky points out that

“Institutions will try to preserve the problem to which they are the solution.”

Rather than solving clients’ problems, agencies that succumb to the principle spend their energies trying to maintain that the world of business and media hasn’t changed, or attempting to stymie symptoms of the change when they encounter it.

As with any corporate strategy, the road ahead for advertising depends on knowing what business you are really in and acting accordingly.

http://www.typepad.com/services/trackback/6a00d8341ca6f253ef015393ed4526970b

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Online Video – time to fast forward

Solid stuff from Paul Silver (@ThePaulSilver) on the challenges facing video and how it can play a more intelligent game.

Article originally appeared at:

http://emergingspaces.co.uk/content/online-video-–-time-fast-forward

Online Video is at an interesting place. It’s poised to accelerate digital spending over the next few years. But it’s stuttering somewhat. Given the time of year, this is not about predictions, but what needs to change if Video is to fulfil its promise.

Planning

Advertisers and agencies alike need to change their planning mentality when it comes to Video. Rule number 1, it is not TV so why plan like it is? Video planning is still dominated by replicating a TV spot buy online. In a world where we now have the ability to address and optimise at scale, why create a plan that is not suited to the strengths of the medium? The Video industry needs to embrace the move to programmatic, audience led buying. There are new ways to reach and engage audiences; TV targeting models simply are not transferable.

We also need to define premium. Advertisers (rightly so) are sensitive about content and environment but to the detriment of innovation. It seems to be a belief that only long form broadcaster content is deemed premium. Id argue that reaching & captivating your precise audience and demonstrating engagement and interaction would be a premium buy? I’m not discounting the value of broadcaster content, but it should sit within a blended schedule that really maximises audience reach and the ability to optimise.

Personalising

A lot of our research from The Pool suggests users want a different online experience, different from TV. All the more reason why we should not be repurposing a TV strategy online. Users want personalisation, they want more relevancy. Our research has shown that if ads are more relevant, users are more engaged. Users understand the web economy; if they need to be exposed to advertising in exchange for content, they want it more tailored. This is another reason why innovation is needed. A change in the way we serve ads, using data (in the same way we do for Display) to customise creatives on the fly. We simply have to.

Measurement

Speaking of optimising brings me onto a fairly contentious subject: No one knows how to measure video. Over the past few months I’ve had a lot of dialogue and conversation with those within the video space and the feeling i’m getting is we buy long form content because it dovetails nicely with our TV spot buying schedules. This would then assume that it’s a reach and frequency game against an audience. However, when we start looking at reaching a precise audience, using actual data, the goalposts move. Buyers look at clicks. Clicks are the worst metric to evaluate as a measure of success for Video. Users who click are a) from a certain type of environment and tend to be a consistent type of demographic and b) are not being subjected and impacted by your advertising. Video is truly about upper funnel engagement. Regardless of whether it’s on your mobile, desktop, tablet, connected TV. Those that do click also drive, invariably, terrible bounce rates. What about connected TVs? We are already accessing inventory within these platforms. Do we expect users to start clicking on TVs??

The problem is that there is not a common currency. And whilst there is not a 100% robust methodology to bridge TV to Video using a GRP, we should be evaluating success on engagement and cost per engagement. If that happens within long form content, short form content, it should not matter. You’re reaching your audience and optimising to engagement. If ITV, et al can outperform all else on a cost per engagement model then great.

Buying

Video is still dominated by the old guard approaches to trading. There is a fear to change and innovate and often it is misplaced, perceived fear. Video publishers look at the display space with the excess volume of inventory and fear that Video will become a race to the bottom. This is not the case. You remove UGC out of the equation and you have a model that is prime for biddable trading. You have constricted supply with an increasing demand for that inventory. Anyone knows this will lead to increased pricing. Addressable video is about improving relevancy for the advertiser and rewarding the publisher appropriately. With improved relevancy and reduced wastage means less ads required to make the impact. Less ads at higher yield means a better user experience. A better user experience means more returning visitors. And then the process repeats itself.

