• by Joe Marchese , November 21, 2006

Last week we looked at the impact of a new media advertising OS on the future role of agencies. Google advertising OS or otherwise, there will be continued advancements in the technologies applied to the challenges facing the advertising industry. And whatever you want to call it, knitted together these technologies will dictate the environment in which agencies will compete to deliver their clients' messages to consumers. Since last week we discussed the substantial impact of advertising technologies on agencies' roles, let's tack a step back this week and look at what role agencies should play in shaping these technologies today.

Agencies need not only to look at emerging advertising technologies as potential tools for distribution, but to look at emerging advertising technology companies as potential partners. Partnering with the right companies will allow agencies to influence the development and functionality of the tools on which their industry will depend, allowing for the utilization of agencies' decades of experience in the immeasurable nuances of brand advertising. Incorporating the cumulative knowledge of Madison Avenue will help create platforms that will enable scalable brand advertising spend online. Finally, and most important for the agencies, by participating in the development of the technologies, agencies can dictate how these technologies will enable the delivery of Madison Avenue's value-added services.

Agencies must make an effort to bring together thought leaders from traditional and interactive media divisions to create a clear vision of the threats and opportunities offered by emerging media trends.. This vision will help to outline the shortcomings of current advertising technologies in new media from a traditional media agency perspective, outlining gaps in the market where there is room for the emergence of new technologies. This can provide structure to the agencies' efforts at the macro-level around specific emerging markets (mobile display, DVR, video sharing, etc.) within the chaotic world of advertising technology start-ups.

Once the target emerging markets have been identified, agencies will need to make effective decisions about which individual technologies they should invest budget, resources, and potentially capital, in.This will require a slightly different approach to the discovery and evaluation of the various technology options in each market. This evaluation should be a strategic one focusing on technologies' market potential (what problems are the technologies solving?) and competitive advantages (management team, company vision, technological scalability and flexibility, etc.). The agency is uniquely qualified to evaluate market potential of emerging advertising technologies, given its intimate knowledge of the needs of advertisers and the functionality required to address those needs. But the wealth of internal thought leadership must also be organized to facilitate efficient evaluations and consistently uncover new opportunities in the rapidly changing market for advertising technologies.

The final, logical, step for the agency, given its goal of partnering in the development of leading advertising technologies, is to create a mechanism for delivering consultative support to those companies in which they invest (see Publics' Denuo group). This support can range from product functionality analysis to business development support. Again, there is no lack of thought leadership within most agencies; rather, the key is the creation of a structure through which to deliver this support.

So, we are saying that to effectively partner with the right emerging platforms, agencies require evaluations of shifting markets for a clear investment strategy, strategic evaluations for business models and technologies and ongoing strategic support... sound a bit like a VC? There certainly are lessons to be gleaned from the VC process, but there are differences, given the subject matter expertise possessed by agencies and the end goal of the agencies' involvement. Since many innovative advertising technology companies are using experiential ad budget commitments as alternative funding sources, does it make sense that agencies should apply a VC-like process to the allocation of those budgets?

This brings us to the hard part; a VC is looking to hit with a couple of investments, owning as much equity as possible in those investments--and, in the end, outperform other VCs. Agencies need to fight this urge with every fiber of their being. If agencies want to influence the creation of technologies that will become the standard in new media advertising, there needs to be collaboration at the highest levels. The technologies that will define the next generation of advertising will need to put forth platforms that allow all agencies and their advertisers to participate based on agreed-upon standardizations. Madison Avenue has to come together on what these standardizations for new media advertising will be, and actively participate (at arms' length) in the development of technologies based around these standardizations. This is why it is in agencies' interest to collaborate on the next generation of advertising technologies, which will be built with the soul of Madison Avenue. Because if Madison Avenue can't build it, then Silicon Valley will.