At Advertising Week in New York, I heard a consistent rumble about the upheaval on Madison Avenue. From Chief Marketing Officers for major brands, to ad buyers, to ad agency execs themselves, everyone seemed to agree that the Advertising Agency business is being turned upside down.
It's very simple — the business of buying ads — agencies bread and butter — has been automated and commoditized by the likes of Google .
So agencies are being forced to redefine their purpose.
If companies can communicate directly with consumers through Twitter feeds and Facebook profiles, why pay an agency to be an intermediary? As more media companies from Time Warner and Martha Stewart Living Omnimedia offer advertisers more in-house help with ad "creative," where do agencies fit in? Many of the Chief Marketing Officers I spoke to this week were cautious to keep conversations on background — they did not say that ad agencies were becoming obsolete, though they admitted that they rely on them for very different services than they did a decade ago.
The CEO of Starcom USA, Lisa Donahue, tells me that as advertising has gotten more fractured and diverse, the agencies play a new important role. Instead of acting as ad buyers, they are brand stewards — helping companies communicate their message across a slew of platforms, from iPad ads to Facebook ads to the traditional 30 second spots. The ads need to be tailored to the format, but they also need to be consistent and true to the brand. Donahue also says the agencies play a key role determining how to allocate resources across platforms, and how to measure the success of various investments
Chuck Porter, the Chairman of the Crispin Porter Ad Agency and the Chair of the American Association of Ad Agencies says that the changes in the ad business are sure to result in some major fallout. He predicts far more specialization among agencies, in areas like mobile and social media. He even went to far as to say that the number of ad agencies could fall by 20 percent in the next five years. And, Porter told me, Madison avenue will be less and less based on Madison Avenue. He predicts that the creative ideas for ad content and connecting with consumers will increasingly come from smaller agencies across the country. So that ads up to a Madison Avenue that's leaner, more specialized, and no where near Madison Avenue.
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