Trading Video over a table is not the future digital model. It will become platform based. It will become technologically enabled. But as to the reasons above, this isn’t a bad thing. It doesn’t mean prices race to the bottom. Change is happening and it’s a positive thing which needs to be embraced. At Audience on Demand we are 100% committed to making the Video space more efficient, more scalable and ultimately more rewarding for publisher and advertiser alike.

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Brands need to ramp up investment in creativity for social TV

Article in Marketing Week (@larakiara) on Social TV – we gave comments in light of our announcement to launch Myspace TV.

SmartTV

The influx of social TV apps and platforms set to launch in the UK in the coming months means advertisers should increase their investment in creativity to produce content that is engaging across platforms, according to industry leaders.

In the past week, BSkyB has acquired a 10 % stake in social TV start-up Zeebox, US TV and film streaming service Netflix, which has deep integration with Facebook, has launched in the UK while MySpace has partnered with Panasonic to launch a social TV platform.

About 60% of UK viewers go online while watching TV, according to research by Ebiquity commissioned by TV marketing body Thinkbox, largely driven by discussion around popular live programmes such as The X Factor.

More than 12 million internet connected TVs were estimated to be sold last year, according to Strategy Analytics.

This, combined with the popularity of “dual screening”, is building the “perfect ecosystem” for advertisers to use social TV platforms to drive interaction and create memorable shared experiences, according to MySpace Studios UK’s vice president Daniel Stephenson.

He adds: “TV has been dominant for 50 years and will continue to be so but now advertisers can now think about using gaming mechanics, challenges and experiences to wrap around their content to complement and deepen their existing TV and social media strategies.”

Jack Wallington, head of industry programmes at The Internet Advertising Bureau, says the roll out of social TV platforms will make it easier to produce seamless advertising across TV and digital platforms.

“More broadcasters will be investing in social start-ups to make it easier to sell the combined approach. Advertisers will want to be included with the online conversation and associated with amazing content, seamlessly.”

Lindsey Clay, managing director at Thinkbox, says while use of social TV platforms is set to grow, advertisers should not make the mistake of “prioritising the cart before the horse”, but should instead maintain or increase their investment in creativity.

“For advertisers, entertaining, engaging and creative TV advertising is even more important now because this will power your social TV activity. Don’t undermine your front end TV budget; take it out of your back end online response budget,” she adds

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100 Things To Watch in 2012

Handy overview on all things 2012 from JWT covering trends in social, food, retail, travel, farming, music, technology etc etc etc…

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The industry speaks: what will 2012 mean for media?

With 2012 finally upon us, Media Week polled selected members of the industry to find out what their predictions are for the year, and found that a cautious optimism still remains in media.

2012: the industry sets out its stall
2012: the industry sets out its stall

Media agency

Jane Ratcliffe, chairman of MediaCom, says, “The obvious winner [in 2012] will be outdoor with the Olympic factor and in contrast the impact of the Olympics on TV will not be as pronounced, with the coverage being on BBC.

“Print will be under pressure and we may well see further restructuring of press sales’ departments to find new ways of cross selling etc…

“Agencies which are technologically capable should flourish in 2012, divergence will grow between the haves and have-nots. We may also see a greater shift towards real time, which could open up the door to new entrants such as those businesses built as digital propositions broadening their footprint.”

“There may also be exciting times ahead in the content arena, both in terms of production companies and content rights, which will open up huge opportunities for the brave.”

Tracy De Groose, managing director of Carat, says, “[In 2012] clients will continue to look beyond advertising to make their budgets work harder and they will demand greater measurement and accountability.

Tracy De Groose

“Media agencies have successfully diversified their businesses which will hopefully mean we’re less reliant on advertising spend.”

Stewart Easterbrook, chief executive of Starcom MediaVest Group, says, “I think the most important development for 2012 is how media will become an increasingly engaging experience for those consuming it.

“It is consumers who will push innovation in media. In TV, for example, they will increasingly want to find, watch and share TV/video experiences in ways that suit them. This creates a very content-centric world.

“The increasing seamlessness of consumption across platforms will become very apparent in 2012. Think video, not TV. Mobility, not mobile. And media, not ‘social’ media.

