Sunday, July 22, 2007

Digital Age Transforming the Way Advertising Agencies Operate

The advertising industry is in transition, moving from an old above-the-line/below-the-line position to one that is driven by the Internet and the massive increases in online spending and that is better described as "through the line."

By exploiting the opportunities the Internet presented to create niche markets for themselves in Web design and build, search-engine optimisation (SEO) and e-mail marketing, entrepreneurs have developed their creativity to the extent that many may now be classified as digital marketing or digital advertising agencies in their own right.

It is in this sector that the most creative use of new technologies is to be found and the larger global media organisations have been snapping these up to add to the services of the long-established agency brands in their portfolios. Some of the most creative - and award-winning - independent agencies are resisting such takeovers and fiercely defending their leading-edge positioning; these are highlighted in this report.

The digital age is bringing about fundamental changes in the way in which both the media industries and advertising agencies operate. The traditional broadcast and print media are having to reinvent their finance models in order to compensate for declining advertising revenues as advertisers chase audiences across the plethora of media platforms that are now available. Some media owners are embracing the opportunities provided by digital media and redefining themselves as content owners.

Others are, arguably more clumsily, looking to consumers in order to compensate for lost revenues, seeing interaction through, for example, phone-ins, texting and video on demand (VoD) as the way forward.

Advertisers, keen to promote their carefully-built brands across all platforms, are dependent on new thinking to help them, but are aware that their global brands, handled by global agencies, might be missing opportunities in the digital arena. This is how relatively small independent agencies can win business from superbrands such as Coca-Cola, McDonald's and Yell.

As a result of such moves, advertising agencies face the issue of how to integrate their services to service clients across multiplatforms as well as being aware of developing markets, such as China and Brazil.

Consumer attitudes are also changing. The previous edition of this report, published in 2005, focused on the increasing awareness of the problems caused by obesity, especially in children. As a consequence of this awareness, the Government focused on how foods high in fats, sugars and salts (HFSS) were marketed to children. The outcome was a ban on advertising such foods during children's programming, with a further ban to be phased in over the course of a year to remove such advertising around any programmes of which the audiences comprise a sizeable number of under-16s.

This report commissioned its own research to discover how attitudes towards food advertising had changed since its previous Market Assessment report on Advertising Agencies and found that a staggering proportion of respondents now believe that it is parents' responsibility to teach children which foods are healthier than others: over 96.8% in February 2007, compared with 59% in October 2004 when the survey was last conducted.

Another controversial advertising sector is gambling. In September 2007,

the rules around advertising gambling change in the UK, with advertisements promoting certain gambling activities, such as the new `super-casinos', being permitted on television for the first time in the UK. The report survey asked respondents whether they thought allowing advertising for gambling on television would be a mistake. Nearly two-thirds (66.1%) of the sample agreed that it would.

The industry is placing strict controls on the nature of the advertisements but it would seem (from the report’s research findings) that this has not filtered through to the viewing public.

Despite falls in some sectors, there have been massive rises in others and the overall picture for the advertising industry is positive. For many, the changes are as exciting as the initial dotcom boom; however, with lessons learned from that time, new ventures are tempered with financial caution. Clients can trust their digital partners to deliver and, while the changes may make some media owners and some established agencies uncomfortable, for some there has never been a better time to be working in advertising.