It's a seemingly great time to be a brand. Our digital world has created numerous challenges in reaching consumers, but thanks to digital channels like social and mobile, there are arguably more opportunities than ever to create connections.

For agencies, whether the digital revolution is a boon isn't always so clear. Yes, agency services are in great demand as a result, but the complexity of digital advertising is creating some significant pain.

According to Andrew Swinand, a former Starcom MediaVest Group executive and founding partner of Abundant Venture Partners, agencies had better be careful: they face a crisis similar to that faced by newspapers and those that don't make changes soon could find themselves winners in a tragic "race to the bottom."

In an AdAge guest post, Swinand explains the three challenges he sees as existential threats to agencies:

  • "The business of managing digital advertising is hugely complex compared with that involved with handling traditional TV, print and radio advertising."
  • "The dominant fixed fee-for-service compensation system vs. the traditional commission-based compensation, whereby digital work was paid much higher, has meant that agencies are doing more work for less money."
  • "Digital work gets even more complex with the emergence of search, social, big data, owned media, branded entertainment and other new media."

According to Swinand, agencies are under increasing pressure, "sapping...the creative and strategic product."

So what are agencies to do? Swinand says investing in technology is a good start, as it can be used by agencies to "increase efficiencies in workflow and media buying, so that agencies can be free to focus on strategy and ideas."

The good news: "breakthrough technology is available" -- often from upstarts backed by firms like Swinand's. The bad news: a lot of this technology is expensive, and agencies already facing declining margins are loathe to write big checks.

Technology doesn't necessarily address complexity

Can technology play a role in reducing complexity, thereby creating efficiencies? Absolutely. But is it the panacea Swinand seems to suggest? Probably not. Technology alone is never a guaranteed solution to problems of complexity, and in fact, more than a few companies have harmed themselves by throwing more and more (and more and more expensive) technology at a problem.

So while there's no doubt that digital advertising is complex, the question here is not whether agencies need to arm themselves with more technology, but rather: where is the complexity coming from?

The real-time bidding (RTB) space may be instructive in answering this. The RTB model is, by design, intended to provide for the type of automation and efficiency Swinand seems to believe is necessary yet, despite the hype around, and growing adoption of, RTBs, there is still substantial confusion amongst both media buyers and sellers. Why? Because, well, the RTB ecosystem required to provide for all that theoretical efficiency is complex.

While this doesn't mean that RTBs are destined to fail, the RTB space is evidence that technology can be a force for increasing complexity just as easily as it can be a force for decreasing it. On the flip side, one only need to look at the $130bn/year television advertising market -- often criticized as being backwards technologically despite the fact that it functions quite efficiently -- to see that efficiency isn't always a product of technology.

Everywhere is nowhere

When it comes to the complexities digital advertising is creating, it's important to recognize that the ever-growing number of channels (the "search, social, big data, owned media, branded entertainment and other new media" Swinand refers to) is a big part of the problem. For agencies grappling with a complex digital advertising ecosystem, it's worth considering that trying to be everywhere is increasingly going to lead nowhere.

No, agencies won't realistically be able to ignore prominent digital channels. They have to be able to speak to these channels. But if one of an agency's core functions is to provide strategic guidance to its clients, as Swinand himself states, an agency should not jump into all channels with its clients.

At the end of the day, channels do not handle themselves. If "already stretched-thin teams are required to manage, track, analyze, slice, maximize and handle countless new responsibilities" because agencies are getting their clients in to each and every channel that emerges, the solution is a return to sanity and thoughtful deliberation, not panicked multi-million dollar investments in newfangled technologies that promise to automagically handle everything.

Redefining the agency

If anything, it would seem that perhaps the greatest existential threat to agencies is an increasingly confused notion of what they are and should be in the digital era. Media planning and buying are an important function of modern agencies, and the idea that ongoing investment in these areas is a necessity is, at the highest level, a seemingly good one.

But before agencies invest millions in software and platforms that carry bold labels like "operating system for the advertising business," they should first assess whether or not they've been a part of the complexity problem by deluding themselves and their clients into believing that every digital channel is a viable one, and that more technologically sophisticated approaches are the best path to higher ROI.

In many cases, they'll find that their complexity challenges are the result of human error. And, fortunately, fixing human error generally doesn't require software.

Patricio Robles

Published 16 October, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (5)


Deri Jones, CEO at SciVisum Ltd

Good article, there's even an argument that agencies find technology hard: clients have demanded technology deliverables such as micro-sites etc so they have done them.

I wonder if the personal strengths needed to to rise to the top in an agency, are very different from the personal strengths needed to effectively manage the roll out of projects that sit on technology.

Just one example - attention to detail. Software writing is an incredible open ended thing, your team can create entirely new functions: whereas in the traditional world your team can never create new types of TV advert!

So managing the open-ended-ness of software requires a manager to also have a focus on detail: as opposed to the broad brush, and conceptual approach that agency managers perhaps tend to have.

Maybe I'm wrong about this cultural issue - but certainly the evidence I've seen working on the website performance of some major brand projects is that agency-built micro-sites are often woefully inadaquately built to handle the anticipated demand.

Just last week we load tested one, and found the micro-site could only handle 1/10th of what the campaign was intended to generate!

They'd lacked attention to detail in matching up the traffic predictions, with the complexity of the code base and with the scale (or lack of) infrastructure allocated.

Luckily there was 2 days free in which to remedy things - but it did involve begging the brand-client to 'borrow' some of their online kit!

But to be positive, maybe we'll see agencies evolve to recognise and reward both of the personality strengths, it order to effectively deliver technology profitably despite the tighter margins.

almost 6 years ago


John Snow

Technology can help solve problems but one of the most common mistakes companies make is not properly evaluate their needs and bring technology that meets these needs. This means fully understanding how to use the technology and what benefits it can offer.

almost 6 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy


Interesting comment and experience. I won't go so far as to suggest that agencies shouldn't under any circumstances build micro-sites for clients, but I do think there's an important question here: if an agency's value is on the creative and strategic side, should it be acting as a web development shop?

Agencies can't do everything, and when they position themselves so that clients expect them to do anything and everything, they aren't doing themselves any favors in my opinion.

almost 6 years ago


Deri Jones, CEO at SciVisum Ltd

Quite right Patricio - it's the classic trade-off, between jack of all trades versus being the best of breed.

It takes some discipline though for an agency to see client money going straight out to suppliers, when internal voices are likely saying that the web is now easy and mainstream and 'we can surely do it in house - we already have some web guys anyway!'.

over 5 years ago


Andrew Swinand

Patricio, I appreciate the insights you brought to my piece in Ad Age. I agree with much of what you said, especially that technology is not the only answer. However, I think the biggest issue isn’t that there are too many media choices but that it’s difficult to manage them well. I wrote about that in a guest blog for Centro, the company I mentioned in my column Would love to continue the conversation. Andrew

over 5 years ago

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