• by Mark Walsh  @markfwal, March 18, 2009

When it comes to tackling digital media, agencies and brands are still too locked into traditional ways of doing business to exploit the full potential of advertising and marketing online.

"The agency business is good at siloeing itself to death," said Tim Hanlon, executive vice president and managing director of VivaKi Ventures, the investment arm of Publicis Groupe's VivaKi unit, at a panel on contextual media and advertising at Digital Hollywood's Media Summit New York conference Wednesday.

Hanlon's fellow agency panelists shared in his industry self-flagellation, diagnosing and debating reasons behind the industry's uneven efforts to crack the code on interactive advertising some 15 years after the medium emerged as an ad platform.

"We have all this money in TV advertising, and in interactive, but we still don't have a particularly good interactive ad model," said Trevor Kaufman, CEO of interactive agency Schematic. One of the obstacles panelists pinpointed was the difficulty in scaling campaigns online as easily as a TV campaign can be expanded across networks, specific programs and times of day.

"You buy a Yahoo (home page) takeover, and what else are you going to do?" said Kaufman. "You can only buy so many banners."

To give marketers more eye-catching options online, the Online Publishers Association this month introduced a trio of new, larger display ad formats intended to give shops like Schematic more room to showcase their creativity on behalf of brands.

Bant Breen, executive vice president and global director of strategic development and innovation at Interpublic, highlighted the benefits of harnessing TV to online advertising via search. By buying specific search keywords related to TV spots, marketers can give consumers a way to get more information about a product or service or act on a message.

"Clients are not optimizing for search off of TV spends," said Breen. "We know people watch those ads because it ties into search."

VivaKi's Hanlon stressed the need for agencies and clients to throw out the conventional distinctions between advertising and marketing illustrated by the link between TV and search. "A lot of brand marketers now have them separated and siloed and funded differently," he said. "We should probably mash the best of those two together."

To do that, agencies and brands must break down long-standing barriers between brand advertising and direct marketing, media-buying and creative, and among different media formats. "I don't know where those boundaries are anymore," said Hanlon, whose VivaKi group was created by Publicis last year as a central hub for its digital media services and partnerships.

But how eager are companies to innovate and experiment in the midst of a punishing economic downturn? While the panelists advocated increased risk-taking by clients during lean times to take market share from competitors, marketers may not be heeding that advice.

"Are classic brand advertisers going to retreat or is it different this time?" said Hanlon. "I still don't know the answer to that."

Interpublic's Breen explained that clients are cutting back on spending, while Kaufman noted that clients are also pushing for 10% fee reductions because of economic pressures. Instead of cutting fees, he suggested that agencies offer to improve ROI by 20%. "That would be a more constructive way to approach the issue and that's how we're approaching it," he said.

Only Mark Renshaw, executive vice president and digital practice lead for Publicis' Leo Burnett-Arc Worldwide unit, seemed to evince a predatory approach when he spoke of "stealing share" from competitors and "inflicting pain on smaller brands."