Trend: Social Media Agencies Turn to Advertising

In a stunning early finding of interviews with nearly a dozen social media agencies and software providers, I’m seeing a new trend: Social media agency of record (SMaoR) are now moving into advertising buying.   I’ve just spent a week interviewing a number of social agencies here in Manhattan as well as taken briefings from around the globe (see below for source info)

Why this dramatic change from social media purists who once declared war on advertising?

The new advertising features from both Facebook and Twitter (Such as sponsored tweets and trends) encourage earned content to become advertising units and give an opportunity for social marketers to get into the advertising game. This also means the opportunity for ads to perform at a higher level because they’ve been ‘approved’ by the crowd is a unique opportunity afforded to the social media agencies vs the ‘carpet bomb’ approach of yesteryear.  This results in three distinct impacts to the industry:

  • Advertising is Limited to Social Networks: The advertising units that these agencies are purchasing are often limited to Facebook or Twitter –not broader banner and skyscraper ads across media and Google serp.  In fact, in most cases they’re analyzing which earned content performs the best, then using the features like Twitter’s sponsored tweets to amplify this earned content to reach new audiences and drive attention or call to action.
  • Social Media Agencies Don’t Have Solid Case Studies, Yet. Most of these pure play social media firms lack an advertising background and are staffed for engagement.  They also tend to have a longer term approach for community building –not six week ad block flights.  As a result, it doesn’t guarantee that they’ll be able to outperform traditional digital advertisers although most say they’re working on case studies to show higher engagement, and conversion.
  • Expect a Battle Between Digital Agencies and Social Media Agencies. Now, there’s going to be a fight over advertising budget as social media agencies battle for small shares of advertising dollars.  We’re also seeing digital agencies develop social competencies and battling the social pure plays.  In the end, I believe we’ll get rid of the term ‘social’ or ‘digital’ as a prefix for any agency as they’ll all have the same competencies, esp after a mass M&A that biz dev execs are already starting to sniff.

Sources: As an Industry Analyst, I’m fortunate to speak to many in the industry for research purposes, In the past few weeks I’ve spoken to Adobe, Attention, Banyan Branch,  Big Fuel, Buddy Media, Converseon, Deep Focus, Edelman, Google+, IBM (Social Products), LiveWorld, SocialFlow, VaynerMedia, We Are Social, and many others.   Our analyst focused on agencies is Rebecca Lieb (Blog, Twitter), although we’re both talking to many-in-the-industry for our upcoming joint report on Paid Owned and Earned integration.

Update: Fast Company’s Francine Hardaway has answered this post discussing how Agencies are Going the Way of the Dodo.

  • http://twitter.com/deb_lavoy deb louison lavoy

    here’s the thing. an impactful campaign needs several things. first and foremost it needs a resonant message/value/substance. then it needs a destination where that substance is aggregated and deep, then it needs to draw attention to those things, while enabling someone to engage, stay engaged and engage others. in other words, social marketing is a variant of marketing, and all the tools need to be coherently orchestrated to create value and make a difference in the market.

  • http://web-strategist.com/blog Jeremiah Owyang

    Its interesting as, many social media purists believe that campaigns are dead –instead long term engagement is what counts.  #cluetrain

  • jkings

    There are cases where a company’s target audience may not necessarily desire long term engagement per se. And in those cases, paid amplification of earned media (especially earned media, not owned media) can be extremely effective in reaching those people. 

    This is especially the case when a company needs a high impact result with a very specific audience within a narrow time window. Say, reaching institutional investors around a major corporate event – M&A, earnings, crises, etc.

    B2B companies should be looking at this trend closely since not all corporate stakeholders want the kind of engagement-heavy relationship we in the industry typically ascribe to consumers and brands. 

    Interesting post and comment thread, Jeremiah. Thanks for sparking the conversation.

  • http://twitter.com/ctreada Chris Treadaway

    I guess I don’t understand the surprise here.  Much more $$ goes into ad spend than consulting or agency services.  An agency that gets into this business can increase margins significantly.

  • http://twitter.com/bryanpedersen Bryan Pedersen

    Erik, I think you’re right that the original social agencies were in fact dressed up PR firms, but the current breed of social agencies are creating story and emotional engagement, and that doesn’t necessarily mean through heartwarming images and soundtracks.  Having a breeding in creative is not a prerequisite to successful engagement.  Just think of Pixar and all the early knocks against them not understanding “story arc,” and being a bunch of computer nerds, yet they produced a series of smart, funny and engaging stories.

