How are agencies evolving their revenue streams with the emergence of new technologies?

Recent technological advancements within media and digital arenas have resulted in pressure on organisations to reassess their revenue models. Traditional models may no longer be relevant to a changing landscape; ‘clients want ideas – the questions are around how clients pay for ideas?’ Simon Carr, Account Director, M2M Media. As new platforms have emerged, agencies have experimented with the various ways to monetise opportunities in a way that best suits the needs of both the company and client. Going forward, there will be an emphasis on consolidating these options and finding new metrics to reflect performance. Agencies must be responsive to these advancements in order to be fully prepared for the future.

‘Agencies need to create value in different ways. We need to move past charging for time and start looking at charging for value.’ Paul Carvill, Mobile Accelerator Director, LBi. The commoditisation of the agency model i.e. the race to the bottom with ever-decreasing rates, is unsustainable and necessitates a new model of joint strategic partnership with clients. There is a need to marry the efficiency and measurability of digital media with the specialisms and culture that agencies have; this needs to be their USP.

‘Looking at social, search, mobile or technology in isolation limits thinking and growth…complete integration into a communication response is required.’ Karen Blackett, CEO, Mediacom. We must use learnings from all platforms to measure value. Agencies shouldn’t be afraid to invest in the unknown, even when they don’t have a clear idea of what the ROI will be. Having specialist departments that can explore and test emerging platforms, and then disseminate the most scalable ideas, means agencies can become a voice of authority. Fully integrating the learnings from across all channels and communicating with a coherent voice will provide the most effective cross-platform strategy. In order to successfully achieve this we must be brave and unafraid to fail.

For both clients and agencies, education in emerging technology is crucial to the evolution of revenue streams.  As the client is the source of the agencies’ revenue, educating and gaining buy-in from clients is key to the development of the industry as a whole. Within agencies, the gap between senior and junior revenue models needs to be bridged; one solution being to increase focus on internal training in emerging technologies and revenue models. Our research shows that while companies are considering new revenue streams, not many are actively pitching them. It seems that although the industry consensus is that client education is key, this is not reflected as much in practice. This education can play an important role in more honest, transparent and profitable relationships between agencies and clients.

Luke Bozeat, Joint Head of Client Services, MediaCom asserts that, ‘savvy clients i.e. ones that know exactly what’s going on [in the wider/marketing world] generally get the best deals and understand where everyone can win…a challenging, switched on client is preferable to work with’. This means that agencies have to distinguish between fads and trends in emerging technologies and have the knowledge to make relevant, timely and commercially viable choices on behalf of their clients.

There is a split amongst agencies as to whether technology should be developed in-house or outsourced. Those that choose outsourcing tend to do so due to the lack of internal capabilities, or they believe that independent technology houses are more specialised and can focus on a particular technology more efficiently. However, developing technology in-house allows for client licensing, intellectual property and a stable revenue stream with lower costs and higher profit margins.

Adaptability and creativity will be intrinsic to how agencies move with the fast pace of innovation. Setting up an agency model that recognises useful and innovative technology, has an effective test and learn structure, and can mould these learnings into a sustainable revenue stream, will prove fruitful in an environment that has never seen such a rapid pace of change.

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