“This will all give advertisers, and their agencies, even better opportunities to engage their customers in an increasingly meaningful and real-time manner. It will also create greater differentiation between advertisers and agencies who can successfully navigate these spaces and those who cannot.”

Television

Nick Bampton, sales director at Channel 5, says, “During the noughties TV came under increasing pressure as it wasn’t able to prove its outcome as well as the internet. But with hindsight and as economic conditions have worsened we now see that whilst a direct link of proof is important, this can’t always fit conveniently into a spreadsheet if your business or brands want real change.

“TV is a creative medium and its confidence is growing, and when it is executed well it leads millions of people to stop and think. No other medium does this quite on the scale or with such regularity. With good execution and the right marketing mix TV can make companies their fortunes as well in 2012 as ever before.

“Look no further than John Lewis, a company that only found TV later on in life but have got it all so very right this Christmas. As a result in 2012 we will continue to see TV stations grow as in 2011, particularly those that work hardest at creating value for advertisers through genuine collaboration and partnership.

“So with this new found confidence, the improvements in approach that’s prevalent in all TV sales houses now and in spite of the horrible economic conditions, we are estimating TV will grow between two and five percent in 2012.”

Lindsey Clay, managing director of television marketing body Thinkbox, says, “In 2012 we’ll see: TV continue to give advertisers the most profit and act as a steroid for other media’s effectiveness; the UK will become 100% digital once analogue switch-off completes; even more investment in gorgeous TV sets and DTRs; more devices becoming TV devices; more mobile TV apps; more integration across home networks with second screening and screens talking to each other; more connected TVs (and the return path they offer), including the launch of YouView; more TVoD coming to the TV set; addressable ads in linear TV; more jostling to build social tools that depend on TV; more tech companies trying to join the TV industry; and more wonderful programmes from the small or cult to the biggest event TV that the nation will never stop gathering around (not least the Olympics).

Lindsey Clay

“There will also be more insightful and useful research studies and events from Thinkbox (had to say it, sorry); even more commercial creativity on screen; the shared TV set remaining the magnetic core of the TV experience; TV advertising again increasing its share of the total ad market just as it has been doing in recent years; and TV advertising remaining the fastest growing part of online marketing money.

“I’m both excited and exhausted thinking about it.”

Karen Stacey, head of broadcast at Bauer Media says: “Despite the dire economic predictions , broadcast (radio and TV) advertising is in a healthy state and we predict another successful growth year for Bauer Radio, its music TV channels and indeed the wider commercial radio industry in 2012.

Karen Stacey

“The Olympics will undoubtedly be a high point and badge of ‘national pride’ but we also expect audiences to continue to live their lives locally – ‘cocooning’ to the security of their known environments  to better ride out the uncertainty of the coming months.

“Listeners will become ever-more demanding, in terms of the quality of programming, the ease in which they can consume it, and how deeply it reflects their needs – whether it’s a family on the school run listening to a local breakfast show in Manchester, or a commuter consuming and interacting with national digital output in London.

“And brands who take risks with innovation and creativity, working collaboratively with media owners to break the mould, will be the ones who gain most.  Advertisers will continue to demand tailored multi-platform solutions, which engage and resonate with audiences on a more personal level.  To this end, Bauer are committed to ensuring clients have direct access to our top creative teams across our radio, TV, publishing and digital sectors to deliver these results.”

Radio

Stuart Taylor, chief executive of GMG Radio, says, “Despite the economic uncertainty and climate we are working in, I think that radio has several reasons to be optimistic as far as revenues are concerned.

“I think the propositions are much clearer, the proof is there and the cost advantages are there for advertisers and agencies. I’m sure that the industry will have a much more sophisticated technology development plan and some of us are already working on that.

Stuart Taylor

“I think that we will be working in an increasingly deregulated environment, which has only got to be a good thing for commercial radio, and I think a deal will be done with the collection agencies to allow more catch up and time shifted listening.

“A lot will hinge on the economy, but there are opportunities available and reasons to be cheerful for radio this year.”

