Research Findings: While traditional agencies clinch up to $162,000 per client from beginner, experimental and formalized companies, yet when corporations become advanced, boutiques earn an average of $238,000 per brand. Expect traditional agencies to glean new skills or start M&A, and expect boutiques who have vision to stand the test of time.
Social Media Boutiques are Emerging to Threaten Traditional Agencies
It’s been a long time coming since we’ve seen major disruptive in the agency space. 10-15 years ago we saw the rise of internet agencies, digital agencies, and web marketing boutiques, and then a fast consolidation during the downturn. Now, we’re seeing the rise of social media boutiques, and we have telling data that shows they are threatening the budgets of traditional digital agencies in a particular type of client. This is a massively growing space, at Altimeter we were tracking the many agencies on a wiki, but stopped updating it due to overflow of submissions.
Above Buyer Data: 2011 Budgets: Social Media Boutiques Overtake Traditional Agencies Among Advanced Buyers
Immature Brands Naturally Rely on Traditional Agencies
In the novice through mature level brands, the traditional agencies are the first go-to. Corporations rely on them, as they have existing relationships and have purchase orders set in place. Yet we know (see engagement DB and our Facebook marketing research) that most corporations are not even engaging with their customers they are doing it wrong. They often rely on traditional agencies for education (often a loss leader) research and strategy and implementation.
[Traditional agencies clinch revenues from immature and formalized clients, yet have often invested unpaid hours in education, research and strategy and are unable to specialize to meet the specific needs in social business]
After Traditional Agencies Have Laid Groundwork Boutiques Swoop In, Clinching Revenues
Once corporations realize that social business is not about short term campaigns, they give $ to boutique agencies. The data from the buyers indicates there’s a significant jump in spending on boutique social media firms when the buyer is advanced and sophicaiated in social business. They know their traditional agency lacks flexibility or doesn’t have a business model for social engagement and relies on them. This is a great opportunity for the boutique agencies, who let the traditional agency do education, set plans in place, experience a few failures letting boutiques swoop in.
[Boutiques lack ability to monetize in immature corporations, but when companies reach maturity they clinch an average of $238,000 per brand and push traditional agencies budgets in social to a mere $87,000]
In my LeWeb keynote, I stand by my convictions not to hire social media “Ninjas, Gurus, and Samurai” and received audience applause. Instead, I offered, corporations should hire business program managers, in other words, people that put business goals first tools and technologies second. This also applies in selecting your boutique agency
Why Social Media Boutiques Differentiate, and Win Deals From Advanced Buyers
Social Media Boutiques are taking the budgets away from Traditional Agencies as corporations become mature. Corporations know they need these specialists for the following reason
- Offer a specialized skillset in new media and social business that traditional agencies may not offer
- Often offer change management within the corporations –traditional agencies have a reputation for layering social media on top of existing campaigns.
- Rather than be ‘campaign’ focused, instead are more long term focused such as building a community with customers for the long term.
- Are ready to roll up sleeves to assist with deeper customer engagement not just deploy traditional advertising (one of the top spends in social business)
- Are more agile within smaller teams and can quickly maneuver as the technology space changes over time.
- Fundamentally are geared to measure differently around engagement, and what it means –not just top line and bottom line measurements
Yet Social Media Boutiques Limited by Size –and Must Partner
Despite their strengths, Social Meida Boutiques have weakenesses. They are often unable to scale as engagement is difficult to roll out to all product units and around the globe, are quickly finding that traditional agencies are catching up by training staff (see how Edelman has an internal black belt education program) and often lack the ability to achieve an integrated marketing approach
Industry Analyst Perspective: What the Future Beholds
- Traditional agencies will adopt these skills, or be forced to contend with options.
- Expect the traditional agencies to generate revenues outside of engagement in brand monitoring, education, measurement, and leading an integrated approach
- Traditional incumbants will acquire these young startups. Expect this data to be cascaded to the upper echelons of traditional corporations who know they need to quickly get a strategy on M&A activity (see today’s Dachis news)
- A handful of these agencies will grow into the next digital agency. Not wanting to sell and enjoy the fruits of their hardwork, many of these agencies will stay
- Brands will rely on traditional for education boutiques often can’t afford to this unless it’s a loss leader for a sale.
- While specialization and competition is good, buyers will demand that their agencies work together. The previous HR block marketing team rallied 5 agencies together to work on a single social media effort, for a holistic customer experience
- We’re already seeing a few traditional agencies like Edelman (in the lead, in my opinion with Rubel, Armano, Carfi, Brito), Oglivy (Bell, Rohit) build strong internal teams on social business using blogs, thought leadership, and hire social media practitioners.
