Ad agencies fail clients in shift to digital marketing

Advertising agencies are failing their clients when it comes to digital marketing – and the clients with the biggest budgets are the ones complaining the most, according to research from intermediary The Haystack Group.

The survey, released this week, reveals that media agencies – and to a lesser extent direct marketing agencies – appear to have grasped the new opportunities. In contrast, advertisers are increasingly frustrated by the attitude of traditional creative agencies, brand consultancies and public relations firms, seeing them as arrogant, lazy and out of touch.

Not delivering

Just 4% of the 85 client companies surveyed feel that their incumbent advertising agencies are keeping up with developments in digital media, while 65% say shops are simply not delivering what is expected of them.

“The vitriol towards advertising agencies was more acute than I expected,” says Suki Thompson, managing director of The Haystack Group. “Clients just don’t believe them, or think it’s a lot of talk and not much action.”

The complaints are becoming more significant for the advertising sector as digital budgets increase at the expense of traditional advertising. More than half of the companies quizzed have spent &£1m on digital marketing in the past year, and 28% of them splashed out upwards of &£5m. This is reflected in the workload of firms such as Haystack, which has seen digital grow from 5% of its workload two years ago to 20% today. Its rivals also report similar trends.

The internet dominates digital activity for advertisers, with mobile, digital television and other forms of media less important. Some of them use their preferred advertising agency for online work, but according to Haystack these are generally companies spending less than &£1m a year on digital.

While traditional agencies are struggling to meet their clients’ expectations, the smaller specialist agencies are fighting their corner well. They enjoy higher levels of trust from clients, 76% of whom think they are the most appropriate suppliers to use. Clients spending more than &£1m a year tend to use specialists in the digital sector, although those spending more than &£20m a year are tending to ramp up their in-house abilities as well.

The challenge for the advertising agencies is to improve performance or risk missing out on business and influence. Budgets are going to the newer digital agencies when it comes to creative work, and media agencies on campaign strategy.

Digital is still minority

However, the news for digital agencies is not all good. Some clients complain that the specialists are evangelical and unable to put the importance of digital activities in perspective. Digital channels still make up a minority of the advertising spend for almost all companies.

But while 70% of companies said that digital activities are important to their business today, almost all (95%) think it is now more important than it was two years ago.

As digital budgets increase, the outlay is likely to be matched with a reduction in both television and print spending – the media that has provided many advertisers with the high points of their careers to date, and in which many agencies have the greatest expertise. As the ground continues to shift beneath them, at least advertising executives will not be able to say they weren’t warned.

Dominic Dudley