• by Joe Mandese  @mp_joemandese, September 22, 2006

How agencies are scrambling to keep up with the accelerated pace of change

During the summer of 2005, media buyers committed tens of billions of dollars to advertise on broadcast and cable TV programming for the TV season that would begin that fall. By October, weeks after that new season had begun, Apple Computer and the Walt Disney Co. announced a deal that would forever change the way people - consumers and advertisers alike - use television.

In the year since the agreement to begin offering ABC primetime programs for download onto PCs, iPods, and other computerized devices via Apple's iTunes platform, the other major networks scrambled to come up with their own Internet distribution deals - some with iTunes, others with You-Tube, Google Video, MySpace, and even new homegrown network download services. By the beginning of the upfront network TV advertising marketplace during the summer of 2006, it was evident that the way networks distribute their programming, the way consumers view it, and the way advertisers sponsor it were all changing.

And they were changing much more rapidly than anyone had anticipated. Unlike the threat of digital video recorders, which promised fundamental shifts but which were slow to roll out, the broadband video marketplace appeared to happen overnight, spurred by a few breakthrough deals. Unlike other emerging digital video platforms, it was available immediately to any of the more than 50 million homes with broadband Internet connections. The speed of that change caught a lot of people by surprise, including Madison Ave., which moved quickly to embrace the new video ad-vertising opportunities, even though the trend threatened to change the way they did business, how they were organized, and how they made money.

One clear change sparked by the sudden emergence of a broadband video advertising marketplace is who handles the ad buys. Historically, the fledgling marketplace was nurtured by dedicated interactive shops, along with the other online and interactive media they purchased for their clients. But when the major broadcast networks emerged as big broadband video players, that all changed. Instead of having their digital shops handle those buys, they were consolidated with the traditional upfront ad buys made by their general market media agencies.

As the nature of the media it plans and buys changes, so changes the way Madison Ave. is organized. Over the past year, digital media units have moved from adjunct or back office to centerstage, or have been integrated into mainstream operations. Rapid changes in out-of-home media, including a surge in digital media networks, and the move toward more experiential marketing have contributed to a reorganization of outdoor media departments. They've been merged with retail media, or so-called "shopper media" units, to form big new centers of media expertise that many believe are as much a part of the traditional ad agency's future as is online media.

The accelerated rate of change is also spawning new organizational structures within media agencies, or is leading them to spin off new operations that are more adept at dealing with the speed of change in media, technology, and perhaps most important, consumer behavior. To understand these shifts, Interpublic Media Group formed the Consumer Experience Practice, an elite team of researchers, technologists, and futurists who are charting new media paths for clients using tools and resources that are unlike traditional methods. Instead of relying on regression analyses and in-depth longitudinal studies, the new group is mining real-time data from blogs, online communities, and pretty much anywhere it can glean the latest buzz.

Publicis Groupe, meanwhile, has spun off a new kind of media services enterprise. Denuo, which is named after the Latin word meaning "afresh" or to "make anew," has assembled an all-star team of Madison Ave.'s most cutting-edge digital media thinkers to help pave the way. Unlike previous ad agency units, Denuo doesn't have a long-term business plan, says founder and CEO Rishad Tobaccowala, on the premise that the media business was moving much too rapidly to be serviced by traditional agency structures. Asked upon its launch what Denuo's business model was, Tobaccowala conceded ignorance. "I don't know," he said, adding that the vague structure was intentional, because "six months from now it will have changed."

Adaptive, not reactive: That's the charge of the new media planning and buying organization, which must not simply monitor changes in media, but must also anticipate them and formulate media strategies for clients on a real-time basis, adjusting as the media marketplace shifts more rapidly than ever before.

In fact, agencies and their clients are beginning to pattern themselves after the media that are forcing those changes, especially the Internet, says Joe Marchese, head of the Online Media Practice Group at management consulting firm Bainbridge Group. In effect, he says, they are starting to behave more like Internet start-ups than like the traditional businesses such start-ups often disintermediate.

"In this environment of rapid change, you cannot plan the way you used to," he says. According to Marchese, traditional strategic planning cycles are moot, because by the time organizations conduct research and formulate a new strategy, the market is likely to have shifted, making much of that decision-making process irrelevant.

Consequently, he says, "Fortune 500 companies must behave like Internet start-ups." Agencies included - especially the way they plan and buy media. And they're starting to get it, Marchese says, citing Publicis' Denuo and Interpublic's CEP units.

But what about traditional media agencies and media departments? They are also reorganizing to become more in tune with rapid marketplace shifts and changes in the way consumers use media. In the past year, both Publicis' Starcom and MediaVest units have reorganized about the guiding principle of "activation," which in essence means the agencies are no longer simply focused on planning and buying media, but are also consumed with figuring out how to activate media ideas quickly and effectively.

"Ideas are the new currency of the media marketplace," Donna Speciale, president of MediaVest's activation operations said this spring, just prior to the 2006-07 network TV advertising marketplace.

And if it is ideas, not gross rating points, cost-per-thousands, or magazine ad pages, that will determine the success of media programs in the future, says Bainbridge's Marchese, agency media organizations will continue to evolve.