Two months ago, advertising agencies were complaining that entrepreneurs from ill-considered Internet start-ups were banging on their doors demanding ad campaigns (MW November 4 1999). Agencies said that while some would become successful businesses in the future, others were just “timewasters.com”. The problem was how to separate the wheat from the chaff.
Now the tables have turned and disgruntled dot-com clients have the chance to reconsider their relationship with the ad industry.
Last week, Smile, the Co-operative Bank’s online service, announced it was reviewing its advertising account out of Partners BDDH, just four months after launching. The agency says of the review: “We are the victims of our own success. The bank has taken off so well that its future plans have been brought forward.”
There is nothing to indicate Smile is unhappy with BDDH’s work. The brand is to be split off from its parent the Co-operative Bank, and has brought in a new director, Bob Head, who was previously commercial director of Egg.
But industry observers predict many dot-coms will review their agency arrangements.
One problem stems from the fact that some agencies do not see these new advertisers as a long-term fixture on their client lists. Seventy per cent of visitors to the Institute of Practitioners in Advertising’s Website believe the “Net bubble will burst”.
The past nine months have witnessed an ad agency windfall unequalled since the privatisation “gold-rush” of the Eighties, when the ad industry had never had it so good. The privatisation of state-owned industries meant ads were needed to raise awareness of flotations. The market was awash with accounts for the taking and many agencies recruited extra staff to work on this rich new seam of businesses.
What followed was not quite so pleasant. Britain was hit by recession and the ad industry forced to cut its workforce by 25 per cent.
What is surprising about that debacle – which left few players unscathed – is that only limited preparations were made for when the new revenue dried up. Things are different this windfall around. Senior industry figures can still remember the last time and are taking precautions. In some cases, agencies view the bulk of this new source of income as a temporary surge, and are servicing accounts with existing personnel.
This is starting to backfire. Martin Jones, managing director of the AAR, which matches clients to agencies, admits some dot-coms feel they are getting a raw deal from agencies and have come to him to find others.
However, he says a number of factors cause a breakdown in the dot-com/agency relationship: “A lot of them don’t do it properly in the first place, rushing into an agreement which turns out to be culturally wrong.
“Agencies have often moaned that media owner agencies make difficult clients. It’s ten times worse with a dot-com.”
The dot-com client not only believes everything can be turned around in a day, but that the effect of advertising can be judged immediately through the number of hits on a Website. The client gets frustrated quickly and often does not comprehend how long it takes to develop a brand.
Dot-com advertisers’ substantial media budgets mean they are often seen by agencies as get-rich-quick schemes. “The industry went through a bad time in the early Nineties, in terms of new business. This dot-com thing explodes and it’s like manna from heaven,” says Ogilvy & Mather chairman Paul Simons. “However, we need to have a few honesty sessions with these clients.”
Simons believes some agencies are taking on dot-coms without seeing a future for the brand. It’s a theory supported by former Orange marketing director Chris Moss, who is setting up Nextweekend.com: “In any gold-rush, there is always a saloon bar, where there are always good-time girls. The ad agencies are being seen as the girls.
“These agencies are taking the money, but 80 per cent of the advertising cluttering our screens is being wasted. It should be about building a brand. All these ads are doing is renting a space in people’s minds,” he says.
Moss also thinks agencies’ creative output is not up to scratch.
Among dot-coms, another gripe is that agencies are not necessarily using the most talented staff available. “With a limited number of talented people on agency books, it’s easy to see why they aren’t put on dot-com businesses,” says Simons. “After all, more than 80 per cent of dot-coms will more than likely not be around in a year’s time.”
This is not an opinion shared by Nick Hurrell, joint chief executive of M&C Saatchi, who counts Lastminute.com and Bol.com among his clients: “We have some of our best people working for high-profile clients.”
In some cases, dot-coms are paying more than other advertisers. They demand that things be done quickly, so agencies charge a premium. “I’m hearing cases all the time of design agencies charging 300 per cent more than normal because clients are demanding such a fast turnaround,” says Moss.
Nick Hough, managing director of Leagas Delaney, which recently picked up recruitment site Justpeople.com, says: “Dot-coms are probably more work-intensive than any other client. In some cases, they should pay a premium. A normal packaged goods client plans a year ahead. Dot-coms want work in two days.”
Agencies are not necessarily increasing their staff for this new surge of business. “The problem is, you don’t know what the market is going to look like in a year’s time,” says Hough. “We have a priority to stay in business, and taking on large numbers of staff is not always viable. If you took on freelancers, you wouldn’t necessarily please the client.”
On the other side of the Atlantic, the dot-com market is 18 months ahead of the UK, and starting to consolidate. Agencies are conscious of the fact that they could spend a year building a relationship and a brand, only for the original client to sell-up or merge, and the account disappear.
Most ad agencies admit that if they were to lose their dot-com businesses tomorrow, in the present climate redundancies would not be necessary. But few would admit they are failing to service adequately their lucrative dot-com clients.