    I think the real value in either the social or digital agency is one that truly understands the social consumer, the social ecosystem, and is agile enough to partner and/or execute on the digital development, creative, and activation/media fronts.  In short, where I see the void in all of the millions of digital and social campaigns, is absolutely missing the mark in terms of voice and audience, and really connecting with the end user.  This could mean so many things from creative, to content, to simply creating utility that puts a smile on ones face.  

    With the growth of social media and social consumers, the margin of error is exponentially smaller, and brands and agencies are still turning out schlock like: “Your ten favorite memories of brand X.” only to get eviscerated by the response unless it’s Apple or LEGO, and everyone kow-tows to the social bait with heartwarming stories.

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  • http://www.facebook.com/johnkerrnz John Kerr

    Hi Erik – if you could give me your pov on what the best-in-class background of a ‘digital agency’ looks like, that would be appreciated. One of the agencies doing the most digital dollars in the world has a direct marketing heritage, another advertising, another building websites – etc etc…
    Keen to understand which one has the best background and is best placed to create ‘overarching emotionally engaging ideas’ – surely this doesn’t come from the world of deep data and analytics, or even consulting like Altimeter or IBM, no?From me, as with agencies from all industries it’s about stripping away labels and asking – “does this firm have the smarts to overcome the challenge, people with the capabilities I need and the case studies to back up what they say.” It’s the net – meritocracy and transparency should win every time.Let’s discuss over a coffee in Singapore soon? :)

  • http://nateriggs.com nateriggs

    Have to agree with that 100%, Jeremiah.  Eventually, we will see the reemergence of simply AOR.  Look at what’s already happen on major networks like ABC, NBC, etc.  We’re already seeing sitcoms, reality shows and completion shows (#thevoice, for instance) integrating with Twitter and other networks while on the air. Now we’re starting to television advertising follow suit in terms of integration as well. Tools like Trendrr are giving agencies more tools to bridge the gap between the traditional media/advertising they are used to and online tactics.

    What will be interesting to keep watch on is just how long it will take the ad agency industry to move back to the true one-stop-shops of a years back.

  • http://twitter.com/rokensa Rodolfo Salazar

    In Central America (where this industry has moved at a different pace and with various challenges we still need to face) in smaller markets we see an opportunity for brewing skillful artisans that can handcraft a more effective type of organic advertising using below the line digital outlets, hand crafted paid ads in social outlets and strategic use of networked groups and influencers for mixing and merging what Digital Agencies and Social Media Agencies are able to provide. 

    What is you opinion: Could there be a chance that as the industry matures and expands to new territories agencies with these special capabilities could rise to the challenge for becoming a new breed of agency?  

  • http://twitter.com/paolojr Paolo Mottola

    No surprise here. Because social agencies already have the expertise with and contacts (sales associates) at the social networks, it makes sense for them to drive the ad buy if they already handle the engagement campaigns, especially when ads and engagement posts may be one in the same. Social agencies are still agencies: They want to grow against competition and will go where the budgets take them.

    I’m all for the purist social media philosophy but also live in the reality that social networks are capitalistic in nature. Facebook doesn’t WANT brands to do something cool and get 1 million Likes without advertising or they wouldn’t have a business model. If you want your message to get beyond your subscriber base of Likes (aka get new customers, leads, SOV, etc.), you have to advertise. All else equal, a brand that advertises will spread its message more quickly to more customers than the brand that doesn’t. It’s not coincidence that the top Facebook brands (Starbucks, Coke, Disney, major-label musicians) are the same brands that were at the top of commercial media pre-social. They have the budgets to stay that big regardless of the marketing medium of the day. SEM/SEO is an interesting channel to bring up comparatively. Search engines at least give you a chance to get great content front and center organically without having to earn or pay for a Like or follow in advance.

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  • http://twitter.com/bryanpedersen Bryan Pedersen

    I think it’s also worth pointing out that the ideal scenario of having real media folks within a social agency handle media spend is twofold:

    One is that the media folks within the social agency should be driving very unique engagement models, and in some cases inventing new media channels or products in conjunction with the platforms they are negotiating with. It shouldn’t be simple a game of pivot tables, but one of true innovation.  And this brings us to the second.

