Eleven years ago, two advertising agencies merged: Draft Direct Worldwide and Foote, Cone, and Belding (FCB). Draft was a successful direct marketing agency specializing in direct mail advertising. FCB was more of a traditional ad agency that specialized in creative work for Television and Print.
The thesis at the time of the merger was to apply the creative work of FCB to the effective media tactics of Draft. Take the effectiveness of Draft Direct, add the creativity of FCB – get the best of both worlds.
I first heard about this strategy in 2007 at a company all-hands, shortly after I started working for DraftFCB in the media department. The address was given by then-DraftFCB New York President Peter DeNunzio – who truly amazed me by his ability to remember the names of all 1000 employees in the New York office.
On the surface, this type of integration seems like a logical idea – but at the time, a move to combine media and creative cut counter to the dominant industry trend. Most large advertisers preferred to shop a la carte for their creative and media services – commonly partnering with two or more different agencies to handle media and creative for a single brand. To some degree the axiom of agency success was: bigger is better when it comes to media (to aggregate buying power and get better rates with national TV networks) and smaller is better when it comes to creative (to get more agile and creative ideas). Another benefit of working with multiple agencies was that advertisers could leverage their supply chain diversity to demand lower rates – often forcing each of their agencies to price themselves down to the brink of unprofitability.
When DraftFCB combined creative and media in the mid 2000’s – it was a smart bet. If it worked, it could have helped DraftFCB escape the “race to the bottom” on fees by selling advertisers a bundled product across media and creative.
There was only one problem. It didn’t work.
Too small to get the best rates on National TV advertising, too big to be known for the best creative work, and unable to break the “a la carte” advertiser mindset – the agency went through a slow decline.
In 2012 DraftFCB spun off the media department into sister media-agency Initiative, ending the experiment of the re-integrated agency. I had left a year earlier to pursue my ambition on the tech side of the industry.
Looking back on my time working in the agency world, I think the thesis behind DraftFCB was correct, but it was about 12 years too early.
Here are the triggers that make me think the integrated model is ripe for a rebirth.
- Biddable Media Doesn’t Require Bulk Deals
Historically, TV has been the largest channel for advertising spend, although, depending on which syndicated research you believe, Digital advertising today is just as big as TV. Unlike TV advertising that relies on large up-front deals, Digital advertising is much more “biddable” – which means bulk deals and getting the absolute best negotiated price is less important than it used to be. This breaks the “bigger is better” axiom when it comes to media buying. Today media is actually about reaching the right people at the right time with the right message – rather than just about negotiating rates with vendors.
- Digital Media is Due for a Creative Makeover
Digital advertising has always been behind the curve when it comes to creative work. However, you could argue that creative is more important to digital advertising than to any other medium. Digital allows you to finely segment your audience and talk to each group of people in a different creative language. A common practice today is for advertisers to take their print ads and “convert” them to digital ads – which fails to take advantage of the unique creative opportunities presented by digital channels.
- Native Advertising is Changing the Game
For as long as I’ve been in the industry – the dominant form of digital advertising has been (generally) ugly banner ads that sit obtrusively on websites. In the next few years, that’s going to change in a big way. “Native Ads” – which is a general term used for ads that are integrated into the content of the site – is what Facebook has been using for years to create one of the largest and most successful ads businesses on the planet. As this revolution makes it way into other content platforms, there is going to be a huge opportunity for new creative work to catch the attention of consumers.
I called this post the “rebirth of the integrated agency” – but perhaps that was a bit of an aspirational title. My hypothesis is that the trends above are something that will allow traditional ad agencies to strike back against declining margins and aggressive entrants on their territory from the technology and consulting sides of the business. But it’s just as possible that this trend could cut the other way. If the new opportunity to integrate creative and media is better captured by the tech or consulting crowd, these trends could further push ad agencies away from what has historically been their core competency.
In my view – watching this unfold over the next few years is going to be very, very interesting.