If you found this helpful, please forward on to your agency partners, and internal teams. Or if you’re an agency and want to share your perspective, I look forward to your comments below.
1. I'd add Waggener Edstrom to your list of bigs getting social right. They've created research tools allowing clients and their front-line media relations experts to make smarter decisions about social media strategies and the ever-changing influence game online. Full disclosure: I used to work there.
2. Sadly, traditional agencies could be much more agile and effective at change management if their clients would let them. In my personal opinion, clients stay entrenched with stale perceptions, real or imagined, of incumbent agencies. Plus, they often expect social media miracles with less budget per project than the shiny new boutiques.
3. I think another interesting area to research would be the percentage of dollars going to advertising agencies vs. traditional PR agencies for social media work. The U.S. government puts social media careers under the umbrella of PR, not advertising. Interesting, right? Of course, this will be a moot discussion soon enough, as ALL agencies will have to do social.
Refreshing to read some original data this morning. Thanks, Jeremiah!
-@Gorditamedia
1. I'd add Waggener Edstrom to your list of bigs getting social right. They've created research tools allowing clients and their front-line media relations experts to make smarter decisions about social media strategies and the ever-changing influence game online. Full disclosure: I used to work there.
2. Sadly, traditional agencies could be much more agile and effective at change management if their clients would let them. In my personal opinion, clients stay entrenched with stale perceptions, real or imagined, of incumbent agencies. Plus, they often expect social media miracles with less budget per project than the shiny new boutiques.
3. I think another interesting area to research would be the percentage of dollars going to advertising agencies vs. traditional PR agencies for social media work. The U.S. government puts social media careers under the umbrella of PR, not advertising. Interesting, right? Of course, this will be a moot discussion soon enough, as ALL agencies will have to do social.
Refreshing to read some original data this morning. Thanks, Jeremiah!
-@Gorditamedia
Jeremiah,
Interesting analysis. I think, though, that you've made the mistake of lumping 'traditional' agencies together when there's a big difference between PR, digital and advertising agencies. (Disclosure: I work for Edelman (thanks for the kind words, BTW).)
Looking at your list of differentiators for social media boutiques from my perspective:
– A good number of PR agencies (ours among them, but other smaller agencies too) have spent the last few years building a team with this specialized skillset. Saying agencies “may not offer” this is like saying traditional agencies may not do digital builds – some don't, but many do.
– Good PR agencies are grounded in long-term reputation and relationship management, far removed from the quarterly campaign-focused approaches that you refer to within advertising
– PR agency models often orient towards long-term, ongoing engagement with clients. This fits well with the long-term nature of social engagement.
– The earned nature of PR has long demanded a different approach to measurement, recognizing that not every “impression” is equal and that other approaches are necessary.
What's interesting is that, while many PR agencies have been early out of the gate (and yes, some ad/digital agencies have too), the larger advertising agencies are now beginning to pay attention to this area. We're seeing a tug-of-war between a long-term engagement-focused approach from folks like us (which is a hard sell to marketers who are used to fast results and low CPM) and a more campaign-focused, layered-on approach from many advertising agencies who, like you say, aren't set up financially to support ongoing engagement. As a result, we're beginning to see a blending of approaches as PR agencies evolve their approach, while other PR folks move to the ad side to work on long-term-focused social business there.
when offering services to clients i often have challenge expressing the value from our social media engagment proposals . As far as the client is concerned they think/assume setting up a twitter/facebook/whatever is a social media solution . So i need to sit down with thema and exlain to them how it works and the conversation concludes to “how can i measure if its making a difference” to which i reply it depends and can take anywhere between 6 months – 2 years for a social media plan to be effective . Also yes the other question is trust since we are a relatilvely new company they dont know us and would prefer someone with a “NAME” and assume traditional advertising agencies can handle social as well . After meeting with more clients (im in new york city ) i think its changing yes the traditional agencies are hiring but they have a lot of layers to go through (approval,maketing,content) before the social media stuff is implemented or before you write content for a client for the traditional agencies . Social is fast / real time stuff and you need to understand the social psychology as well and its always changing so you've got to be adaptable and ready be able to deal with change in a timely manner and a new / younger agency can do that , because there are just less politics and less layers to go through we are dealing directly with the client .that's the way i see , you may see it differently . Interesting post @jowang. where the heck do you these insights ! 😉
best
@adamqureshi
Wow – love to see this kind of thinking and analysis! More clients are willing to explore other media options when they are in a pickle…like when their sales force is halved or their brand will be launched without a sales force at all. Our focus is in the health care professional arena, which I think is REALLY going to get exciting in 2011 – stay tuned.
I somewhat disagree here. Social isn't digital? I would argue that point, especially recently as the bulk of the reporting on social media campaigns and efforts would have been called “great digital work” only 1-2 years ago.
