Why Ad Agencies aren’t adjusting to a real-time social media world


Usually when I hear a sentiment three times in week it is a signal for a blog post. Here are the signals coming at me in the last few days:

  • “Our advertising agency is staggeringly out of touch with the demands of a digital world. I caught them giving us the same cookie-cutter plan they tried to lay on me when I was with another company three years ago! ” — Brand Manager, Fortune 500 company
  • “We are losing a lot of digital business to smaller agencies. We have too much bureaucracy, too many contracts, too many approvals to go through to be responsive and real-time.” — Creative Lead, Large New York Agency
  • “Our ad agency set up a separate division for social but they still try to manage it like it is purely advertising. I’m not happy with that. I don’t think they know the difference.” — CMO, Hospitality Industry

So what’s going on here? Social media is a relatively mature channel by now. Why the ad agency angst?

I think I know the reason.

The dynamics of social versus advertising

I am about to make some generalizations. These statements are not universal but I do believe they paint a broad view of the problem.

Here is how Advertising typically works: A client gets money approved for an ad campaign. The Ad Agency pitches a concept for the campaign and if they win, they plan, create and execute. As the money is spent, awareness for your product goes up. When the money goes away, the awareness goes away.

There are MANY uses for social media but GENERALLY, it is a channel to deliver a drip of useful/interesting/vital content that leads to awareness, trust, and eventually loyalty. It rarely results in a short-term bump in sales like an ad campaign (although it can). It is more of a long-term play to reach new and existing audiences where and when they need you.

Although this is an evolution in how we may think about marketing, it’s not really rocket science. Why are agencies having trouble adjusting to the digital world?

It’s all about money

For decades, ad agencies have been organized and funded by this campaign model. Bid. Win. Execute. Repeat.

But succeeding in social media marketing and social influence marketing requires an organization and budgetary process geared toward the long-term. Agencies are not built to handle that. Every internal process is optimized for “campaigns,” not “relationships.”

I believe the main reason agencies seems to be flailing around is not for a lack of wisdom or ability, it is a matter of organizational design, company culture, and internal accounting processes.

The fact is, most company marketing departments are built this way too. Their budgets are constructed based on some percentage increase or decrease of what was done with the agency last year. Making a budget overhaul more aligned with today’s realities is going to take some time.

So in a way, these outdated agency models are reinforced by their customers who take lazy approaches to budgeting based on past performance and some quarterly sales goal.

The challenge

In summary, ad agencies are slow to shift due to:

1) An accounting/organizational model built on campaigns.

2) Customer budgets historically aimed at quarterly spends and results (that reinforces this agency model)

3) Unrealistic expectations for social. When a customer approves a budget for social, it typically has the same quarterly budget and performance requirements, which may not be realistic, contributing to a cycle of unfulfilled expectations.

Some critics may add here that if social can’t be held up to the same economic standard as advertising, why do it? An example:

I was consulting with a large company that is spending $70,000 a month on full-page newspaper advertising. They called me in for advice because they felt their ads were not working as well as they used to. Well duh … newspaper circulation in this city was down by 30% in five years.

Why were they still spending that amount each month on a sinking ship? Because that is what they had always spent, so it was easy to create that budget and get it approved.

Meanwhile, I was able to show them how competitors were building a vital, useful social media presence integrated with both TV advertising and digital ads. I tried to convince them to take a percentage of their traditional ad budget and build a social media presence.

This was two years ago. They still haven’t done anything on the social media scene (other than a token Facebook page and Twitter account) because they can’t move their organization and budget process away from the quarterly advertising metrics and budgeting cycle.

I want to emphasize once more that this is a generalization, not a gospel. Certainly there are exceptions and the best-managed companies are moving forward. What has your experience been? Is the ad industry stuck or is it moving ahead?

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  • Mark, it took some organizations hundreds of years to grasp Copernicus’ concept that the earth rotates around the sun, not the other way around. What does that have to do with agencies? Fear. (Happy Cinco de Mayo, BTW.)

  • As you describe, Mark, this inertia represents the triumph of the familiar over the possible, reinforced by increasingly out-of-date processes. In the end, some degree of cultural change (within both agencies and their clients) is a must; and, arguably, the only force strong enough to force that change is a relentless focus on what matters to the consumer or customer. Social is clearly a means by which to understand and interact with those consumers or customers, eventually creating some degree of emotional investment (which can become “relationships” in some cases). Even in the b2b environment, purchase decisions involve a powerful emotional element; whether they make widgets or waffles, companies that won’t invest in getting to know their customers better as people risk losing sales and share as they stubbornly hold to “procedurally convenient” but increasingly ineffective time-bound campaigns.

