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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