    Two, the media folks in many cases are then working much more closely with account, strategy and creative to conceive of those spends.  Whether ‘social’ or ‘digital’ agency, the goal is to create a more cohesive and nimble atmosphere that can adjust to the hundreds of platforms and innovations produced each day.  Perhaps the buying power and scale is not there, but this should be made up for in creativity and cohesiveness.

    Keep in mind, one of the driving reasons for the separation and specialization of creative and media agencies under the large holding companies was in case a client got tired of the creative, they could still keep their media budget, while switching up and freshening their creative agency.

    Of course the social/small digital shops want their 12-15% cut of the big media budgets, but it’s not just about grabbing revenue share, it’s about producing a product in the end that addresses the unique challenges of an incredibly fragmented and rapidly changing digital ecosphere.

  • http://twitter.com/deb_lavoy deb louison lavoy

    campaigns aren’t dead – they are just transformed. Rather than a hit and run, a campaign should be a chapter of an ongoing story. A campaign should be the result of stepping back and considering your customer experience journey (how people engage with you, become customers, and so on over time and according to their changing needs) and your message, and where/how people can engage with it. the Hit and Run is dead – probably – but if we think of campaign as a coordinated action to have an impact on the market, its not in the least bit dead.

  • http://www.pleasurebypixel.com ilkut

    I agree that the terms “social” and “digital” will decease but I believe the term two will be merging under will be “communications”.

  • Andrew Jenkins

    Part of me is a purist that believes in the organic development of a community but I can see where a strategic approach to advertising can play a role in turbo-charging community growth. I emphasize the “strategic approach” because there have been enough examples of  ads backfiring.

    Risk cannot be completely eliminated but advertising how a brand is giving back rather than what they have to sell will likely have a better, less risky payoff. 

    I also think you make an interesting point where purists could still be outperformed by traditional ad agencies. Some stakeholders just down have the patience for long term community building. Perhaps a hybrid approach of organic growth complemented by advertising will do the trick.

    Some agencies are trying to figure out where they can add value on the new Facebook due to limitations around apps and landing pages. Part of me thinks that this is just Facebook gearing up for their IPO and driving/forcing brands down the advertising chute. 

    Agencies are also coming to terms with the limited contribution they can make with Twitter other than community management. They can’t sell custom apps or landing pages for Twitter which explains why some downplay the platform.

    There are going to be interesting times ahead as the industry evolves.

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  • http://www.jakeoliveronline.com/ generate marketing

    An agency does the job of a certain company. That’s always the main picture, and as a matter of fact I agree with 
    Peter Kim

  • http://www.agencyseo.com/ Kabir38k

    This is a amazing post.Like those point.I think those right.

  • http://www.agencyseo.com/ Kabir38k

    This is a amazing post.Like those point.I think those right.

  • http://www.reallyeasycart.co.uk/ ecommerce

    If  tied into your agency’s website and branding, is constricted and has little room to breathe and grow.

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  • http://www.kronikmedia.co.uk/ Web Designer, London

    I guess it was only a matter of time till advertisements found their way into day to day tweets and Facebook shares. Let’s just hope it does not reduce the quality of content or become a concern such as comment spam on blogs.

  • http://www.kronikmedia.co.uk/ Web Designer, London

    I guess it was only a matter of time till advertisements found their way into day to day tweets and Facebook shares. Let’s just hope it does not reduce the quality of content or become a concern such as comment spam on blogs.

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  • http://www.anticsstudios.com/ Erik Posthuma

    Hi John,

    We definitely should do that coffee. KL next week?  :)

    I think the key point in what Jeremy was saying is that Digital and Social will end up merging. Which I also believe.

    In fact I’m going to throw another wrench into all of this. I think an often overlooked “department” is Customer Service and Customer Experience Strategy. These guys have always understood that the customer is central to all business activities, and that all of the brand touch points need to be aligned to give the most value (monetary, utility, emotional) to the customer in order to succeed.

  • http://www.anticsstudios.com/ Erik Posthuma

    Only if competence is then measured as technical capabilities.

    I really appreciate that social media agencies (just like PR agencies) are a key component of the communications ecosystem. But to take it that level higher those companies will need to bolster their creative technology capabilities to really stand out. 