  • Well said Pete. Kind of a weird dynamic. Company: “We need to go social but we don’t know what we want.” Ad Agency: “It looks just like advertising and we can do that for you.”

  • Thanks Doug!

  • Carmen Allan-Petale

    I think if the company is innovative enough then they’ll succeed in social media – it’s only the businesses that are stuck in their ways that don’t see the benefits of adapting. Look at Virgin – it’s always innovating and creating great social media campaigns thanks to Richard Branson having the foresight.
    I guess unfortunately not every business can have Richard Branson as their leader!

  • Funny. I mention Richard Branson in tomorrow’s post! Thanks for the great comment Carmen!

  • Carmen Allan-Petale

    Haha, really? Will have to read it – I’m interested now!

  • MaureenMonte

    I sometimes wonder if ad agencies aren’t a cross between the Wizard of Oz and a Brain Surgery Office – they don’t expect to be examined once a proclamation or diagnosis has been made. Do you think that is part of the problem, and that a “social media advocate” is required to bridge the gaps?

  • PeterJ42

    Marketers are expert at deception. But in the past few years the thing they are deceiving is themselves. They don’t want to move out of the broadcast era (when broadcasters talked to people, but people couldn’t talk back).

    Content Marketing and Marketing Automation are good examples.
    MA said – just keep sending the emails, but we’ll automate them so you can send more (and hey, let’s call them nurturing).
    Content said – “you love telling your story. Why you are brilliant, what makes you different etc. So here’s a new way to do it, without any of that “listening”.

    The ultimate is “Think like Publisher”. That really is throwing good money after bad. Publishing is in decline (bigtime) so let’s throw our money at using a method which obviously doesn’t work.

    Marketers have to stop deceiving themselves and their companies. They must pivot and start working on providing what buyers actually want – a company which makes clear promises and keeps them.

  • The more I do this daily, the more I’m convinced social media can’t be outsourced successfully. It’s impossible to be real-time if you’re not present in real-time. It’s impossible to be real-time if you have to email a client for an answer to a question before you can give a customer a reply.

  • Recently had the same chat with CEOs of 3 different companies. They think the same way you described it Mark. They go for things they know, scared of changes and marketing makeovers.

  • Love this comment Peter. You’re so right, marketers are experts at deceiving themselves. There so no place in social media for playing games and using tricks. People can respond anytime they want. We have to realize that behind likes, tweets, and g+ there are people like us. They want to be cherished, they want to be heard, they want to matter. Social media give that chance to marketers. It’s really up to them whether they gonna use it or not.

  • solid analysis, Mark. words are everything. and from what I’ve found, the friends and colleagues that work in advertising seem to speak an entirely different language. they use terminologies like “target, attack, win” vs. the social language of “connect, engage, and offer value.” the change needs to first start with a fresh perspective…and then build into integrating and educating them on an entirely new language – one in which the advertising execs can grasp. this may not be easy to execute, but quite necessary.

  • First, it is a DELIGHT to see you back int he comment section Maureen!

    There is a weird dance going on. Brands are trying to figure out social, ad agencies are trying to hold on to the billable model while convincing companies they can “do” social. Nobody wants to rock the boat too much.

    In the first quote above, the second sentence from the brand manager was “and I’ve had it. I’m going to fire these guys.” So maybe change is ahead?

  • Thanks for the comment sir.

  • Superb comment Konrad. Well said.

  • Really good observation. Bringing this activity in-house has profound consequences, doesn’t it?

  • I had a real shock coming to me when I started working with some of the major brands. I had this image that they were pushing the edges and eager to move with the latest ideas. No. Not at all. It’s like moving an air craft carrier!

  • Interesting observation Jessica and thanks for the comment.

  • Karl Yeh

    This is a great post mark. Whenever i put out a call for RFP for a marketing agency, paid is the first thing i always see. And I still get recommendations to do ads in some sort of print publication that boasts xxxxx thousands of readers. I get social as an outbound tool rather than a conversation builder or an amplification method.

  • MaureenMonte

    Awww… thank YOU. It’s good to be back home! 🙂 Let’s hope for change that makes a difference. Thanks Mark!