Stephen Miron, Global Group chief executive, says: “Radio in 2012 will continue to build on a great 2011, where along with online, it was the only medium to show year on year growth. The major advertising forecasters have predicted 2012 to be another very good year for radio.

Stephen Miron

“At Global we’re really looking forward to kicking off 2012 with the new Capital Breakfast Show with Dave Berry and Lisa Snowdon and finishing the year by trying very hard to break history and make it three in a row as Media Week’s Sales Team of the Year. Bring it on.”

Outdoor

Matthew Dearden, chief executive of Clear Channel UK, says, “I envisage digital creativity and innovation being the key differentiators in the marketplace for 2012.

Matthew Dearden

“Iconic events such as the Olympics will undoubtedly bring a feel-good factor as well as a great opportunity for business, despite our British potential for cynicism.

“It will be a volatile year and I think the winners will be those who remain disciplined and invest for the future.”

Online

Daniel Stephenson, senior director of category development at Specific Media, says: “With economic doom and gloom showing no signs of abating in 2012, consumers will be looking for bursts of cheer wherever they can find and afford them.

Daniel Stephenson

“These may involve increased consumption of online video and music and even purchasing the occasional ‘feel good’ treat around key events of national pride, such as the Olympics and Queen’s Diamond Jubilee.

“It will be these manifestations of ‘recession fatigue’ that will drive the marketing agenda in 2012.”

Mobile

Gary Cole, commercial director at O2 Media, says, “2012 will see mobile’s growth continue apace.

Gary Cole

We expect new areas such as m-commerce, rich media, video messaging and augmented reality will to become the norm as brands increasingly use mobile’s agility in their communications plans.”

Of course, this is just the beginning of the year but with events such as the London Olympics, Diamond Jubilee and the continuing growth in certain sectors of the industry, the outcome is far from certain. I guess we’ll have to wait until the end of the year to see if our commentators were right.

Until then, Media Week will be following the news and views daily and by the minute. Hope you can join us

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2012: A Round-Up Via Slideshare

A great selection of 2012 predictions via Slideshare.net that show where we’ve been in 2011 and predict trends for the coming 12 months.  A useful reference point for 2012 presentations on trends, strategy, emerging technology etc.

Ross Dawson: What To Expect In The Year Ahead

SapientNitro: How Digital Impacts Your Business

Content Marketing Institute: Social Media & Content Marketing Predictions 2012

Trendwatching.com: 12 Crucial Trends

UN: World Economic Situation 2012

Skytide: 7 Online Video Trends for 2012

Millward Brown – Digital Trends

SapientNitro: What Will Social Media Look Like in 2012

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2012 Predictions

Some further 2012 predictions and observations.

Dan Calladine, Head of Media Futures at Aegis (@dancall1) are:

The List:

1. Mobile Commerce

2. Mobile Payments

3. Mobile+TV

4. Connected TV

5. Mobile in China, India & Africa

6. Mobile’s Threat to Other Services

7. Ecosystems & Walled Gardens

8. Real Time Bidding & Automation

9. Education Enabled

10. Hijacks & Guerrilla Marketing

11. ‘eBay’forServices

12. Simplicity

Justin Cooke (@justincooke) CEO of Fortune Cookie offers his opinion below – I’m keen on Phygital and will be weaving that in somewhere in 2012.

Justin writes: 2011 proved to be an eventful year for digital marketers with scandals, acquisitions and IPOs. From the way things are looking now, 2012 is shaping up to be quite the ride as well. Here is what we can expect to see in digital and interactive media in 2012…

1. Attribution is everything

The volume of digital data on the planet will grow another 48 per cent in 2012 reaching 2.7 zettabytes (2.7 billion terabytes). For CIOs data management must be pervasive and protective but for brands, publishers and agencies it is analysing, interpreting and translating this data into meaningful insight and attributing the source that really matters.

2. Tech meets agency

Code is the universal language of the web. It forms the building blocks of everything digital. As the level of complexity to deliver brand engagement and grow revenues across multiple channels increases, agencies and brands will be expected to understand what underpins everything. Knowing what an API is and how to build a multi-platform app will become a marketing prerequisite and as empowering as desktop publishing became in the 1980s. For the same reason, 2012 will see a significant rise in the number of collaborations between brands and tech start-ups.

