The Future Of Ad Agencies

Today, you cannot go online without seeing an article about the death of advertising. Advertising agencies are getting the squeeze, and things are likely to get worse. What’s the way forward?

Let's start by defining the problem. Customers don't trust advertising for the most part. They are tired of being interrupted. Many are blocking ads altogether.

To map the future, I looked at the present. I analyzed the four trends that are trying to solve these problems: Performance marketing, influencers, entertainment, and platforms. Then, I identified the winners and losers among agencies, brands and media for each trend. The assumption is that one of these trends will dominate the future.

Here is a window into the future:

Advertising As Performance Marketing: A Galaxy Ruled By Google, Facebook And Amazon 

Performance marketing is about delivering more targeted, relevant and faster ads to customers. Today, you can target someone next door who likes burgers with an ad about burgers from the local joint at lunchtime on Facebook.

Personalization solves the interruption problem. The right message at the right time through the right channel makes communication relevant. But personalization doesn’t solve the credibility problem. Plus, if everyone is doing it, customers are still being bombarded with ads.

The winners: Google, Facebook and Amazon

Brands will continue to pay to play on social platforms. The digital giants will own the data, the relationship and the rules of the games. Amazon, who owns the last mile, might become the biggest winner in this game.

The losers: Brands and ad agencies

As customers move to ad-free platforms, the pool of customers is going to shrink -- think Netflix, YouTube Red and HBO, all of which are ad-free. Brands will continue at the mercy of Google and Facebook's walled garden. Agency work will become more tactical. Big brands are likely to bring social media capabilities in-house to reduce cost.

Advertising As Influencers: The Influencer Is The Agency

Influencer marketing has skyrocketed in the last few years to the point that it has become a category. The premise is that people trust more people than advertisers. So, brands are more likely to get the attention by channeling their message through people with a trusted network.

Influencer marketing might solve the credibility problem, but not the interruption one. Brands commission influencers to develop content that they can amplify as “ads” through paid media. Influencers also run the risk of losing credibility if they start promoting too many brands.

The winners: Social networks and influencers

Brands are still playing in the same sandbox. They are just using a different vehicle. Brands still need to pay attention to social networks to amplify the message. The days of Facebook or YouTube giving a free ride to influencers are gone. Influencers also win in this game, though they are likely to get taxed by the social networks more.

The losers: Brands and ad agencies

While brands might address the credibility problem, they are still at the mercy of influencers. Social networks will own the data and relationship. The agency’s role will significantly diminish under this model. The influencer is his or her own agency.

Advertising As Entertainment: Dances With Hollywood

As customers move to ad-free platforms, more brands will need to engage customers through long-form content. Consider The Lego Movie. The movie is the advertising.

Entertainment solves the interruption and credibility problem. Customers choose to immerse with the content. They are not interrupted to watch it. Plus, with long-form content, the brand takes the customer through a journey as opposed to trying to sell them on a product.

The winners: Film production companies and big brands

Production companies are more likely to benefits as brands will prefer to work directly with them. Some agencies might adapt to this scenario by building capabilities in-house. Big brands will start competing for attention that they can no longer buy.

The losers: Small brands

Brands will continue spending money on social media and search. However, they will likely shift resources to long-form content. Small brands, on the other hand, are likely to be stuck in the Google and Facebook galaxy. Creating long-form content tends to be expensive for smaller players, though it does not necessarily need to be.

Advertising As A Platform: Make It Easy

Customers are no longer buying products. They are buying experiences delivered via the products. The more a brand can make a customer's life easier or better, the more customers are likely to engage and buy with the brand. No need for interruptions. The platform is the experience.

When you buy from Nike, you are buying into a system that makes it easy to stay healthy. It inspires and helps you improve your performance. Think the Nike+ Running App. This is the same model that Amazon and Uber are using to a certain extent.

The winners: Brands and ad agencies

We have already seen the system work for brands such as Nike. The brand owns the data, the relationship and the rules of engagement. The agency can play a critical role in helping brands develop the value proposition, design the system and communicate with customers.

The losers: Google and Facebook

Brands are going to be less dependent on social networks to engage with their customers. People might get more benefits by engaging directly with brands than by being targeted by ads on Facebook.

Brands will continue spending money on social media and search. However, they will likely shift resources to long-form content. Small brands, on the other hand, are likely to be stuck in the Google and Facebook galaxy. Creating long-form content tends to be expensive for smaller players, though it does not necessarily need to be.

There Is No Magic Bullet

The future of ad agencies will be in creating platforms that help brands make a customer's life easier and even better. At the core, ad agencies are not in the business of creating ads units. They are in the business of changing behavior. The more we can make customers' lives easier, the more customers are likely to buy the brand.

To pull this off, agencies need to be consultants, and consultants need to be agencies. Helping clients design and manage platforms requires bringing business, brand, design, operation and technology together. Many agencies don't have the depth to play at this level. No wonder consulting firms are moving aggressively to this space.

Thank you for reading my post. This post was first published in Forbes.

Also, here at LinkedIn, I regularly write about advertising, innovation, and culture. If you would like to read my future posts, then please click 'Follow' 

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