  • Interesting Karl. Sounds like you’re seeing the same thing as me. Will be interesting to see how it unfolds.

  • I agree with your observations RE: Ad Agency biz model, and pointing out the fact that most cannot utilize social media as the effective marketing tool it can be.

    Having worked in the ad agency world early in my career (media buying and account services), I saw how the model was set-up, and I believe it didn’t work so well to serve the clients’ needs, even before social media!

    That is why when I established my own boutique in Tampa, I turned that (failing model, in my opinion), and flipped it to serve better — and it worked! It was very populate, and within 5 years I was nominated for the Greater Tampa Chamber of Commerce Small Business of the Year Award. I believe it all has to do with focus.

  • That is a great story Becky! Congratulations!

  • Vaso Gildizi

    Good approach, Mark. Problem is probably that ad agencies cannot afford a frequent, real-time presence on social media and real interaction with real people.

  • Hi Mark. Really interesting post; not seen this discussed from the ad agency side before. It’s normally PR agencies that get criticism for this type of thing.

    Anyway, on that note and from a broader perspective, I can’t help but wonder whether ANY type of agency (PR, ad, marketing or SEO) is getting this right? At least, any traditional type of agency. Is there a huge gap in the market for a new type of agency model, structure or even offering that operates in a very different manner? And if there is, would there be a market for that agency, as companies are used to the ad/PR/SEO split?

    Any thoughts, anyone?

  • I don’t work for an Ad agency, but I do work for a, let’s just say, HUGE university. The university as a whole has embraced and is pushing local as well as global social, digital marketing/campaigns. They do “get it.” However, some of the smaller departments (like the one I work in…) are still in the “this is the way we’ve always done it…duh” mode. Ugh!! Struggle, struggle…chug chug…chug. Social/digital in my opinion is “The Little Engine That Could” right now..and will be the engine that CAN!

  • Thanks, Mark! I believe when a business model focuses more on the client than supporting infrastructure, it serves well. Case-in-point: when an account was lost in the large ad agencies I worked with, many of the people working on that account also left because they lost their jobs.

    I based my model on collaboration, which at the time was not the norm, but obviously it works — look how much collaboration goes on today! It was a leaner model, we were able to move quickly, and concentrate on the client’s needs.

    RE: Social Media — I’ve been waiting for us to get to this place!

  • Absolutely! I don’t think it’s a coincidence the majority of companies seeing outstanding results are the companies that have chosen to bring the digital marketing team in-house.

  • I haven’t looked at it this way. Would be an interesting study.

  • I believe that is part of the problem. How do you pay for that? How do you pay for “relationships?”

  • Great question. There are boutique agencies popping up all over the place but i don’t have a broad enough perspective to judge them on their success. It really takes a combo of a company that gets it and an agency that gets it. I think Racepoint Digital is doing some pretty good things with influence relations.Ogilvy’s new social media arm has some great personnel behind it. Arment-Dietrich is a small firm with a holistic view of integrating media.

  • You made my day : )

  • rohan goel

    Hi Becky,

    Interesting case – in – point . May I ask… which commercial model works for you, a monthly retainer or a project based one?

  • Gini’s model is certainly something very different, not least for the fact that a) it’s virtual, and b) she recruits people who she’s come to know and trust through social channels.

    To your original point, it takes a sizeable shift in mindset and processes to do what Gini’s done. Personally, I’m not sure most are up to that task.

  • LOL! Thanks Mark! ; )

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  • Bingo! Great article, Mark.

    I worked for an ad agency with many large clients and was part of a small team (>4 people) that managed almost half a million per month in digital ad spend alone. How much of that was in social media? Probably close to $4,000 tops, for ALL their clients. Less than 1%.

    Their argument was that social media doesn’t provide an immediate return. What they fail to realize is that they can attach the same call-to-action and creative campaign to their social.

    As soon as these agencies understand how to utilize, measure, and report on social media, the budgets will follow.

  • Actually, it depends upon the scope of the project, or piece of business. Not every client wants/nor requires a retainer-type arrangement. I prefer to work on a project basis. What about you, Rohan?

  • rohan goel

    Well, as you rightly mentioned , it depends on the scope of work
    Project based assignments don’t give you the time to add value to the client beyond the accepted KPIs
    We generally work with a few clients, but deliver far greater value beyond the scope of work
    I generally look at projects to get the ” foot in the door. ”
    Do you also feel the need for short term performance overshadowing long term benefits in project work?

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