Why digital agencies may start going hungry

3 September 2009 | By Richard Huntington

After the Met Office’s rather confident prediction this would be the summer of the barbecue, it turned out to be a rather different meteorological kettle of fish and once again the summer has been unremittingly dreary.

Similarly, at the beginning of this recession digital soothsayers were predicting this would be the time of the digital agency, basking as they would be in the sunny glory of a culture of accountability. More than that, it would be the death of those sad, old, orthodox ad agencies that simply don’t get it.

Alas, if you’re a digital shop, it’s turning out to be anything but your time. Good news for digital, bad news for the rather quaint idea of the standalone digital agency.

Indeed, the orthodox agencies will emerge from this recession stronger, better and leaner, with the lion’s share of the business that used to be the preserve of pure-play agencies as the latter struggle to play in the big league.

In many ways this is because, at long last, client organisations are taking digital seriously and marketing directors in particular now see it as part of their core responsibility, rather than something that can be delegated to someone keen and junior. And with contemporary marketing involving so many disciplines, there are real advantages in integrating as many of these into as few agencies as possible.

Of course, we’ve long acknowledged the inevitable convergence of the two agency worlds, since the division of labour we now tolerate means at least two sets of overheads. However, there’s a very specific and powerful new factor at work: the fee negotiations that orthodox agencies are involved in to secure their retainers for 2010.

Orthodox agencies may have been the brunt of jokes about slowness, limited creative ambition and a culture that doesn’t get interactivity, but that has long ceased to be true. They’ve got with the programme and if not hired the programmers certainly hired anyone else a bit tasty in the digital world. And armed with this capability and ambition, CFOs are marching into fee negotiations poised to take out the standalone digital agency with a finely crafted remuneration proposal. Such a document will promise significant savings for the client’s budget and moderate increases in revenue for the agency by rolling the brand’s digital scope into the responsibilities of the lead ad agency.

The solution for standalone digital agencies is either to follow the lead of the media agencies and create vast buying points for commoditised production capability, or to develop such strong creative or technological specialisms that they remain of greater value to their clients than the bigger scope deals from the orthodox agencies.

Otherwise, it’s not just the barbecues digital agencies should be worried about, but their lunches too.