Research Findings: While traditional agencies clinch up to $162,000 per client from beginner, experimental and formalized companies, yet when corporations become advanced, boutiques earn an average of $238,000 per brand. Expect traditional agencies to glean new skills or start M&A, and expect boutiques who have vision to stand the test of time.
Social Media Boutiques are Emerging to Threaten Traditional Agencies
It’s been a long time coming since we’ve seen major disruptive in the agency space. 10-15 years ago we saw the rise of internet agencies, digital agencies, and web marketing boutiques, and then a fast consolidation during the downturn. Now, we’re seeing the rise of social media boutiques, and we have telling data that shows they are threatening the budgets of traditional digital agencies in a particular type of client. This is a massively growing space, at Altimeter we were tracking the many agencies on a wiki, but stopped updating it due to overflow of submissions.
Above Buyer Data: 2011 Budgets: Social Media Boutiques Overtake Traditional Agencies Among Advanced Buyers
Immature Brands Naturally Rely on Traditional Agencies
In the novice through mature level brands, the traditional agencies are the first go-to. Corporations rely on them, as they have existing relationships and have purchase orders set in place. Yet we know (see engagement DB and our Facebook marketing research) that most corporations are not even engaging with their customers they are doing it wrong. They often rely on traditional agencies for education (often a loss leader) research and strategy and implementation.
[Traditional agencies clinch revenues from immature and formalized clients, yet have often invested unpaid hours in education, research and strategy and are unable to specialize to meet the specific needs in social business]
After Traditional Agencies Have Laid Groundwork Boutiques Swoop In, Clinching Revenues
Once corporations realize that social business is not about short term campaigns, they give $ to boutique agencies. The data from the buyers indicates there’s a significant jump in spending on boutique social media firms when the buyer is advanced and sophicaiated in social business. They know their traditional agency lacks flexibility or doesn’t have a business model for social engagement and relies on them. This is a great opportunity for the boutique agencies, who let the traditional agency do education, set plans in place, experience a few failures letting boutiques swoop in.
[Boutiques lack ability to monetize in immature corporations, but when companies reach maturity they clinch an average of $238,000 per brand and push traditional agencies budgets in social to a mere $87,000]
In my LeWeb keynote, I stand by my convictions not to hire social media “Ninjas, Gurus, and Samurai” and received audience applause. Instead, I offered, corporations should hire business program managers, in other words, people that put business goals first tools and technologies second. This also applies in selecting your boutique agency
Why Social Media Boutiques Differentiate, and Win Deals From Advanced Buyers
Social Media Boutiques are taking the budgets away from Traditional Agencies as corporations become mature. Corporations know they need these specialists for the following reason
- Offer a specialized skillset in new media and social business that traditional agencies may not offer
- Often offer change management within the corporations –traditional agencies have a reputation for layering social media on top of existing campaigns.
- Rather than be ‘campaign’ focused, instead are more long term focused such as building a community with customers for the long term.
- Are ready to roll up sleeves to assist with deeper customer engagement not just deploy traditional advertising (one of the top spends in social business)
- Are more agile within smaller teams and can quickly maneuver as the technology space changes over time.
- Fundamentally are geared to measure differently around engagement, and what it means –not just top line and bottom line measurements
Yet Social Media Boutiques Limited by Size –and Must Partner
Despite their strengths, Social Meida Boutiques have weakenesses. They are often unable to scale as engagement is difficult to roll out to all product units and around the globe, are quickly finding that traditional agencies are catching up by training staff (see how Edelman has an internal black belt education program) and often lack the ability to achieve an integrated marketing approach
Industry Analyst Perspective: What the Future Beholds
- Traditional agencies will adopt these skills, or be forced to contend with options.
- Expect the traditional agencies to generate revenues outside of engagement in brand monitoring, education, measurement, and leading an integrated approach
- Traditional incumbants will acquire these young startups. Expect this data to be cascaded to the upper echelons of traditional corporations who know they need to quickly get a strategy on M&A activity (see today’s Dachis news)
- A handful of these agencies will grow into the next digital agency. Not wanting to sell and enjoy the fruits of their hardwork, many of these agencies will stay
- Brands will rely on traditional for education boutiques often can’t afford to this unless it’s a loss leader for a sale.
- While specialization and competition is good, buyers will demand that their agencies work together. The previous HR block marketing team rallied 5 agencies together to work on a single social media effort, for a holistic customer experience
- We’re already seeing a few traditional agencies like Edelman (in the lead, in my opinion with Rubel, Armano, Carfi, Brito), Oglivy (Bell, Rohit) build strong internal teams on social business using blogs, thought leadership, and hire social media practitioners.
If you found this helpful, please forward on to your agency partners, and internal teams. Or if you’re an agency and want to share your perspective, I look forward to your comments below.
We (Ant's Eye View) have certainly experienced this. I'd likely add the following to your list of reasons why: The service provider of the future (particularly in the enterprise) must be as comfortable with VP's of Customer Service, Support, IT and Product (BU's) as the are with sr. leaders in Corporate Communications and Marketing. I know in our case, we have built from the ground up a team of practitioners with deep backgrounds on the brand side (MSFT, Dell, Intuit, Lego, IBM, Comcast, RealNetworks, etc) who came from leadership roles across all of these silos / functions. Lasting success with Social is about focusing on customer experience across all the touchpoints with a brand. Credit to Bruce Tempkin here – it's about the “point of value” between when your product/service is purchased and when the consumer feels they are getting full value from their purchase. It's in this moment where brands have the biggest opportunity to catalyze value from social customer engagement. Expertise will be needed that can deliver on change management, cross functional strategic planning, organizational design, participatory/engagement marketing, web, research, etc. As we've shared recently on our blog, there's a journey to social customer engagement and success on that journey will require a broader set of skills than the outcomes historically favored by traditional marketing.
