Groundwork done for a year of growth

21 December 2006

2006 has been a year of transition; 2007 will be a year of dramatic acceleration. Across the industry, the people I've been talking to believe this year has seen the ground prepared for a huge explosion of activity in the next 12 months.

Certainly a number of factors point in this direction. As we report in our 2006 Review (page 19), the amount of money flowing into online advertising shows no sign of slowing. In fact, recent weeks have seen the UK market recognised as the world leader, as MSN's Sharon Baylay points out in our Profile (page 14). And the amounts of money being spent not just in online advertising but in interactive marketing communications as a whole are pushing interactive agencies up the food chain into more strategic roles. The downside, for some, is that budgets are also coming under much greater scrutiny, which means greater involvement of procurement departments in the client/agency relationship. But it also means greater emphasis on measurement and analytics.

The strategy question raises another important issue. There's growing concern among agencies about the power of novelty over efficacy. Whether this is clients asking for the latest fashionable thing, or agencies experimenting with clients' money, the concern is that effective but unglamorous aspects of online business are being ignored, as are the real business needs.

Another key trend that's likely to continue next year is the reshaping of the agency side of the industry. Researching the introduction to the NMA Top 100 Interactive Agencies 2006 guide revealed a significant change from the previous year. In 2005, agencies were warning that the staff shortage was holding back growth; this year they were saying it was fuelling merger and acquisition activity, as agencies sought to buy presence in specialist areas. More seriously, they warned that unless creative agencies could maintain margins, staff costs could force them under.

The flipside of this is likely to be an explosion in new agencies. There have been very few established in the past couple of years, but as existing staff look at the amount of business out there and the reported prices being paid for digital agencies, the urge to do it for themselves will prove hard to resist.

One things is for certain: no matter what happens, 2007 will be another transitional year, just like every other year of the internet age. Things are moving too fast for it to be anything else.



Michael Nutley, editor, NMA michael.nutley@centaur.co.uk