Commentary

The Anti-Advertising Agency

by dave.b , Max Kalehoff , September 18, 2009

Advertising agencies typically don't have R&D embedded in their playbooks, budgets or DNA. They're hardwired to favor what's worked in the past. They have incentive structures that thwart long-term employee and client loyalty. And perhaps their biggest challenge is their relentless quest to deliver service, which often comes at the expense of pure product inventiveness. In our age of digital media disruption, this is a recipe for atrophy.

That's why I was intrigued by a small agency called Rockfish Interactive, featured as Ad Age's Small Agency Of The Year. The organization is divided in two: Rockfish Interactive (the agency operation) and Rockfish Labs (a technology and product incubator). According to Ad Age, the incubator arm has launched a slew of Web-based products, with ambitions of spinning them off as standalone ventures.

Founder-CEO Kenny Tomlin told Ad Age: "We don't want all of our cash flow and revenue to be 100% client-driven." Instead, according to the article, the agency's revenue model "requires that a healthy percentage of its dollars come from innovative businesses -- sprung from the minds of Rockfish staffers and created on the shop's own dime -- that generate positive cash flow for the agency. That experimentation, of course, attracts the kind of tech talent that can also be used on programs for marketers. It also speaks to one of Rockfish's core principles: That there's no better way to understand the marketing challenges of a client than launching and running your own business."

Rockfish is a nice counter to the traditional agency consulting business. I question its ability to scale, yet its success points to a growing cottage industry of independent, entrepreneurial digital think-tank incubators that take marketing far beyond the advertising campaign. The company taking innovation, design and insight much further upstream -- embedding the marketing into the development of culturally relevant products and experiences. Another such example would be 3iying, a girl think tank. I don't know a lot about the Barbarian Group, but I do know that one of its lead strategists, Noah Brier, thinks like this as well.

It's the rise of the anti-advertising agency. They're probably incapable of becoming massive agency institutions, or thriving within agency holding companies. But they'll take far greater prominence in the marketing value chain.

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9 comments about "The Anti-Advertising Agency".

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John Jainschigg from World2Worlds, Inc., September 18, 2009 at 11:17 a.m.
How true!
I'm not sure when the zeitgeist on this shifted so dramatically. But I've been saying for years and years (at one global media company after another) that it was time to admit that we were really software developers, build the lab (I always tried to present it as a loft-space "lab" instead of a cube-farm), and learn how to invent cool stuff and profit by it. And all of a sudden, in the past couple months, the notion seems to have achieved both traction and currency. Yay!
Now, maybe people will stop squinting at my bizcard.
John Jainschigg, Director
Internet and Community Laboratory
ZiffDavisEnterprise
Reply

Robin Anthony from MLB Associates, September 18, 2009 at 11:40 a.m.

Hey Max - don't you think there are so many degrees of this form of business model that RockFish really is NOT all that innovative here? Think of all of the 'service providers' which grew up selling product (packaged or proprietary) and realized their tools were so user-un-friendly that they had to grow consultants to go in and make them work for the clients. It appears to me that RockFishs' web-based applications (much like a 'Saleforce.com", for example) likely need online chat and tele-support teams, so in essence, aren't these folks the 'account managers'? And don't you imagine that the AM's on the Interactive agency side of the business 'strongly recommend' the 'Labs" products to their clients? C'mon - what's the difference between these guys and most of the others, really? So they're not just a strategic offering, but who is these days? All agencies have third parties in their back pockets....these guys simply own their third parties.

Douglas Cleek from Magnitude 9.6, September 18, 2009 at 11:43 a.m.

Good Insight. There are a few agencies doing pure product development as strategy to smooth out the revenue disruption that can take place with client relationships. This is certainly more true in today's marketplace where there are even more opportunities than in the past.

My old firm, K2 Design funded several small start-up ventures in-house. One was called CliqNow. This little start-up was founded by Joe Apprendi and Scott Paternoster, which was one of the earliest ad networks back in 1996. CliqNow was eventually rolled up into the initial public offering and launch of 24/7 Media in the late 90's.

Several other ventures, resulted from initial client development, with negotiated rights to retain licensing for their use. Often these were the by-product of servicing clients, which we discovered could be marketed as a separate service.

By making innovation a more revenue-driven strategy, instead of a by-product, agencies can deliver value for their clients and investors, and add to the bottom line.
The agency of the future will be defined by how well they harness technology and creative simultaneously to deliver value. This was certainly our vision back in 1996.
Whether product development stems from a client relationship, or through a more direct strategy, the latter will certainly take center stage as the business models evolve.

Bill Chambers from Bright Chapel Financial Services, September 18, 2009 at 12:49 p.m.

Typically brilliant POV from Max. All ad agencies should take note. Campbell-Ewald was doing something similar back when I was with them in the 70s; (the ad agency for Chevrolet and famous for doing one thing better than any other ad agency which was hanging on to the Chevrolet account.) For example, they had created a company called Ceco Publishing which wrote, designed, published and circulated a magazine called Friends which was Chevy’s loyalty publication. It was so well done and puts to shame the things that, for example, the cruise lines put out today; (it would be SO much easier, one would think, to do a great quarterly on cruising than on driving a car).

Erik Gillberg from AvatarLabs, September 18, 2009 at 3:19 p.m.

Our company is on this path and while it is risky it's very exciting and rewarding! As far as scaling, I think in future the efficiencies created by innovating like this will help make scaling easier, and in some cases unnecessary. As a small agency we're gaining market share precisely because of our ability to maneuver and stay in front of larger entities. Having the ability to make something in-house gives us the ability to respond quickly to changing conditions in the marketplace, and maybe even to help shape the market. In both cases our clients benefit. And its fun!

Stephen Byrne from DIFFUSION, September 18, 2009 at 4:44 p.m.

I agree with a couple of the other posters here that Rockfish is not doing something that's likely to scare the horses. The agency model as we know it has reached a break boundary as we know it. Here's more of what I think http://diffusionblog.blogspot.com/2009/07/facing-break-boundary-how-advertising.html
Many traditional agencies will continue to survive under the protectorship of the large multinational networks and holding cos but many won't. Morphing into digital and content agencies is something we're likely to see more of but as far as any great historic shift - it's not likely to happen until say somone like Aegis or Havas fail. They are both struggling right now, engaging in massive layoffs to fight off potential bankruptcy.

Stephen Byrne
Director, Strategy
www.diffusion.com.au

Mickey Lonchar from Quisenberry, September 18, 2009 at 6:39 p.m.

Max, your article states that the "organization is divided in two." No, it is two separate businesses. It has to be. As an "agency" the shop must represent the interests of its clients. As a "product incubator" it is responsible for developing, marketing and selling its products. Anybody see a potential conflict of interests here? Even if the two "companies" have as little to do with one another as share employees, there could be a turf war over which company they really work for. And while I agree that "there's no better way to understand the marketing challenges of a client than launching and running your own business," isn't that what starting an agency is all about?

So I'm not totally sold on the value for clients. Makes for great PR, though.

http://www.quisenblog.com

Max Kalehoff from MAK, September 18, 2009 at 10:02 p.m.

Mickey: that's an excellent point. Let me clarify: I agree an agency cannot simultaneously be a product company -- two conflicting masters won't allow it. But I think product incubation (which spins things off) is very possible.

STEVE CLIMONS from Crosssover Creative, September 21, 2009 at 3:50 p.m.

This is to me is the good part of the needed evolution of today's traditional ad agency business- to become innovative enough to create product that solves marketing and consumer problems. And I don't see a conflict of interest if it helps the client.