Online Advertising: Traditional Agencies’ Line Item or Interactive Shops' Competitive Advantage?

by Jeff Lanctot, Sep 30, 2002, 12:00 AM

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For the last year (or more), the interactive community has talked about the need to get “TV dollars” from large agencies. Countless case studies have proven the efficacy of interactive, but the industry continues to feel ignored, a two-bit option in a million dollar business. It has become quite clear that traditional agencies will not drive the growth of online marketing. It is little more than an afterthought for them… a low profit line item included to show passing consideration of all opportunities.

Any new medium requires a champion and an advocate to grow and prosper. No one champions a line item.

This has happened before. Traditional agencies used to call direct mail “crap that folds” and they now view Interactive as “crap that blinks.” Direct Marketing and Promotions were seen as a cumbersome and complicated way to reach consumers. Online is now seen in a similar light - an aggravation and a nuisance, and generally a drain on the agency bottom line. There is little incentive for large, traditional agencies to incorporate interactive into a client’s marketing recommendations.

It’s easy to understand why this is the case. Television advertising, the core of most traditional agency campaigns, is all about the creative. A 30-second spot can drive emotions… it can drive sales… and it most certainly drives agency profits. In interactive, it’s not so straightforward (and for the vast majority of agencies, not as profitable). Success in online advertising is driven by data, analytics and technology much more than it is in broadcast. In addition, the lack of standards in online advertising make buying online ad inventory infinitely harder than broadcast.

Make no mistake, online can and does work for marketers, for a myriad of reasons. Rates for online media are incredibly attractive relative to other mediums. The advertising is accountable. The Internet has penetrated the workplace in a way that no other medium ever has. The targeting capabilities available online are unmatched offline. However, few marketers (and fewer agencies) realize or embrace this.

So for the near future, large agencies will continue to shy away from interactive advertising. Their collective size, experience and reputation afford them the luxury of being conservative in their approach. They have earned the right to let others do the heavy lifting. When the Internet is “figured out” they will use their resources to quickly embrace it. When that time comes, the slower-moving agencies (and their clients) may be behind in the game, but deep pockets can go far when you are playing catch up.

Today, online marketing is incredibly hard to do well, and very few advertisers and agencies have figured it out. This is due in large part to the fact that it’s not merely another “medium,” but it’s also a “channel.” Consumers are indeed viewing ads, just as they would on television or in print. If online is incorporated into a traditional plan through a handful of banners and value-adds, a superficial level of cross-channel integration might be achieved. However, the true value of the channel would be ignored. Customers aren’t just viewing ads online, they’re emailing customer service to ask about their new computer, researching automobile purchases, shopping for new clothes, and buying stereo equipment. For sophisticated marketers, the Internet is not just a new place to advertise, it’s also a new way to identify and engage customers. Traditional agencies have neither the experience interacting with customers in this manner, nor the financial motivation to try.

So will interactive advertising grow in a meaningful way? Yes, but in this economy, it will take time. Who will drive that growth? It will be a handful of interactive shops, suppliers, and progressive advertisers that have made a commitment to the Internet, know how to extract its value and realize it’s a competitive advantage. The change will not come as quickly as many would like, and the “TV dollars” will take the longest. But online advertising will continue to grow. Advertisers will continue to prosper. The medium (and the channel) will survive.

And if your agency says they can’t make any money in online advertising - that’s their problem, not yours.

Jeff Lanctot is Chief Media Strategist at Seattle-based interactive ad agency Avenue A.