…As marketing veers fully into the digital world, specialized digital agencies are either evolving into more full-service shops or specializing further still
Digital agencies were once the hottest segment of the advertising agency business, serving as key vendors for chief marketing officers looking to bring their work into the online future and essential acquisition targets for giant ad-agency holding companies.
As their skills gradually became table stakes in marketing—and waves of new disruptive technologies washed over the business—such digital shops have been evolving into new types of companies.
Now the arrival of generative artificial intelligence threatens to put a period on the generalist digital agencies the industry has known, according to one prediction for the year ahead from Forrester Research
The firm defines that brand of agency as those that help companies design, build, manage and activate digital experiences and digital marketing.
Some digital specialists are specializing even further.
Merkle, an agency owned by Japanese ad giant, Dentsu that has long provided a wide range of digital, customer-relationship management and data services, in August announced it was simplifying to focus more on customer experience, for example. Some other capabilities previously provided by Merkle were absorbed by sibling companies in the Dentsu portfolio.
Other agencies, including digital shops DEPT and PMG, have grown their services to go beyond the traditional remit of digital agencies, said Jay Pattisall, vice president and principal analyst at Forrester. Agencies are expanding offerings to include technology consulting or creative services, for example. Sometimes this expansion has happened through mergers, as when ad holding company WPP combined digital agency VML with creative shop Young & Rubicam in 2018, then merged the resulting entity with another creative agency in 2023.
“‘Digital agency’ is less meaningful when all touch points and nearly all channels are digital,” said Pattisall. “We think it will go away as a descriptor.”
What marketers are looking for
Astha Malik, chief business officer at software company Braze, said the agencies she works with are already moving away from branding themselves as “digital.”
“Anecdotally, we see less of our partners using the word ‘digital’ at their company level,” and in job titles, Malik said. “Even within the big [advertising] holding companies, we see this almost blurring or integration between what might have been previously separate technology shops and traditional, more creative shops.”
Those same holding companies are simultaneously creating hyper-specialized offerings that target specific business needs or industries such as retail, or giving brands more tailored solutions for practices such as customer engagement.
That proliferation means brands will need to streamline the number of agencies they work with to create campaigns effectively, Malik said.
“The number of partners and agencies [CMOs] need to know and integrate together has increased,” she said.
Sustainable online grocery company Hive Brands has moved away from large digital-focused agencies to work with more specialized freelancers, an arrangement it finds quicker and more cost-effective for doing various marketing and digital tasks, according to Katie Tyson, its co-founder and president. The company still works with a small-to-midsize external performance marketing agency, but also has a performance marketer in-house.
“I really believe you can’t have one without the other,” Tyson said.
“We need the agency for big-platform, big-picture stuff.” External agencies are skillful at navigating Google or Meta Platforms, which rapidly change the way their platforms work and often prioritize their relationships with bigger spenders, she said.
Digital estate-planning company and settlement platform Trust & Will looks to supplement the marketing functions it handles in-house with agencies that specialize in areas such as social media.
“What works on TikTok doesn’t really work on Facebook, and so a lot of times when you have an in-house team, you’re creating one asset and then you’re just cutting it in sizes for different platforms,” said Trust & Will Chief Marketing Officer Dale Sperling. “It’s not the best strategy to get that authentic connection and growth on those different social channels. So I do see a use case for having a specialized creator or agency that knows that platform and is really good at that style.”
Sperling said she believes smaller marketers are more quickly shifting their strategy away from relying on classic digital agencies than larger companies.
“I think it’s going to be a slower pace with some of those bigger corporations. They tend to always lean on those agencies of record to fill the gaps,” she said, since those companies are less tapped into the newest trends and technologies than their agencies might be. “Over time, maybe, but that’s a big ship to turn.”
How agencies are preparing for the new reality
Forrester’s Pattisall said that for digital agencies, this moment is particularly acute because of the rise of AI.
“The highly specialized skills once occupied by data analysts, data scientists, search professionals, engineers, etc., are readily accessible to all in the form of simple chat interfaces,” using large language models and other AI technology, Pattisall said.
Some digital agencies created in recent years say they have sought to future-proof their business models, some of which involves preparing for the changes AI will bring.
January Digital is in the process of changing its slogan to “The Marketing Leadership Company” from “The Digital Leadership Company.”
Chief executive and founder Vic Drabicky said when he started the company in 2011, he believed digital media execution—the planning and buying of media on online channels, a service that it provides—would eventually reach a point in which it was automated.
He set up a company designed to work as a business partner with clients, rather than as a vendor solely hired to deploy media campaigns. That meant providing a wider set of functions, including new market and business development, auditing marketing technology partners and evaluating talent, he said.
As major players such as Google and Meta continue to automate much of what strategic media buyers once did, certain types of agencies will see their value lessen dramatically, Drabicky said.
“The premise of agencies being these outside organizations that just sort of twist knobs in the background, from the beginning we’ve said it’s a dying piece,” he said.
DEPT, a digital agency founded in 2015, has sought to work across both technology and marketing in an integrated way, said CEO Dimi Albers. But it doesn’t matter how agencies have referred to themselves or whether they began as consultancies, traditional agencies, digital agencies or IT services companies, Albers said.
“In the end, those are all semantics,” he said. “What’s more important is their ability to help marketers deliver work that connects businesses with their customers in smarter ways.”
Source: The Wall Street Journal
