Shops Stand to Lose in Digital Revolution

November 14, 2007
By Brian Morrissey

Agencies have the most to lose in the new digital order, even more than broadcasters, per industry leaders surveyed by Accenture.

NEW YORK Changing consumer habits, driven by the shift from analog to digital media, are revolutionizing the ad industry. But that could spell bad news for agencies, according to a new study by Accenture.

According to 70 industry leaders surveyed by Accenture, agencies have the most to lose in the new order, even more than broadcasters. When asked who would fare worst in the transition to digital advertising, 43 percent said agencies, compared to 33 percent who answered broadcasters. Cable operators were third with 10 percent. No respondents chose search companies or digital ad specialists.

The challenge agencies face stems from the rise of performance-based advertising and the technology tools needed to execute highly targeted campaigns, rather than mass-media pushes fueled by a singular "big idea," according to Charlie Symmons, senior manager in Accenture's media and entertainment practice.

"It used to be content was king; now it's very much context is king," he said.

For that reason, Accenture sees a threat to agencies from technology companies, which can provide the tools that allow clients to better know their customers. This could displace agencies' value to their clients, the report warns.

Accenture interviewed 70 advertising "decision makers" around the world from February through April this year. Respondents included executives from agencies, media companies and technology providers.

The consulting firm found 50 percent of respondents believe digital media would be the primary form of content and advertising delivery in the next five years. Over 80 percent think it will happen within a decade.

With that shift to digital, the survey found that advertising is undergoing a fundamental shift to become more accountable, Nearly four-fifths of respondents expect advertising will become more performance based, while 87 percent believe analytics will play a critical role.

Yet traditional advertisers are pessimistic they have a good grasp of the tools needed to operate in this landscape. Over 70 percent said the industry is not "technologically prepared for the resulting changes in performance measurement."

"People felt the complexity had grown over the last few years," Symmons said. "It's harder to target and track and develop campaigns."

While ad agencies were not expected to gain from these shifts, 46 percent thought search companies and 19 percent said digital ad specialists had the most to gain.