Written By Kate Zimmermann | February 28, 2007 | Share This |

“Huge gaps exist between marketer and agency perceptions of ability to deal with changes in TV, Internet, and consumer-generated media,” writes Peter Kim in a recent Forrester study on marketing agencies (via MediaPost). Despite the growing demand for cross-media advertising, traditional agencies are still largely incapable of producing sophisticated interactive campaigns. We witnessed this in our Search Marketing Scorecard of Super Bowl advertisers; it was certainly no coincidence that an online direct marketing firm, not a multi-billion dollar brand, produced the best cross-media campaign.

Because of this rift, most companies spread their online marketing budget across multiple specialized firms - one house for paid search, another for creative, another for social media, etc. Says Kim,

“Marketers are increasingly calling on specialists to fill skill gaps. Marketers first turned to digital specialists to build Web sites during the dot-com bubble. Now, the specialist trend has expanded as marketers seek fresh approaches from digital shops.”

The problem may not be, however, that large agencies are too slow to keep up with digital media. The digital advertising industry has grown faster than the talent pool, and though agencies may be trying to expand their digital offerings, the lack of qualified management-level candidates has created a ceiling on growth. As ClickZ analyst Tessa Wegert writes, “If you’re an interactive planner, buyer, or account manager with more than five years of online experience, you’re one of the most wanted employees in America.” Everyone in this industry - from “client-centric” startups to the Fortune 500s - is feeling an HR pinch.

Rather than build specialized departments from the ground up, many agencies are buying out smaller firms to stay competitive. On Monday Kim blogged about TNS Media Intelligence’s acquisition of Cymfony, an online brand monitoring company. Kim writes, “Expect additional activity in the brand monitoring market,” such that, “Agencies will boost their market research capabilities” and “PR services agencies [will] upgrade their offerings.” Peter Hershberg blogged about this in December after the Chicago SES conference. He wrote,

“In just a few years, ’search marketing’ has from gone from the bid management of text ads, to running campaigns across multiple ad networks - content pages, display ads, even radio. Search marketing spend grew 44% between 2004 and 2005, and will likely accelerate as the search engines develop new ad channels (print, audio, mobile, etc). Naturally, the number of agencies offering search services has also grown. Today - in addition to traditional SEM firms - interactive agencies, direct marketers, analytics companies, independent consultants, ad networks, and the engines themselves all claim to “do search”…

“It seems that some of the trends we saw in Chicago last week should give us some insight into where the industry stands as a whole. It appears as though search is moving in two different directions at the same time…Mergers & Acquisitions [and] Greater Niche Focus… The search marketing world will soon be made up of a smaller number of large full service shops, and a greater number of small niche players. If executed properly, both strategies could prove to be extremely profitable.”

Until a new wave of qualified job candidates arise - either from graduate programs focused on interactive marketing, from small niche companies, or middle-management at full-service agencies - expect the Big Fish eats Small Fish cycle of talent acquisition to lead marketplace transformation in the digital advertising industry.

Topics: Investment, M&A, Media Convergence, SEM: Firms |