Do ad agencies have a future? The What, How and Why.

Credit/Copyright: Hugh MacLeod/@gapingvoid

Social media has done more than connect consumers in ways never imagined before. It has done more than challenge brands that traditionally communicate with consumers by dictating behavior in a “push” rather than “pull” strategy. Social media has also redefined the short and long-term roles of advertising agencies. Here’s why.

Traditionally brands have broadcast their messaging to consumers with the help of their strategic and creative partners, advertising agencies. This relationship operated on the long-standing premise that brands and consumers were already in dialogue when, in fact, brands played a dictatorial role.

When the Internet gave consumers access to an almost unlimited amount of information, it created transparency like never before. Rather than simply following the dictates of brands, consumers could satisfy themselves as to what they thought about a brand’s products or behavior and share their thoughts with each other. As a result, the dynamics between brands and consumers have fundamentally changed.

Brands have good cause to be concerned. The dynamic they have relied on for some 40 or 50 years still exists but the polarity has reversed. If brands carried the most weight in conversation with consumers in the past, social media has meant that the weight is now shared equally. This shift in control will continue as consumers become better equipped to communicate in real-time from wherever they are. As a result, consumers will get increasingly organized and vocal in opinions about brands.

Brands are being forced to respond by changing their behavior. They may create a product that consumers want, change messaging that is considered inappropriate, or behave in a way that is conscionable to better serve the interests of consumers.

So what does this mean for advertising agencies? In the short term, advertising agencies must help brands accept and engage this shift in polarity between brands and consumers. That means several things:

1. Facilitating a mind shift among corporate management and employees about this new communication dynamic.

2. Helping brands restructure their internal organizations, employee roles and skill sets.

3. Educate their brand partners as to how consumers are currently communicating and the best ways to reach them.

4. Assist brands in monetizing this new dynamic.

In my experience brands often understand this shift better than advertising agencies, making the need for advertising agencies to embrace this new role even more urgent. Many advertising agencies were slow to embrace the digital revolution and are proving equally reticent to embrace the social media revolution. As such, agencies will contract or disappear as new social media companies fill this need just as digital companies did five years ago.

What about the long-term role of advertising agencies?

Once an advertising agency has facilitated this shift in mindset, organization, and messaging to consumers, they must be re-born as strategic and creative partners. They do this by helping brands embrace a wider definition of self-interest that includes the greater good of consumers as well as their own profit. They do this in several ways:

1. Communicate to consumers how the brand has reworked and improved its business practices in order to serve them better.

2. Use strategic and creative thinking to enable their partner brands to profit from their conscionable behavior. That means using their skills to translates consumer goodwill into loyalty, word of mouth advertising and sales at the cash register.

3. Monitor, strategize and continually re-conceive both the identity of the brand and it’s messaging to keep up shifting consumer communication and technology.

4. Constantly resolve the tension between the timeless purpose of the brand and the changing ways to reach consumers. Their role is to ensure the brand’s identity remains consistent, it’s purpose fulfilled, and its engagement effective in the marketplace.

5. Prove themselves to be like-minded partners who operate with the same integrity they expect from their brands.

The short-term role for advertising agencies will be critical in the next 12 to 24 months. After that, the majority of brands will have internalized the importance of social media. (Here’s a great Nielsen report on adoption rates). Those advertising agencies that wait longer will suffer the same fate of those agencies that ignored the digital revolution for too long. New companies, born out of the revolution, will fill the vacuum and steal market share.

For confidence, brands need only look to efforts by industry leaders like Coca-Cola, Nike, Pepsi, Starbucks and Ford. For even more granular examples, the Center for Marketing Research at the University of Massachusetts Dartmouth has conducted a study that looks at the usage of social media among Inc. 500 companies. It confirmed that America’s fast growing private companies are adopting social media at a much higher rate than other companies.

Joseph Schumpeter characterized capitalism as “creative destruction”. In the same way that we have seen a massive reconstitution of the music, television, auto and publishing industries, the advertising industry is now undergoing the same transformation. Technology does not destroy industries, it just changes the players.

There will be those that are so invested in the habits and thinking of the past that they will only respond appropriately when it is too late. There will be those that try to saddle the future with the past with varying degrees of success. There will be smaller, nimble companies born today and tomorrow that will be the titans of the future.

The good news is that every advertising agency has the ability to choose which one they will be. The bad news is that no choice is easy. No amount of wishing away the changes in the marketplace can change the massive shift that is already taking place. It is a tidal wave that will crush some companies and throw others forward if they position themselves ahead of it. One thing is for sure, though. If an ad agency chooses to be a part of the future they not only ensure their own survival but get a chance to shape it.

The tension between ad agencies, digital companies and the new crop of social media companies is such a hot issue. What do you think ad agencies should do?

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