Battle in Adland: Big Shops Encroach on Little’s Digital Turf

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As the global economy continues to waver, things are looking positively rosy for advertising and public relations firms. With Veronis Suhler Stevenson predicting a 55-percent increase in U.S. spending on public relations services by 2013 (up to $8 billion annually), news has been rushing in from all sides of the major ad holding companies of expanding revenues and new digital opportunities.

The uptick in optimism started last week when Publicis reported a 19.8-percent increase in full-year revenue. Omnicom added to the fun after reporting 2010 revenues that were up 6.4 percent, which prompted this headline from the normally stoic Financial Times: “Omnicom heralds advertising acceleration.” Not a bad assessment of happy days to come.

But things really picked up this week after WPP announced it was developing a new interactive ad network to fully vest itself in all things digital.

From WSJ.com:

The network will stitch together four digital ad agencies that WPP has acquired since 2005—New York-based Schematic, Cincinnati-based Bridge Worldwide, Singapore-based Blue Interactive and New Delhi-based Quasar —creating an organization that will have roughly 1,000 employees in 18 offices around the globe.

By acknowledging the vast opportunities that large digital agencies have, both for meeting client demands and forecasting and delivering upon future innovations, WPP may have made the strongest statement yet that the age of small, nimble digital shops holding an edge over their big, traditional brothers is coming to an end.

For the longest time, one of the knocks on the big ad and PR agencies has been that they’re too slow on the digital side, too ingrained in old-school silos and just too big to handle the myriad real-time marketing and communications challenges faced by modern businesses. Thus, many small, digitally-focused agencies have made a name for themselves by expertly meeting clients’ immense digital needs.

But I’m not so sure that advantage will last. Don’t get me wrong; I’m a big fan of the young, vibrant digital shops that have cropped up in recent years. Just in the New York City-area alone, we’re privileged to have several great, digitally-savvy boutique agencies, such as Attention PR, Carrot Creative, Droga5 and a whole host of others.

But let’s be honest with ourselves: many of these agencies have built their business and reputations on being not like the big agencies. They eschew silos, they’re incredibly savvy on the digital side and are more nimble in helping clients meet today’s modern marketing and communications challenges.

But the large agencies are starting to catch up. They’re realized that trying to keep traditional marketing and advertising separate from digital doesn’t work too well. As the big-boy agencies continue getting smarter when it comes to digital, they will have the resources and financing available to take on new initiatives and develop new partnerships to benefit clients, which can be difficult for digital start-up agencies.

That doesn’t mean all is bleak for the small shops. Certainly not. But it does add an interesting twist to the ongoing small-versus-large battle in PR and ad land.

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  • prestonpesek

    As a client
    deciding whether not a larger or smaller advertising agency is best suited to represent
    my firm, I am very wary of the potential conflict of interest that exists
    within a company that finds itself at a point where it has made the decision to
    acquire other companies.  By the time a
    company becomes large enough to grow by acquisition, they are now sandwiched
    between two distinct and potentially conflicting interest groups: their clients
    and their investors. 

    As a
    client, I want a company that can efficiently tailor a PR campaign that gets my
    message into the world and doesn’t cost me too much. 

    As an
    investor, I want the company to demonstrate quarter over quarter growth in both
    top line revenues and bottom line financial performance.  One of the most efficient ways for any
    company to grow these figures at a scalable rate is to acquire other companies…
    This is done by acquiring revenue streams from existing books of businesses,
    and then cutting into corporate overhead costs by consolidating operations
    under one roof. 

    I don’t
    know exactly when it happens, but there is a fundamental shift in the evolution
    of many client services companies when the focus naturally gravitates away from
    the client and toward the investors.

    The
    question I have as a client, is, what do I gain from getting a specialized arm
    within a larger company with unquantifiable synergies across all arms of the
    company, when all I need is my specialized arm at a fraction of the cost?  What types of unquantifiable culture and
    individual entrepreneurial drive is lost by the cost cutting efforts exacted on
    a specialized company who was recently acquired? Let’s face it, the guys who run the recently acquired just cashed out and are thinking about retiring, not about my company’s problem. In short, who do the partners of the firm
    serve: me as their client as an individual, or their equity investors at scale?

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