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November 15, 2007

Traditional Ad Agencies, an Endangered Species

Traditional ad agencies have the most to lose during the transition to digital advertising. At least that's the assessment of 44 percent of those executives interviewed by consultancy Accenture.

One in three say broadcasters could be the biggest losers. And, they aren't referring to the reality show.

"The dual challenges of technology and cultural adoption create a pessimistic perspective on the fate of the traditional advertising agency," warns Accenture's media and entertainment team in its global digital advertising study released this week.

What's more, the consultancy says some business leaders contend that traditional agencies are incapable of adapting to the digital era, thus clearing the way for technology savvy upstarts to fill the void.

Businesses with the most to win during advertising's evolution? Online search companies and digital advertising specialists, say survey respondents. The consultancy interviewed 70 business leaders from advertisers, media companies, ad agencies, and technology providers earlier this year.

Survey respondents predict advertising will be viewed on three screens -- television, computer, and wireless handset. And, advertising agencies must be prepared to support all three.

Advertising will become more performance based. "In effect, this change will put TV advertising on the same basis as the film industry's weekend box office -- with accurate measurement of results, rapidly delivered," the Accenture team says.

Advertising agencies, to survive, must master technology to target advertising, perform customer analytics, measure performance, and interact with customers. Fewer than one in four respondents said their companies are equipped to do so now.

The global annual spend on television advertising is currently pegged at more than $150 billion, almost 10 times larger than expenditures for online advertising. Still, more than two in five business leaders say they expect digital media will become the primary form of programming and advertising content within the next five years.

Posted by Anna Maria Virzi at November 15, 2007 9:25 PM

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