3. Consumerisation of B2B

Gamification — engaging consumers by applying simple game mechanics to pedestrian situations — was a big trend in 2011. 2012 will not only see an evolution of the principles of gamification beyond crude points-based badgification but also a shift towards gamifying the enterprise. Brands will realize that their business customers and employees are consumers too and want the same level of fun, persuasion and incentives to perform mundane, repetitive tasks and those that get it right will see huge returns not just in conversion but in loyalty too.

4. Mobile wallet — tap it, swipe it, buy it

UK smartphone adoption is forecast to tip from 40-60 per cent next year and for many the relationship with the phone will become more intimate and complex than ever — 83 per cent of millennials already sleep with their mobile. With mass storage and apps everything we need and hold dear is found on our mobile. In 2012 we’ll be adding our wallets to this list. Around 170,000 UK shoppers a week are already using eBay’s mobile app; PayPal saw mobile transactions up a staggering 552 per cent in the last twelve months; Google hopes to launch its Google Wallet in the UK this year and Near Field Communication (NFC), which enables data transfer between two devices in close proximity will become a standard smartphone feature. This in turn will in turn create opportunities for mobile operators and brands to engage with consumers in exciting and new ways in the battle for the digital wallet.

5. Phygital 

When it comes to true customer engagement, ‘phygital’ sums up where marketing is going and is set to become one of the big trends of 2012. Phygital creates an ecosystem between brands and consumers across the physical and digital worlds, speaking to the needs and aspirations we have as human beings and the physical relationships that are so important to us. What we are seeing at last is a genuine move beyond delivering a one-dimensional brand communication cascaded through a series of channels. Brands are now building saliency, increasing sales and market share through phygital interaction.

6. Social, location-based, mobile commerce

The future of mobile marketing will be intertwined with social, location and commerce. In 2012 social and mobile commerce will expand to make up 20 to 30 per cent of overall e-commerce transactions. 2012 will see a huge rise in location-based interactive services as our devices start to take advantage of near field communications (NFC). NFC enables a brand to send a message to a mobile device when its owner walks past or comes close to a specific spot, whether that is in a train station, airport, shopping centre or supermarket. That message can be an exclusive promotion or a QR code offering a shopper an instant discount on a specific product.

7. Connected TV

We’ve been hearing a lot about the convergence of television and the web this year and it’s predicted that about 350 million connected TVs will be on the market by 2014. The formation last month of the Connected TV Marketing Association , a trade group focused on digital advertising on Internet-enabled television sets and devices, underlines marketers’ belief that this will be game changing. The challenge for marketers will be to weather the transition from traditional broadcast and cable to Internet-connected television while still effectively monetising both. Let the ‘social ratings’ battle between ITV and BBC commence!

8. The app is dead, long live the mobile internet

With more than one million apps in existence and more than two billion apps being downloaded a month the app story isn’t over — it’s just moving up to the next level. As universal adoption of HTML5 drives down the cost of cross platform development for the first time the number of mobile and tablet applications developed will exceed websites.

9. New kids on the block

Google+ was among the new kids born into 2011’s digital block. Fast-forward to the end of 2012 and I predict there will be another new bunch of companies all vying for their space in the digital ecosphere. And who knows, today’s favourites could well be tomorrow’s also ran.

10. BRICS & CIVETS driving growth and innovation 

The BRICS are all well on the way – we all know about the explosive growth of China’s social media platforms Ren Ren and Kaixin and micro-blogging phenomenon Weibo (which overtook Twitter users in 2011). But 2012’s story will be all about ecommerce, where thanks to Government subsidized broadband; excellent e-fulfilment and distribution via Taobao; and Alipay a version of PayPal that only releases funds when the consumer is happy, China will soon become the world’s largest ecommerce nation. 2012 will also see the rise of new digital powerhouses Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa where a lack of legacy infrastructure and massive growth (from a low-base) has resulted in a stream of innovative and disruptive mobile technology particularly around banking, health and agriculture.

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