Sean O'Driscoll
CEO
Ant's Eye View
We (Ant's Eye View) have certainly experienced this. I'd likely add the following to your list of reasons why: The service provider of the future (particularly in the enterprise) must be as comfortable with VP's of Customer Service, Support, IT and Product (BU's) as the are with sr. leaders in Corporate Communications and Marketing. I know in our case, we have built from the ground up a team of practitioners with deep backgrounds on the brand side (MSFT, Dell, Intuit, Lego, IBM, Comcast, RealNetworks, etc) who came from leadership roles across all of these silos / functions. Lasting success with Social is about focusing on customer experience across all the touchpoints with a brand. Credit to Bruce Tempkin here – it's about the “point of value” between when your product/service is purchased and when the consumer feels they are getting full value from their purchase. It's in this moment where brands have the biggest opportunity to catalyze value from social customer engagement. Expertise will be needed that can deliver on change management, cross functional strategic planning, organizational design, participatory/engagement marketing, web, research, etc. As we've shared recently on our blog, there's a journey to social customer engagement and success on that journey will require a broader set of skills than the outcomes historically favored by traditional marketing.
Sean O'Driscoll
CEO
Ant's Eye View
IMHO the ones with the most to risk in this new disruption are the digital agencies. Social strategies are quickly becoming digital strategies, and they touch all parts of the org, not just marcomm.
I can't tell you how many RFPs we've responded to/won this year from large global orgs who have been dabbling but are now getting serious. They're *all* looking for specialist agencies. Your research perfectly dovetails with our experience in the market.
All I want for Christmas is an @armano infographic…
Some really good perspectives brought to light, both in the original post and in the comments below. Thank you.
I actually think one of the most important pieces you have highlighted is the dimension around client maturity. Having been at a large “digital agency” and now being at a “social marketing agency”, many clients still are only interested in touting the number of FB fans, and obsessed with large numbers — whether there is any true engagement, dialogue, value exchange, or not. This is probably as much due to flaws in agencies as much as client maturity. So be it. The clients who are most innovative are quickly embracing social as an integral part of their customer dialogue — everywhere, from customer service, to campaign integration within a product launch, to an ongoing, consistent way to add value. And they are seeing the results in metrics that span “social pulse”, brand preference, and bottom line business results.
@glennengler
We also need to consider boutique agencies ability to tap into more than just the marketing budget.
I come from a boutique agency. And the best success story we have is with a telecom client where we tapped into the PR, R&D, and the marketing budgets. This was an instant win win with record revenues for us and great ROI.
While marketing contributed most to the budget, our ability to serve more than the marketing dept. differentiated us from traditional agencies and secured a bigger SM budget.
As a marketer, it can be very difficult to sort through all of the agency options. Currently, those decisions are being made based on social media's perceived importance to the business (with service providers often taking the lead), previous digital and social media experience with existing agencies, and the marketers own comfort level with social media. Marketers are currently being forced to go outside their existing agency roster to get the social media expertise they need and turn to specialists. However, the average brand director already manages somewhere between 5-10 agencies which is not an optimal strategy long-term.
As a result, I believe the real growth will start to come from the agencies that can provide expertise across several marketing disciplines. The key will be for social media or traditional agencies to expand beyond their core competency and get up the learning curve without hurting their credibility with clients as they “learn”. These will become the strategic partners clients will choose to help simplify their plans, create real synergy among communication vehicles, and ultimately drive topline growth.
Fantastic piece of work, I found it really interesting as a social media consultant with clients in the beauty industry. Thank you! Kay
The boutique being hired typically handles one particular niche of a brands social presence, which they would have been hired to do anyways through a larger agency. The only thing that is really changing is that the client does not have to pay the huge mark up of the middle man for that need. Now instead of a larger agency juggling the variety of vendors it is the client who has it added to their workload. Typically after a year of this kind of “cost savings” they revert back to the larger agency to handle the efforts.
We see this with every new platform that comes out and it does not make sense for an agency to have an adopt every new technology policy. They would not be able to keep the lights. Social is what is talked about here but it is only one piece of what is going on the marketing world. We have mobile, enhanced experiences through touchscreen technology and augmented reality, new analytic and data mining tech and so on. Smaller boutiques pop up to cover the need of all these new toys and the ones that survive either are bought and consumed by corporate America or grow to add more traditional services to their lineup and prepare to be surpassed by the new startup with a great new SAAS feature.
The question is as an agency, are you the turtle or hare?
Is there a list that rates the Social Media Boutiques and System Integrators? It could be by ability to fulfill their consulting job, revenue, etc…….
Hi Jeremiah
This is certainly the experience Bendalls Group and Digital Intelligence are experiencing in the Australian market. Clients feel the agency model is restrictive and broken. They want fresh thinking and digital savvy thinking, that can align and help transform current operations, whether marketing or in other parts of their business, such as recruitment or investor relations. They want deep insights, learnings, the ability to digitise their businesses for the future. It means that like many industries (Music, research, DM and so on) the marketing and advertising industry is not isolated from the impact of digitisation on their business models. Its time to rip up the old model and get with the new. Happy new year to all.
I particularly like your statement : Dont hire “gurus, samurai’s and ninjas”. Hire people who understand business goals and have the ability to relate to your business needs. This is true while looking for social media agency or a traditional digital agency
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