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Ad agencies need to re-invent themselves if they’re to survive
Tomorrow’s consumers will be increasingly hard to reach over the next ten years so agencies will need to re-invent themselves to adapt. This is according to a new IPA report that has just been published (2nd January 2007) �The future of advertising and agencies: A 10-year perspective�, which has looked at the future shape of the advertising industry. The IPA has worked with the Future Foundation, a global strategic consultancy and think tank to outline the future challenges for the industry.
This is the first time that a fully comprehensive overview of the total commercial advertising marketplace has taken place. The IPA, along with the Future Foundation economics and modelling team, was able to cross-correlate Advertising Association Data with published information from the Bellwether Report, the Direct Marketing Association, the Institute of Sales Promotion and the Interactive Advertising Bureau.
The report prescribes that as non-traditional areas of marketing communications activity grow it is incumbent upon agencies to either invade this space or face a shrinking business future. The majority of the IPA�s members are optimistic about their ability to grapple with the future. However the overriding message of the report is that of a wake-up call to agencies who need to get to grips with emerging trends or else see commercial advertising begin to decline.
Says Andrew Walmsley, Founder and Chairman of I-Level: �In the last few years we�ve seen quite staggering amounts of change, change in the way that consumers can see the media, can see the product, and changes in the way that the economics of markets operate. These are really quite fundamental shifts, and they�re not going to go backwards. If anything they are accelerating.�
Re-classifying the industry
To create a more meaningful picture of the industry going forward the IPA and the Future Foundation have attempted to re-classify all marketing communications to better reflect the present and future dimensions of advertising. The report proposes a move away from historic definitions such as : above the line and direct to newer, broader definitions. These include :: named ::(or personalised media, for example DM) versus :: not-named :: (for example TV), :: screen :: (for example TV, mobile) versus :: non-screen:: , (press, radio etc) :: two-way :: (interactive) versus :: one-way :: (passive).
The new world order
In the future agencies must recognize that traditional advertiser/agency/consumer relationships will be challenged with new models of engagement coming to the fore. As traditional advertising continues to decline, by 2016, the hypothesis is that media owners of all kinds, including online search, all networks, gaming environments and interactive digital TV, will be integrating brands directly into content and editorial. Moreover, savvy consumers will be taking increasing control of content and the directional flow of interactions. Agencies will not just be competing with other agencies. Allies may become competitors, consumers may become channels, advertisers may become suppliers and agencies may become media owners. Already, consumers are creating their own forms of advertising, free of commercial imperative in the form of social networking sites. Already, media owners are already bypassing agencies to develop advertiser funded content through their own creative departments.
The advertising model of the future
Thus the report has proposed three scenarios for the advertising model of the future, which were the result of a number of workshops with senior agency management that took place earlier this year. Who will be in the driving seat? Agencies, media owners or consumers? Whoever it is will have a tremendous impact on the growth or decline of commercial advertising. By 2016 if agencies continue to be in charge then commercial advertising will grow by an average 4.6% per annum, if its media owners it will only grow by 2.3%. The worst scenario for agencies will be if advertising becomes consumer led whereby commercial advertising will only grow by 1.2% per annum. This last scenario suggests agencies have no room to be complacent and must start to capitalise on emergent new opportunities.
New roles for agencies
This report indicates that by 2016 traditional advertising will shrink at the expense of consumer-influenced content and brand�influenced editorial so agencies will need to both innovate and evolve into new territory. New freedoms in the delivery of content, data and channels will provide new business opportunities whilst still maintaining the overriding focus on brand creation and development. Agencies will need to take on multiple roles such as:
-agency as media brand owner
-agency as joint venture partner
-agency as content collaborator
-agency as programme producer
-agency as network creator
-agency as data provider
-agency as data aggregator
If agencies don�t take these opportunities there will be tremendous implications in terms of their relationships with clients, their remuneration packages and their very existence.