So the digital revolution is here for the second time around - and this time it looks like it's here to stay.
Statistics confirming the rude health of digital media abound: the Institute of Practitioners in Advertising's latest Bellwether Report showed internet advertising was the only UK media sector where budgets increased in the first quarter of 2006, with more than a quarter of all marketers reporting an increase. Meanwhile, the Internet Advertising Bureau reports that online spend now totals £1.4bn in the UK - accounting for nearly 8% of total media spend - and expects it to overtake national press spend by the end of the year.
For media agencies, the digital world is, as one agency chief puts it, "rebooting". Agencies that dismantled or hived off their fledgling internet offerings after the first dotcom bubble burst are now rapidly hiring specialists as they seek to underline their digital credentials.
But there is a different emphasis this time around. The established path for agencies has been to set up a specialist digital "division", often separate from the main agency. But clients are beginning to demand a more holistic approach as they put digital more at the core of their own businesses.
Procter & Gamble, for example, is creating its first pan-European digital roster. In response, many agencies claim to be putting digital "at the heart" of their offering.
OMD is one of them. "Our goal is to render the expression 'digital agency' redundant," said CEO Nick Manning last week, as he announced the appointment of Sheryl Norman, head of integrated services at Coca-Cola, to evolve the agency's OMD Digital brand.
Norman's brief is to ensure digital specialists are integrated into the agency's main operations, so digital is not seen as an "add-on" to other channels. She will also have a seat on the board.
Elsewhere, many agencies are attempting to give their mainstream planning teams an understanding of digital media. While ZenithOptimedia's sister agency Zed is a digital specialist, the agency has also put in place a series of compulsory masterclasses called "I-Academy" to train all its staff in digital. Meanwhile, MediaVest Manchester has rejigged its agency layout so that digital specialists now sit with the main teams.
At Walker Media, the fledgling Walker-i team operates as a separate business but sits on the same floor as the main planning teams. Mark Syal, heading the division, says he will spend 20% of his time working with the core planning team on the agency's newly acquired Barclays account, contributing to central planning. "I don't see it so much as putting digital at the heart, as giving it its correct weight in the strategy," he says.
Over at Aegis, the strategy has been to build a global umbrella digital brand, Isobar, to house and share the expertise of its various digital offerings, including online creative agency Glue, Carat Digital, which services Carat clients, and Diffiniti, which services both its own clients and Vizeum.
But are agencies really serving the needs of their clients or are some agencies simply paying lip service to digital?
"A year ago, most agencies could not really claim to be putting digital at the heart of their strategy, but now the situation is changing," says Guy Phillipson, chief executive at the IAB.
However, he claims some large traditional agencies still do not have the resources to cope. "If the client isn't pushing it, some agree to just let it ride for the time being. They may find themselves deliberately agreeing with the more old-fashioned type of client who is sceptical about what digital has to offer," he says.
The best media agencies understand that consumers form opinions and make decisions online, he believes. "They need to build the plan from there up, rather than tack internet on to the end of the plan. It doesn't work so well when people are on another floor - or in some cases a different building."
One major stumbling block is the skills shortage, Phillipson says; it seems the keen young digital experts around at the start of the internet boom have mysteriously melted away.
Trading places
But there is plenty of scope for non-digital specialists to move over - just look at Mark Chippendale's move to Yahoo! or Mark Howe's new position at Google. The IAB has created IAB Progress, a training and development programme encouraging those in the industry to switch to digital, while the IPA is also running training courses in digital.
Another issue for agencies to take into account is remuneration. According to Phillipson, servicing online work can be very resource-heavy, so it makes sense for agencies centralising their digital offerings to move away from commission-based deals with clients to resource-based deals.
But if agencies are claiming to put digital at their heart, it seems not all clients are convinced. Some still run digital-only pitches and appoint a separate agency to deal with their digital needs.
BSkyB, the AA, and Orange all ran digital-only pitches last year - and all three appointed the independent digital specialist I-Level. Co-founder Andrew Walmsley firmly believes I-Level still has the edge over traditional media agencies, thanks to its dedication to digital.
