Agencies will need to re-invent themselves to adapt to consumers over the next ten years, or suffer the consequences.
This is according to a new IPA report, ‘The Future of Advertising and Agencies: A 10 Year Perspective’, which has looked at the future shape of the advertising industry.
The IPA has worked with the Future Foundation, a global strategic consultancy and think tank, on this report.
This claims to be the first time that a fully comprehensive overview of the total commercial advertising marketplace has taken place.
The IPA, together with the economics and modelling team from Future Foundation, was able to cross-correlate Advertising Association Data with published information from the Bellwether Report, the Direct Marketing Association, the Institute of Sales Promotion and the Interactive Advertising Bureau.
The report found the majority of the IPA’s members are optimistic about their ability to grapple with the future.
However the overriding message is a wake-up call is needed for agencies who need to get to grips with emerging trends or else see commercial advertising begin to decline.
Founder and Chairman of I-Level, Andrew Walmsley, says, “In the last few years we’ve seen quite staggering amounts of change, change in the way that consumers can see the media, can see the product, and changes in the way that the economics of markets operate.
"These are really quite fundamental shifts, and they’re not going to go backwards. If anything they are accelerating.”
Re-classifying the industry
To create a more meaningful picture of the industry going forward, the report has attempted to re-classify all marketing communications to better reflect the present and future dimensions of advertising.The report proposes a move away from historic definitions such as ‘above the line’ and ‘direct’ to newer, broader definitions. These include ‘named’ (or ‘personalised’ for example DM) versus ‘not-named’ (for example TV), ‘screen’ (for example TV, mobile) versus ‘non-screen’, (press, radio etc) ‘two-way’ (interactive) versus ‘one-way’ (passive).
The new world order
In the future, the report claims that agencies must recognise that traditional advertiser/agency/consumer relationships will be challenged with new models of engagement coming to the fore.
As traditional advertising continues to decline, by 2016, the hypothesis is that media owners of all kinds, including online search, all networks, gaming environments and interactive digital TV, will be integrating brands directly into content and editorial.
Moreover, it argues savvy consumers will be taking increasing control of content and the directional flow of interactions. Agencies will not just be competing with other agencies.
Allies may become competitors, consumers may become channels, advertisers may become suppliers and agencies may become media owners.
Already, it says, consumers are creating their own forms of advertising, free of commercial imperative in the form of social networking sites.
Already, media owners are already bypassing agencies to develop advertiser-funded content through their own creative departments.
The advertising model of the future
Thus the report has proposed three scenarios for the advertising model of the future, which were the result of a number of workshops with senior agency management that took place earlier this year.
Who will be in the driving seat? Agencies, media owners or consumers? Whoever it is will have a tremendous impact on the growth or decline of commercial advertising.
By 2016 if agencies continue to be in charge then commercial advertising will grow by an average 4.6 per cent per annum, if its media owners it will only grow by 2.3 per cent.
The worst scenario for agencies will be if advertising becomes consumer led whereby commercial advertising will only grow by 1.2 per cent per annum.This last scenario suggests agencies have no room to be complacent and must start to capitalise on emergent new opportunities.
New roles for agencies
This report indicates that by 2016 traditional advertising will shrink at the expense of consumer-influenced content and brand–influenced editorial so agencies will need to both innovate and evolve into new territory.
New freedoms in the delivery of content, data and channels will provide new business opportunities whilst still maintaining the overriding focus on brand creation and development.
Agencies will need to take on multiple roles such as: media brand owner; joint venture partner; content collaborator; programme producer; network creator; data provider and data aggregator.
If agencies don’t take these opportunities, the report warns, there will be tremendous implications in terms of their relationships with clients, their remuneration packages and their very existence.
IPA President and Chief Executive, PHD Worldwide, David Pattison, says, “During my time as IPA President, I have talked a lot about ‘putting the business back into the ad business’.
“While this is very appropriate for the short and medium term, long term planning is also essential if we are to maintain our world leading position”
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