Vive la revolution
Posted 19 September 2014.
by Paul Head
Citizens and consumers, we are riding the wave of the digital revolution – the scale of transformation akin to that of the industrial revolution in the 18th century. For the broader marketing community, sweeping changes in how people communicate, consume information, make buying decisions and shop have changed the marketing landscape forever. The advertising industry is going through a tectonic shift and, in just a few years, even the very meaning of “advertising”, “agency” and “campaign” have altered.
Recently CAANZ, in conjunction with Lew Bentley at Headlight, undertook a significant and wide-ranging piece of research into the state of New Zealand’s advertising industry. We spoke to agencies, senior marketers and researchers and augmented these surveys with desk research and an analysis of awardwinning
campaigns. The findings provide some interesting insights and also confirm anecdotal evidence.
The fundamental change occurring in our industry is fragmentation.
A recent report by the Ministry of Business, Innovation and Employment indicates that there are approximately 4800 people employed in the advertising services industry, working in over 1600 firms. While the number of employees is largely unchanged since 2008, the number of firms has increased by almost 7% in the same period. This supports our research that found that, following the global financial crisis, there has been a fragmentation of the industry and the appearance of new and specialised companies in the market. Specifically, there has been a significant increase in the number of miniagencies, freelancers and virtual agencies, digital and mobile specialists, as well as activation and content specialists.
There are three underlying drivers fuelling this fragmentation.
1. Emerging digital technology requires new skills
Digital technology is becoming an increasingly important core discipline for the industry. As a result, most agencies have built – and are continuing to develop – in-house digital creative and planning capability.
The technology has also given rise to a large number of digital specialists joining the advertising landscape – website builders, search specialists, mobile and SMS companies, social media specialists, content specialists and more.
Digital and social capability is now mandatory. Today, after some initial reticence from both clients and advertisers alike, we appreciate that digital and social are not simply additional mediums to deliver a message but rather present new opportunities for entirely different ways of thinking, engaging and interacting with people. And, as we learn to use these channels more effectively, the parameters of what is possible are constantly being redefined.
To cover this broadening range of capabilities required by clients, we have also seen an upsurge in collaboration between agencies and specialists. And, consequently, it is now common for clients to be served by a consortium of complementary agencies.
The rise of digital and social communications has also brought more people with backgrounds in science and mathematics into agencies. Traditionally, agencies have been populated by people with backgrounds in arts and business, and long term this may impact the gender balance in the industry.
2. A squeeze on margins has increased the freelance population and startups
Since the global financial crisis, industry margins have compressed significantly as a result of reduced client budgets and fees. Agencies responded with headcount reductions and a resulting increase in contract employees and freelancers across all disciplines and skill levels.
With little regulation and low set-up costs, the advertising industry has a low barrier of entry to practitioners. Associated shortfalls in capability can easily be addressed through collaboration. (There is an obvious “watch-out” for clients here to make sure you are dealing with competent people).
3. A fundamental shift in how advertising campaigns are developed
There is significant evolution in how campaigns are developed both locally in New Zealand and internationally. We are living in a world where “communication platforms” are overtaking “advertising campaigns.” Not only does this challenge the very meaning of the words “advertising campaign,” it has opened the door to new skills, new ways of thinking, and new possibilities for how clients can connect with consumers.
But Newton’s third law states that “For every action, there is an equal and opposite reaction.”
Reacting to increasing industry fragmentation, clients – particularly the large multinationals – are leading an increasingly loud debate on the need for greater industry integration. Tired of managing multiple agencies, the clients are demanding greater integration at an operational level as well as a campaign level.
Only time will tell how this tug of war plays out. But living through a revolution is always challenging, sometimes uncertain and a little dangerous and always exciting.