Which Online Marketing Agencies will Survive the Recession?

Business.com / Marketing Strategy / Last Modified: February 22, 2017

Recession fears raise the same question among online marketing agencies - "Will we survive?". Setting aside warnings of impending agency...

Among the client pitches, creative brainstorming and status meetings, one thought is never far from mind for anyone working at one of the various flavors of online marketing agencies these days - "Will we survive?"

Its also a pretty important question for their clients since the last thing a marketing director, already struggling with a declining budget and fewer personnel, wants is to have to deal with the disruption of finding a new agency.

I've been there before. During the dot.com boom, I ran a small B2B integrated marketing agency in Silicon Valley. Thankfully, through a fortunate confluence of events, we were able to get out of the agency business just before the peak and were spared what seemed to be the complete decimation of high tech marketing during the early 2000's. But other agencies weren't so lucky and a lot of great people lost the opportunity to do what they loved most - find innovative, effective ways to communicate the value of products and services to buyers.

Sean Carton, chief strategy officer at Baltimore, MD web and communications design firm idfive, recently wrote a great summary of the predicament in which agencies find themselves entitled "The End of Ad Agencies as We Know Them." (kudos for the wonderfully inflammatory title). Reading this article brought back a number of memories from the dot.com bust for me, just as it did for a number of those commenting on the article. The main question this article poses is:

"Do we really need advertising agencies anymore? Are we witnessing the great "reboot" of the advertising industry hastened (but not caused) by the current recession?"

The answer to the first question is yes, we absolutely do - there will always be a need for outside specialists to do what a company cannot (or should not) do internally, and this is particularly important in the creative and technical services domains where talent is both scarce and expensive. Along these lines, Mr. Carton certainly is not predicting the demise of either advertising or agencies. Rather, he feels the recession will drive a trend toward smaller agencies more concentrated on the following areas:

  • Strategy
  • Account/project management
  • Creative leadership (but not execution)
  • Media strategy (but not the actual planning & buying)

In this new world, according to Mr. Carton, agencies will be built with the purpose of providing high-level strategic guidance that clients need in a media-chaotic environment. These agencies will expand or contract as needed or will explore radical solutions to get work done for less money. In essence, the monolithic agency concept crumbles in favor of smaller, more nimble, focused, strategic agencies or consultants linked together via the (free) collaboration and social networking tools now available.

This vision is, as they say, "old wine in new bottles" (something Mr. Carton admits, with the exception that the collaboration/social networking tools now make this vision more possible than it was in the past). I see things a bit differently:

1) Large agencies make the best stories during economic downturns, so its no wonder people frequently predict the demise of the large agency model -  Large agencies typically work with large, well-known clients, both of which get a lot more press and public attention during good times or bad. When times get tough, clients cut back which forces an agency to contract, cut costs and the whole process draws much more public attention than the same challenges faced by smaller agencies or consultants. Let's not fall into the "base rate fallacy" where people judge more visible events to be more common, even if that's not the case.

2)  Both large and small online marketing agencies are hurting and facing changes to their business models - Online marketing is certainly faring better than offline, and drawing increasing budget from traditional marketing, but agencies large and small rely on the health of their clients to grow and thrive. A broad recession like this one doesn't discriminate by company size.

3)The consumer and client backlash against agencies has more to do with the times than inherently inefficient practices - We know we're in La-La Land when 66% of US Internet users in a recent Harris poll indicate that agencies are at least partly to blame for the current economic crisis.

4)The ability to collaborate isn't an impediment to agency survival, strategy is - Collaboration and social networking tools have great potential to facilitate communications among dispersed experts, but are small agencies that use these tools inherently better off than larger agencies with more face-to-face collaboration in a central office? I'd argue that its not the tools, but the strategy behind the agency that matters. Agency personnel can collaborate like crazy on a project that's still a horrible disaster for a client if the right focus on client needs, KPIs or creative standards aren't enforced.

5)Which online marketing agencies will survive this recession? The ones keeping a laser focus on understanding and meeting changing client needs- Again, I don't think this is a large agency or small agency issue. Its a strategic priorities issue. Clients are under amazing pressure to drive results with fewer resources. Under pressure, people's focus tends to narrow - they become much more concerned about what's happening today versus their long-term strategic plan, and also focus more on what they know best. In this environment, agencies must choose whether they or their clients will be most affected by this pressure. Will the agency take the view of their clients and adapt to changing client needs, even if this is incredibly uncomfortable at times? Or will the agency give in to their own pressure and fight back in the face of changing client requests, clinging rigidly to pre-recession practices? Agencies that put the client first may experience more short-term pain but are likely to be the big winners from these trying times.

Some concluding recommendations for online marketing agencies:

Keep serving the clients' stated, immediate goals as your #1 strategic priority.  It's easy to get caught in the hype of all the new digital mediums and ad channels, risky creative, etc. This is no time to strongly argue that your clients should "trust us, we're the experts."  Understand what clients really want, insist on knowing how this will be measured (one area in which to dig in your heels) and execute efficiently.

Stick to your knitting - Its (very) tempting to say "yes, we can do that" to a client interested in a marketing channel, such as social media, where your agency doesn't have much experience or expertise. With clients under considerable pressure to deliver results, this is not a great time to learn on the clients' dime, so to speak. Instead, tap into talented experts across a wide range of B2B marketing domains who suddenly find themselves out of work (or underutilized). When the economy turns up, you may or may not choose to bring these new skills into your agency - as I said, I don't believe that the smaller, focused agency described by Mr. Carton is inherently better - but the need to consistently deliver great results to clients today should drive outsourcing.

Crow about your true expertise like there's no tomorrow. What is your agency really, really good at doing for clients that you have the case studies and stats to back up? Not what you think you're good at, but where have you really driven great results? Clients want solutions. If their existing agency isn't delivering, they're going to be searching online, talking to their friends/colleagues, sending RFPs out via Twitter and otherwise trying to find an expert as quickly as possible. Make sure your agency is found, and make sure what prospective clients find is tangible examples where you've delivered results, not just unsubstantiated assertions about what you can do.

In summary, the online marketing agency that's fit to survive in today's economy isn't going to be the one that offers all forms of advertising (or even digital advertising for that matter), the latest and the greatest innovations in advertising, or even the one that's the epitome of the small, specialized, nimble agency described by Mr. Carton. Its the online marketing agency that makes itself truly indispensable for meeting their clients' goals TODAY, and the one that can demonstrate this success in a concrete way.

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