It’s been a long time coming since we’ve seen major disruptive in the agency space. 10-15 years ago we saw the rise of internet agencies, digital agencies, and web marketing boutiques, and then a fast consolidation during the downturn.
Now, we’re seeing the rise of social media boutiques, and we have telling data that shows they are threatening the budgets of traditional digital agencies in a particular type of client. This is a massively growing space, at Altimeter we were tracking the many agencies on a wiki, but stopped updating it due to overflow of submissions.
Immature Brands Naturally Rely on Traditional Agencies
In the novice through mature level brands, the traditional agencies are the first go-to. Corporations rely on them, as they have existing relationships and have purchase orders set in place. Yet we know (see engagement DB and our Facebook marketing research) that most corporations are not even engaging with their customers –they are doing it wrong. They often rely on traditional agencies for education (often a loss leader) research and strategy and implementation.
Traditional agencies clinch revenues from immature and formalized clients, yet have often invested unpaid hours in education, research and strategy and are unable to specialize to meet the specific needs in social business
After Traditional Agencies Have Laid Groundwork Boutiques Swoop In, Clinching Revenues
Once corporations realize that social business is not about short term campaigns, they give $ to boutique agencies. The data from the buyers indicates there’s a significant jump in spending on boutique social media firms when the buyer is advanced and sophicaiated in social business. They know their traditional agency lacks flexibility or doesn’t have a business model for social engagement and relies on them. This is a great opportunity for the boutique agencies, who let the traditional agency do education, set plans in place, experience a few failures letting boutiques swoop in.
Boutiques lack ability to monetize in immature corporations, but when companies reach maturity they clinch an average of $238,000 per brand and push traditional agencies budgets in social to a mere $87,000
I stand by my convictions not to hire social media “Ninjas, Gurus, and Samurai” and received audience applause. Instead, I offered, corporations should hire business program managers, in other words, people that put business goals first –tools and technologies second. This also applies in selecting your boutique agency
Why Social Media Boutiques Differentiate, and Win Deals From Advanced Buyers
Social Media Boutiques are taking the budgets away from Traditional Agencies as corporations become mature. Corporations know they need these specialists for the following reason
Offer a specialized skillset in new media and social business that traditional agencies may not offer
Often offer change management within the corporations –traditional agencies have a reputation for layering social media on top of existing campaigns.
Rather than be ‘campaign’ focused, instead are more long term focused such as building a community with customers for the long term.
Are ready to roll up sleeves to assist with deeper customer engagement –not just deploy traditional advertising (one of the top spends in social business)
Are more agile within smaller teams and can quickly maneuver as the technology space changes over time.
Fundamentally are geared to measure differently around engagement, and what it means –not just top line and bottom line measurements
Yet Social Media Boutiques Limited by Size –and Must Partner
Despite their strengths, Social Meida Boutiques have weakenesses. They are often unable to scale as engagement is difficult to roll out to all product units and around the globe, are quickly finding that traditional agencies are catching up by training staff (see how Edelman has an internal black belt education program) and often lack the ability to achieve an integrated marketing approach
Industry Analyst Perspective: What the Future Beholds
Traditional agencies will adopt these skills, or be forced to contend with options.
Expect the traditional agencies to generate revenues outside of engagement in brand monitoring, education, measurement, and leading an integrated approach
Traditional incumbants will acquire these young startups. Expect this data to be cascaded to the upper echelons of traditional corporations who know they need to quickly get a strategy on M&A activity (see today’s Dachis news)
A handful of these agencies will grow into the next digital agency. Not wanting to sell and enjoy the fruits of their hardwork, many of these agencies will stay
Brands will rely on traditional for education –boutiques often can’t afford to this unless it’s a loss leader for a sale.
While specialization and competition is good, buyers will demand that their agencies work together. The previous HR block marketing team rallied 5 agencies together to work on a single social media effort, for a holistic customer experience
We’re already seeing a few traditional agencies like Edelman (in the lead, in my opinion with Rubel, Armano, Carfi, Brito), Oglivy (Bell, Rohit) build strong internal teams on social business using blogs, thought leadership, and hire social media practitioners.
If you found this helpful, please forward on to your agency partners, and internal teams. Or if you’re an agency and want to share your perspective, I look forward to your comments below.