Social media has become a tag for everything digital of late.
Maybe if you look at what tra-digital shops offer in term so big builds / implementation services – where the focus is on tech and development I can see where you are coming from. And there are many who specialize there. But for the most part shops like my little firm and others who focus on human interactions with brands in the digital space. So that really ensures thinking across social and digital interaction points.
This is what we have been experiencing (MotiveQuest LLC) – and our most advanced clients make sure that all of the agencies (from social thru AOR) are working together and on the same page.
@tomob
Fascinating insights–and consistent with what I heard from a few in boutiques.
We (Ant's Eye View) have certainly experienced this. I'd likely add the following to your list of reasons why: The service provider of the future (particularly in the enterprise) must be as comfortable with VP's of Customer Service, Support, IT and Product (BU's) as the are with sr. leaders in Corporate Communications and Marketing. I know in our case, we have built from the ground up a team of practitioners with deep backgrounds on the brand side (MSFT, Dell, Intuit, Lego, IBM, Comcast, RealNetworks, etc) who came from leadership roles across all of these silos / functions. Lasting success with Social is about focusing on customer experience across all the touchpoints with a brand. Credit to Bruce Tempkin here – it's about the “point of value” between when your product/service is purchased and when the consumer feels they are getting full value from their purchase. It's in this moment where brands have the biggest opportunity to catalyze value from social customer engagement. Expertise will be needed that can deliver on change management, cross functional strategic planning, organizational design, participatory/engagement marketing, web, research, etc. As we've shared recently on our blog, there's a journey to social customer engagement and success on that journey will require a broader set of skills than the outcomes historically favored by traditional marketing.
Sean O'Driscoll
CEO
Ant's Eye View
We (Ant's Eye View) have certainly experienced this. I'd likely add the following to your list of reasons why: The service provider of the future (particularly in the enterprise) must be as comfortable with VP's of Customer Service, Support, IT and Product (BU's) as the are with sr. leaders in Corporate Communications and Marketing. I know in our case, we have built from the ground up a team of practitioners with deep backgrounds on the brand side (MSFT, Dell, Intuit, Lego, IBM, Comcast, RealNetworks, etc) who came from leadership roles across all of these silos / functions. Lasting success with Social is about focusing on customer experience across all the touchpoints with a brand. Credit to Bruce Tempkin here – it's about the “point of value” between when your product/service is purchased and when the consumer feels they are getting full value from their purchase. It's in this moment where brands have the biggest opportunity to catalyze value from social customer engagement. Expertise will be needed that can deliver on change management, cross functional strategic planning, organizational design, participatory/engagement marketing, web, research, etc. As we've shared recently on our blog, there's a journey to social customer engagement and success on that journey will require a broader set of skills than the outcomes historically favored by traditional marketing.
Sean O'Driscoll
CEO
Ant's Eye View
Social is often a subset of digital, yet they are both pervasive.
You need to do another magical armano framework graphic.
Completely agree that traditional agencies will begin acquiring the social media startups. No doubt.
As someone who gets lumped into 'boutique' and 'specialist' I'm of mixed feelings about this, even though I definitely agree with the post. My current revenue is roughly 60% derived *from* those large agencies. As a counter to the exact situation described in this post the more intelligent agencies have worked out a symbiotic relationship with people and small firms like myself. They take a piece of my margin, maintain control of the broader relationship, while providing access to the more specialized services. I on the other hand have lowered acquisition costs which makes that margin available to the agencies, while often sacrificing things like the ability to disclose my relationship or work product.
The reality is that someone like me or my firm should *not* be owning the oversight of a complete integrated strategy (breadth), nor should a large agency be expected to provide the depth that I can provide in particular engagements.
There's no need for this to be an either/or scenario, and the balance is easier to strike than most might perceive. Acquisition is not an answer, as it ultimately destroys the culture and focus necessary for the boutique perspective due to resource demands that the parent company inevitably applies.
Just my .02 cents
I could write the How Social Media Boutiques are faking influence.
These PR Agency's hire young people just out of collage and give them the title of Digital Strategist when their only digital experience is a Facebook page, or MySpace and AOL chat.
The skill of the Social Media agency is their ability to convince/con corporations into believing their Digital Strategist's are exceptional communicators with a following.
A Social Media agency will never admit they outsource Social, so 100,000 impressions on Facebook could have been made in Bangalore or even by a BotNet.
The Vanguard of Social Media was blogging with passion and authority, soloists who could sing the high notes not a chorus singing the company song.
To me, at the highest level, 'social' is construct. A mindset and cultural instigator. The focus currently is simply on digital tools that enable it, but I'm with you in regards to the 'fundamentally different' notion vs. simply a subset of a known quantity.