  • http://twitter.com/PramodDikshith Pramod Dikshith

    Great post. This is an eye opener for so many social media folks who view social media as mere PR and not as an advertising platform. For more please read this post by me on this link for how effective social media advertising can be from an efficacy standpoint of view as well as trust stand point of view http://t.co/Olc1qct4

  • http://twitter.com/PramodDikshith Pramod Dikshith

    Great post. This is an eye opener for so many social media folks who view social media as mere PR and not as an advertising platform. For more please read this post by me on this link for how effective social media advertising can be from an efficacy standpoint of view as well as trust stand point of view http://t.co/Olc1qct4

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  • http://room214.com jasoncormier

    Totally agree. And I’d even say if you are not in a state of bolstering your creative technology capabilities – then you are comfortable with cutting key ingredients to a recipe that’s growing in demand.

  • http://room214.com jasoncormier

    Totally agree. And I’d even say if you are not in a state of bolstering your creative technology capabilities – then you are comfortable with cutting key ingredients to a recipe that’s growing in demand.

  • http://room214.com jasoncormier

    I agree with the trending Jason. Another perspective to consider from the social media agency side relates to the data and recommendations. Here’s two scenarios to the point:

    1. The (competent) social media agency delivers insights from data other agencies aren’t focused on. Other agencies are then informed by these insights, with an opportunity to creatively respond in the form of content creation and/or ad adjustments.

    Budget is allocated accordingly (not to the social media agency), and the heroes at the end of the day are the ones who actually executed against the insights delivered.

    2. Again, due to the data/insights and natural necessity of “keeping up” – a competent social media agency is often in the position to make good and unique recommendations.

    Now ask yourself this: where will companies place greater weight? A recommendation from the agency who is managing millions of dollars on their behalf – or the agency that always brings up neato stuff but gets only a sliver of the marketing budget pie.

    I can’t tell you how many times we’ve heard our own recommendations recycled by the big agencies we’ve shared clients with — in several cases, even more than a year later. And yes, the client is generally more on board with moving forward when it’s coming from the big dog.

    To be clear, this is not complaining. Rather, it is the state of things from my own experience – and another example of why we see the “industry” going where it is.

  • http://socialfreshacademy.com/ Jason Keath

    Yes indeed. The ad side of the industry wins because they will get the budgets. 

  • http://www.socialnerdia.com Esteban Contreras

    I won’t comment on our agencies but I can assure you that we work with different agencies, vendors, and consultancies for different efforts. 

  • http://www.socialnerdia.com Esteban Contreras

    I won’t comment on our agencies but I can assure you that we work with different agencies, vendors, and consultancies for different efforts. 

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  • http://twitter.com/AlexdeSoto Alex de Soto

    The social validation of Facebook advertising ( “X person likes X company” statement that appears under the ads ) is a very powerful tool for advertisers. But it is important to remember that advertising is interruptive for the most part. Persuasion, not necessarily “advertising” will find a way in this world of push notifications and the networked marketplace.

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  • Rob Key

    Hi Jeremiah — We’re 8 years into the “term” social media and i believe it still means many things to many people.   I think what’s core going forward is the agency of the future (or today) has to be adept in socially-centric, data driven approaches.  This means being part technology company, part management consultancy (since effective social requires integration/collaboration/agility across the enterprise in ways that haven’t been done before),  and of course more traditional agency services. Paid, owned, earned is collapsing.  Best agencies will be “real time,” story tellers who can find insights in the noise and act on them more quickly than others for competitive advantage.   Is that social media?   Time will tell. I’ve advocated for removing the “social” but then that leaves “media agency” — and it’s certainly not that..   But until agencies see the full picture and have capabilities in them — as opposed to seeing social through the prism of a particular discipline — social agencies will continue to grow.  The internal change management capabilities will becoming increasingly important as well which falls out of traditional agency capabilities.

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  • http://www.rxgs.com/ Rxgs

    Fascinating stuff. What’s particularly interesting is that the
    digital agencies’ reign was so short. I can understand the traditional
    agencies getting eclipsed, but the digital ones had a very short stay on
    the throne. As the buying becomes a commodity (like everything else, as
    Francine pointed out), the only thing that seems secure is the strategy
    role. Seems like a great time to be McKinsey or BCG– clients should
    spend money on the hard, leverageable part (the thinking), and outsource
    the creative and the media buying to low-cost providers. (Why not send
    the media buying jobs overseas?)

    Whoever collects and synthesizes those elusive case studies into real
    capital-K Knowledge will be able to sell a whole lot to clients
    desperate for help.

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