Of ad agencies, specialists and brands

I wrote this on my blog in October 2013.

Leading companies in India ‘prefer startups over old agencies for digital ads‘ said an article in The Economic Times, recently. The headline may have been awkwardly phrased but the message was clear: marketers are increasing turning to ‘specialist’ social media or digital agencies for digital creative & execution and not to their traditional ad agency. The common reason attributed to this is that the traditional or mainline agency ‘does not get the new medium’.

If one were to elaborate, the marketing team at the client’s side must have been given reasons to believe that the mainline agency team which interacts with them on a daily basis does not get digital and/or has not recommended suitable digital campaigns for the brand or has not delivered a digital campaign. From the client’s side, what they usually ‘expect’   from a ‘digital’ campaign is: (a) a strategy presentation on how the brand can use new media and suggestions thereof (b) an execution plan or road map (c) sample creative to demonstrate their understanding. That might seem like a lot but what they usually end up approving is (a) a Facebook page and a team to churn out the content there (b) a Twitter handle and frequent hashtag driven campaigns designed to trend and as a bonus (c) website design and management.

While this may seem like a straightforward deal, there are wheels within wheels. From an ad agency perspective they feel that the input to output ratio is all wonky when it comes to social media management. Clients get away with pretty low retainer feel in most cases for  mainline advertising and they expect the social media part to come free or at best a marginal extra cost.  But the demands of social media management is no less stressful than handling the mainline advertising. It means expecting a 10pm call from the client: ‘some guy from Baroda has uploaded a video of our product with worms all over it! Get it off YouTube right now!” and such. Clients, on the other hand feel that the senior management at the agency side is not involved enough in social media activities and may even think that they are too old school to even understand this medium. They also believe that the specialist social media agency understands the medium better and executes far more effective (and cost-effective!) campaigns in new media.

In the context of ‘social media agency vs. ad agency for digital’ debate, herewith some views (unconnected ramblings, more like):

1. What needs to be at the centre of the debate is ‘brand management’ not ‘social media management’. In marketing and advertising’s history we’ve never heard of ‘Radio Management’ or 'TV creative & plan management’ before for a good reason. It has always been and will be about understanding the consumer and formulating brand strategies for long term business growth. The media used to reach the consumer – be it television, social networks or mobile, is only a means to an end.

2. Just because someone spends a lot of time surfing social media networks it doesn’t automatically make him or her a ‘social media expert’. By that yardstick, anyone who spends 3 hours in front of the television everyday should have been labelled a ‘Television content and media planning expert’. What is critical is an understanding of brands and the business of brand building using both short term tactics and long term strategy. ‘How to make a hashtag trend in 15 minutes’ should not be the pre-requisite.

3. Ad agencies have themselves to blame for the situation they are in vis-a-vis digital media, especially in India. In the West,  global agencies and independents have integrated digital thinking in brand communication. There are two models in operation: the old-school ad agency model whose core team formulates brand strategy and creative across  media, without hiving off a specialist division. Wieden+Kennedy, CP+B and Droga 5 come to mind. Just take a look at their brand building success stories of late (note: not just award winning campaigns) and you will notice that new media, digital, social (whichever term you use) is an integral part of the success. It sends out the signal to the outside world that these guys not just understand new media but are masters of it. More importantly they know how to use  marketing communication to craft business building campaigns. The other model is the specialist model, where a social media or digital agency (often part of a global holding group or a division of the mainline agency) handles the digital duties. There have been success stories in this model too. In my view, it a sub-optimal option as the core team formulating the strategy, tactics & executing them has to be one. In India, the latter option seems to be the preferred choice with marketers for reasons mentioned earlier.

4. Clients have begun to realise the importance of a digital presence and understanding of the medium. They have invested in MarCom talent to lead such initiatives within the company. Such talent is relatively junior – having come from ad agency, digital agency or media backgrounds. They find kindred souls (read: young people who have an affinity for new media) in specialist agencies.  And their media agency is steeped in understanding media consumption habits of the consumer, including digital. In contrast their mainline agency team is perhaps content with handling the big ticket film production and other collateral. Naturally, the silo system will only continue to thrive.

5. The utopian solution is to go back to the days of ‘one agency’. Unfortunately, that is impossible. The media planning & buying agencies have become powerhouses of their own and will continue to operate as separate entities. They seem to be better off than their ad agency counterparts in many ways: they attract & retain better talent, they get a place in discussions with the CMO, they are seen as adding value (they number-crunch and understand media consumption habits, invest in research and make recommendations), they have media clout and their award winning work is not only creative but also done for solving real business problems for real brands.

6. The loser in all this is the humble account man. He has no interaction with the specialist media planning team and therefore has no clue (forget say) about media in terms of numbers or strategy. If the other specialist division, Digital is housed within the agency – he has some scope of interaction & contribution to digital. If the agency is an outside entity that too is not an option.

7. Ad agencies cannot afford to train all their employees across disciplines or hire specialist talent (for digital, mobile etc.) simply because their current remuneration structure does not permit it. Due to lack of unity within the ad industry, the concept of monthly fee has become the standard as opposed to the 15% commission. The fee system has very little margin and agencies under cut each other to survive the next quarter. The end result is that they are unable to hire the right (often premium) talent and bring down the fee structure for the entire industry. There are agencies which sign on a retainer fee of Rs.100,000 (approx $1500) even (I guess the average is Rs 2-3 lacs per month - approx$ 3000-4500) – at that fee they will only end up compromising on quality of inputs to the client’s brand. No wonder the client feels the pinch in no time and calls for a pitch or calls a specialist agency to handle digital. Given the cost structure of such specialists they will only be glad to accept assignments at Rs.50,000-2 lacs a month as fee. For that amount all they are expected to deliver  Facebook page management (2-3 posts a day, few contests and a fan larger than the competing brand) and Twitter campaigns with an emphasis on hashtag trending. Sometimes you have to wonder what impact a trending hashtag has on a brand; ‘awareness’ is the common response. But even well-known FMCG brands who have spent millions in brand building adopt such moronic tactics. A ‘specialist’ agency and a willing client aren’t always right for the brand.

8. In my view, in the long run brands will revert to the concept of one agency handling all their brand communication needs based on an understnading of the brand and business-building techniques. Ad agencies may employ or hire specialist talent (say, for creating mobile apps) which they may not need as a full-time employees through the year. Clients will soon realise that bundling all their requirements with one agency and one business leader is far effective in the long run. But the onus is clearly on the ad agencies for that shift to happen. They need to invest in training their current lot and bring digital thinking to the centre of brand communication and not just pay lip service. It is not going to be easy without the support of clients, especially when it comes to fees.

9. The other global trend is for clients to handle social media in house. Not all clients can afford it but if they can, it is great – especially in service categories. A retail store or a service brand may have to deal with consumer interactions in real time and who better than an employee to deal with it? But that kind of investment may not be possible for all brands.

10. So where does all this leave specialist social media or digital agencies? There will be enough business floating around for them: entrepreneurs, small businesses, NGOs and others who cannot afford the ‘big agency’ will find such specialists great to work with. And it doesn’t automatically mean that it is ‘small business’.

Do comment in with your thoughts.