"This is a really dynamic area and takes a great deal of effort and focus to stay ahead of the game," he says. "A specialist can offer the focus you really need to gain a competitive advantage."
Walmsley is sceptical of some media agencies' claims of expertise. "All the talk is about digital, but at the bottom line, with one or two exceptions, it is just talk," he says. "In my experience, many clients have spotted that they actually know more about this area than their agencies."
One problem, he says, is that too many agencies fail to realise that the internet is "not just a marketing channel, but a channel to market".
"Only a small percentage of internet usage equates to media consumption," Walmsley adds. "The rest is people using their e-mail, buying goods online and so on. It doesn't reflect the breadth of consumer usage of the medium."
Integrated solution
But others claim the age of digital specialists and digital-only pitches is just a transitional one, insisting digital will eventually become part of an integrated solution offered by agency groups or networks.
MediaVest Manchester managing partner Dave Lucas says: "Yes, you need specialists but it is madness to divorce them from the rest of the business. You can't hope to have an understanding of how the web is delivering business back into a client without understanding that client's consumers' overall media behaviour. For example, if a brand advertises heavily on TV, what effect will that have on a search?"
OMD's Nick Manning argues that specialists such as I-Level don't have access to the range of added-value services offered by a larger agency. Part of Norman's brief will be to ensure OMD's consumer insight, branded content and measurement services apply across all platforms, including digital.
Robert Horler, managing director of Diffiniti, says digital-only pitches are often needed simply because there is too much information for one overall pitch. However, as he points out, the client does not always appoint a separate agency: Carat won Abbey both off- and online.
If integration is the answer, why bother with a "digital" brand at all? Manning says that in theory, the "OMD Digital" brand should eventually be "self-liquidating" but in the medium term OMD feels it needs a strong digital brand, particularly as there are still clients issuing digital-only briefs. And Phil Georgiadis at Walker Media argues there's a need to mirror clients' structure, as many still organise digital activities separately.
But for the future, the IAB's Phillipson believes big brands will increasingly prefer everything to be covered expertly in one place.
"We are coming to a crossroads in all of this," he says. "By the end of the year we are predicting that online will overtake national press, and it has to fit together. Agencies are taking it seriously."
WHAT IS YOUR STRATEGY FOR THE FUTURE OF DIGITAL?
NICK MANNING, CEO, OMD
Our plan is to create a new model closely aligned to the new consumer landscape, where digital distribution is the key to all media development. As ITV, Channel 4 and the rest move to become multi-platform, we'll think about content in a platform-neutral way. Sheryl Norman, our new director of digital, is charged with looking at the structural changes required. Rather than having digital as a stand-alone discipline, we will grow a new generation of digital strategists who will be integrated into the main agency. There will also be a learning and development programme aimed at training everyone who joins the agency, so that they don't think about digital as an afterthought.
DEREK MORRIS, Vice chairman, ZenithOptimedia
If you want to be in the media planning business then digital must be at the heart of the agency. Its execution will remain in the hands of experts, but in the future there will not be separate digital pitches. All serious communication agencies will move to this central ground. With Zed, ZenithOptimedia believes it has both a rounded acquisition agency with the ability to do more than a digital specialist, and an asset that can provide the traditional agency with the knowledge and expertise to close the skills gap. We are embedding digital expertise in key planning groups via job swaps, and running "i-academy" masterclasses for the agency.
PHIL GEORGIADIS, Chief executive, Walker Media
Last year, we developed our online proposition into a separate business, Walker-i, after we identified that the time was right for us to develop our digital credentials. Putting digital first is something that will happen naturally as the internet moves to the heart of what consumers do. However, many online agencies are effectively sales agents for the internet rather than good counsellors to advertisers. Our view was that we needed to find people who could respond to client briefs cognisant of channels outside online, as well as thinking about the internet.
WHAT IS YOUR STRATEGY FOR THE FUTURE OF DIGITAL?
