Change. It has come to define the current era and remains the only constant in the foreseeable future.
Digital has reigned the last decade, but as technologies converge, budgets shift, new partnerships form and capabilities for both agencies and in-house teams grow, the definition of digital has also begun to change.
The Society of Digital Agencies (SoDA) has released its latest report, the Global Digital Outlook Study, aptly themed, Inflection.
The findings suggest that agencies remain confident, but fully aware of the challenges ahead. And there are plenty to prepare for.
The new guys
Now, if you’re not already, please sit down. We have some bad news.
Agencies are no longer the top preferred innovation partner for marketers.
In fact they have dropped to third on the list, behind consultancies at number 1 (Accenture, Deloitte, McKinsey) and digital media partners at number 2 (FB, Google) – a finding that echoes AdAge’s recent report highlighting the threat of consultancies with burgeoning capabilities and offerings.
And marketers are welcoming them with open arms. A huge shift from 2016 is the complete reversal of marketers’ openness to working with consultancies, with 77 per cent willing to consider the idea this year.
There’s sad news around marketers’ spend as well. Only 25 per cent want to increase their agency spend and 27 per cent are planning on decreasing it.
Another trend seriously affecting the role of the agency is brands bringing digital capabilities in-house. More than half of agency leaders (58 per cent) are concerned about clients insourcing digital teams – inevitably impacting on agency profits.
It's you, not me
Marketers’ main reasons for ending a partnership differ from what you may think according to the report.
The top reasons for ending a relationship are:
- Needs outgrew agency's ability to deliver
- Clients unhappy with technology/dev capabilities
Agencies may also need to rethink their value propositions to clients, as there is a discrepancy of opinions on what clients value most in their agencies.
Five things marketers value most in their agencies:
- Expertise in emerging trends and technology
- Design excellence
- Strategic/strategy planning
- Content creation
- Marketing creativity/campaign ideas & process/project management
These apparently don’t overlap with agencies’ view of their most valuable offerings.
But all is not lost...
Agencies are still confident about revenue growth though, with 86% confident that 2017 will be better than 2016.
The areas of projected revenue growth by agencies correlate with areas in which marketers are increasing budgets, namely:
- Emerging tech like VR, AI, IoT, chatbots etc
- Customer insights/analytics
- Content development
- Digital products
The report suggests, there are two key drivers of growth for agencies – attracting new talent and developing new services and capabilities. Which makes sense, especially when you look at marketers’ wish list when it comes to agencies.
Four things marketers want from their agencies:
- Better design/creative
- Stronger data capabilities
- Stronger tech capabilities
- Difference pricing models
The death (and re-birth) of the digital agency
The term digital will inevitably disappear as a meaningful differentiator and within 5 years; say more than 75 per cent of client-side marketers and agency leaders. Some have already rendered it gone.
So what does this mean for digital agencies?
A key trend from the report suggests the end. And a new beginning.
“What was once an area of specialised differentiation may become dead weight for agencies and marketers who think too myopically about digital as a distinctive channel or capability and fail to open their aperture to the wider role technology now plays in connecting marketing activities to a more fundamental and integrated human experience.”