Traditional advertising agencies are not well suited for thriving in the new digital world because the skills and expertise still pertain more to traditional advertising needs. Highly specialized digital disciplines require specialists, but those are too expensive and rare to maintain on full time staff. So the agency model must also adapt to the times.

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Digital Marketing
Trends, Implications
for Agencies
- 1 -
Dr. Augustine Fou
http://linkd.in/augustinefou
December 2013

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Trends
1. Brands/clients take tasks in-house (e.g. in-source social
media, analytics, and digital media buying)
2. Shift from commission to fee-based compensation
3. Shift from AOR (agency-of-record) to project basis
4. Procurement departments involved in sourcing
5. Production work (e.g. HTML coding, graphic design) no
longer profitable for large agencies due to lower cost
alternatives (e.g. small firms) and globalization
6. Trend towards analytics and big data and away from just
“creative” (which was an agency stronghold)
7. Trend towards specialization and maintaining a roster of
specialists that can be used on as-needed basis.

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Source: ANA via eMarketer, Sept 2013
Brands Use In-House “Agencies”
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56% have
already
started
moving
work in-
house to
save costs

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Source: ANA via eMarketer, Sept 2013
What In-House “Agencies” Do
- 4 -
• Magazine ads
• Social media
• Online display ads
• Search engine marketing
• Newspaper ads
• Search engine optimization
• Mobile advertising
• Out of home advertising
• Radio advertising
• Tv advertising
• Social Media
• Display Ads
• Search Marketing
• Search Optimization
• Mobile Ads
Are being done in house
because they can buy direct
or use ad networks
themselves.

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Buying Direct from Facebook
Source: AdAge RBC Capital Survey September 2013
More clients/advertisers are buying direct from Facebook (similarly
with Google Adwords, Twitter, etc.); so the “buying power” rationale
is no longer valid, or will be less so going forward,

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Changed from 70% commission and 30% fee to 81% fee and
only 5% is commission; Increasingly clients add in
performance clauses
Fee-based Compensation
Source: Association of National Advertisers

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Performance-based Incentives
Source: Adweek, August 2013

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Procurement Involvement
Source: Assoc. of National Advertisers, via MarketingCharts June 2013

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IDC Study April 9, 2013
An IDC study has found sweeping changes in how mobile display
advertisements are sold, with Facebook, Pandora and Twitter
successfully wresting away control from advertising
networks over the last year.
“In display ads, the era of ad network dominance has come to an end,”
IDC said. “New mobile ad budgets flow more easily into the coffers of
publishers than into those of networks.”
“Mobile display ads accounted for US$1.7 billion of spending in 2012,
up from $700 million the year before. IDC expects mobile advertising
spend to reach $7 billion this year, up from $4.5 billion in 2012.”
Source: IDC April 9. 2013

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Specialization Rules
Source: SoDA 1H 2013 Digital Marketing Outlook

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Trend Toward Specialization
“The last few years has seen the dramatic rise of small, niche
specialists in various digital disciplines like paid search,
organic search optimization, mobile marketing …
Unfortunately this has led to the current situation – dozens of
agencies working on various parts of marketing projects and
little coordination among them.
What is needed is better digital strategy, or a strategy to begin
with, so that the different digital activities “row in the same
direction” and synergize to drive business impact.”
Source: ClickZ “The Agency-Client Relationship is Forever Changed” by Augustine Fou

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So What?
“These large, irreversible changes in the
marketplace are having correspondingly large and
permanent impacts on traditional agencies and
their holding companies. The relic agency model no
longer works efficiently in the new digital world and
new forms of revenue and streamlined operations
are called for. Agencies that cannot evolve and
innovate like this will not be able to survive.”
Augustine Fou- 12 -
- Dr. Augustine Fou

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Dr. Augustine Fou – Digital Consigliere
“I advise clients on what to in-source and
what to out-source to vendors and agencies. I
also help them set up metrics to measure the
impact and efficiency of the tactics
deployed.”
FORMER CHIEF DIGITAL OFFICER, HCG (OMNICOM)
MCKINSEY CONSULTANT
CLIENT SIDE / AGENCY SIDE EXPERIENCE
PROFESSOR AND COLUMNIST
ENTREPRENEUR / SMALL BUSINESS OWNER
PHD MATERIALS SCIENCE (MIT '95) AT AGE 23
ClickZ Articles: http://bit.ly/augustine-fou-clickz
Slideshares: http://bit.ly/augustine-fou-slideshares
LinkedIn: http://linkd.in/augustinefou

14. Augustine Fou- 14 -
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Augustine Fou- 14 -