NEIL JONES, Managing director, Carat UK
I am evangelical about putting digital at the core of our strategy. It's Aegis policy from the top down and has been reflected in the acquisition strategy over the past few years: our offering now includes creative online agency Glue and web development agency deconstruct, as well as Carat Digital and Diffiniti. Isobar, our umbrella digital brand, was set up to allow these agencies to share best practice. Client demand for digital has amplified dramatically over the past year and it helps us to move upstream with our most important clients and sit at the top table in their strategy. Ideally I want everyone in the agency to understand it and be able to talk to clients about it.
DAVE LUCAS, Managing partner, MediaVest Manchester
We set up our MVi division in 1999 and made digital a core part of the offering at an early stage. Today, I see a lot of overlap between digital and broadcast media in particular and our digital team is now seated next to the broadcast team in the agency. There is an obvious technical overlap and it also works intellectually, because there will be greater integration required between TV and digital planning. In the past, a lot of digital has been based around search marketing and direct marketing to customers, but if you look at how brands are using the web now they are aiming for the same kind of exposure and engagement that TV buyers have been honing for years.
THE CLIENTS' PERSPECTIVE
SIMON THOMPSON, Regional marketing director for Europe Motorola
Digital is now a fundamental part of any consumer-facing plan. The consumer has changed, so the planning thinking needs to change.
Specialist "web" units should now be a thing of the past - it is a basic marketing discipline.
But the bitter reality is that for the "traditional" agencies there is not enough money in digital ... yet.
So, although they would love to have it as a vital part of the marketing mix, it's currently not a key margin generator. As for guidance, it is improving - but where there is no margin there is no advice.
Clearly the specialist agencies such as I-Level have a business model and therefore a dedication to the media.
But many media agencies' business models are still wrapped around TV - and there are more people on the web between 7pm and 11pm than there are watching TV. Nobody has really quite conquered this yet.
As a client, I would hold a digital-only pitch but I would never recruit a digital marketing specialist. Marketers need to understand the full mix to be able to make balanced decisions. If you are a marketer today you must have a good knowledge of digital.
ROISIN DONNELLY, Head of marketing UK & Ireland, Procter & Gamble
Media agencies are evolving. They are integrating digital into their operations, but it's not yet into the heart. It's either being done by specialist arms or specialist people within agencies.
Digital is a huge opportunity for agencies because it is now moving so quickly. In the US, for example, blogs are now carrying advertising.
Agencies need to put the consumer at the heart: they need to plan in a media-neutral way and think about how digital works with other media - for example, how can you make a TV sponsorship work online?
At P&G, we've found interactive TV is a great challenge. For low-ticket items such as FMCG products, the pricing model is tough to crack. But in other areas we've done some very successful interactive campaigns - for example an outdoor ad for Aussie Haircare which was hyper-tagged, allowing the consumer to point their mobile at the poster and get a sample sent to their door.
Specialists have really challenged traditional agencies, but in future we will see the specialists and the generalists coming more together. And while we've done digital-only pitches in the past, in the future we are certainly looking for integration.
JUSTIN ELIAS, Marketing director, Nissan Motor GB Brand Media
The digital age has exploded media fragmentation. The challenge for a company such as Nissan is to embrace opportunities effectively and maximise impact. To ensure we maintain strong integrated activity, we now have to deselect opportunities to simply ensure we have sufficient weight to impact the areas that we do commit to.
With MG OMD as a media strategy agency, we've been kept extremely well informed of digital communication opportunities, whether via TV, web, mobile, podcasts or outdoor interactive. They bring in specialist support as appropriate and all our agencies work within an inter-agency forum.
Media agencies are strong on web/online and have a good view of digital TV. But areas such as podcasting and mobile are quite immature. What is clear here, and with outdoor digital media, is that media companies excited about the opportunities are struggling to to prove the benefits to clients.
There is sometimes a rush to be first to market - but having sold us on the measurability of digital TV and web, the key metrics don't always add up for newer media, as the audience is still growing and the cost of entry has a premium.
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