David, I agree and have been thinking for several years now who those new hybrid professionals should be — and what expertise they should bring to the table. It seems that the messaging, influencer outreach and crisis management skills of PR pros are essential, paired with an keen understanding of search optimization and conversion metrics. Add a heavy helping of customer service (with a pinch of CRM) with a dollop of media production, and you might have the start of a great recipe for the ideal social media marketing professional.
Since we™re still in the early stages of this sea change, you absolutely need a side of corporate training to get marketing departments (including executives) up to speed. I teach a class in social media marketing at Portland State that™s geared to people in the workforce (most students are middle-aged marketers) and I™m always surprised at how little people know vs. how much they THINK they know.
Likewise, I™m always surprised at how various marketing disciplines want to shoehorn social media marketing into old ways of doing things “ on the agency side or the client side. I suppose nobody wants to spend the thousands of hours it takes to get up to speed on new technologies and skill sets (having done that, I know how painful that can be to the bottom line). Until clients have a more sophisticated understanding of what is required, it seems many agencies can skate by with social media titles on business cards and little expertise to back it up. But Jeremiah™s fantastic research certainly suggests that once clients become more sophisticated, they realize they need professionals with skill sets typical agencies can™t provide.
@CarriBugbee
Sorry to confused, I think this would also include PR agencies too, no doubt. They were one of the first to join this space. I use “traditional' and 'traditional digital' to span a variety of firms.
The thing to know is, this is existing firms vs boutiques.
Dave, as someone who spent years doing traditional PR, I mostly agree with your points. However, I've yet to encounter any PR folks who have an excellent understanding of metrics, search behavior, conversion methodologies, etc. For this reason, I think SEO firms will probably get a lot more social media work than PR firms in the short term. I don't think this is necessarily beneficial for clients, but the seduction of metrics over messaging is too great and PR people seem loathe to add technical skills to their resumes.
I am going to write a blog post so that I can carefully analyze each segment of your post. As a woman in a “traditional” agency, I can only say here that there is no such thing as traditional anymore, except maybe for the small shop that does nothing but production. The new traditional agency (and that's not an oxymoron) will thrive, in my opinion, more than a Social Media boutique because we can offer expertise in social and in other channels of marketing. We can help you build your sand castle, tell you what the tide is doing, and help you pick out good buckets, too.
I think painting with a broad brush is misleading in these kinds of scenarios. There are I'm sure “traditional” agencies who don't get Social Media, and I'm sure there are also Social Media boutiques who “get” a lot more than Social Media.
I think for our clients to succeed, we all need to abandon the idea of expertise in just one area, and we need to abandon the idea that any one channel of marketing is inherently superior to others. I just don't think that kind of logic will hold up in the long run.
I also LOVE to see research on the percentage of dollars going to various marketing disciplines for social media work. I realize this would be hard to do since social media is quickly becoming “baked in” (as it should be), but I'd like to see this comparison for:
1. ad agencies
2. PR firms
3. SEM firms
4. Digital shops (website dev, gaming, etc.)
I'm still processing the post, but one point of clarification that I think is important to the overall setup: Consolidation amongst and with digital/web agencies during the dot com boom didn't start or even really accelerate after the bubble. Consolidation, roll-ups, buy-outs, and mergers gain significant momentum at least two years before the bubble burst, with many of them coming at the tail end of the boom. In some part, the bust was brought on by the foolishness of the gold rush that was consolidation. I was part of two different companies that were rolled up (one in early 1999, one in late 1999) in that period and things were so poorly planned employees and clients suffered in a big way.
After the bust, consolidation was less about growing a business and more about trying to put a thumb in the dyke that was the downward spiral of revenue. Consolidation, sure. But vastly and radically different than what Dachis just pulled off.
I'm still processing the post, but one point of clarification that I think is important to the overall setup: Consolidation amongst and with digital/web agencies during the dot com boom didn't start or even really accelerate after the bubble. Consolidation, roll-ups, buy-outs, and mergers gain significant momentum at least two years before the bubble burst, with many of them coming at the tail end of the boom. In some part, the bust was brought on by the foolishness of the gold rush that was consolidation. I was part of two different companies that were rolled up (one in early 1999, one in late 1999) in that period and things were so poorly planned employees and clients suffered in a big way.
After the bust, consolidation was less about growing a business and more about trying to put a thumb in the dyke that was the downward spiral of revenue. Consolidation, sure. But vastly and radically different than what Dachis just pulled off.
That's just it, though – rather than being confused, I'm saying that it's a mistake to lump the agencies all together as they have different characteristics. Many PR agencies, for example (which is the perspective I come from) don't have the issues you outline above.
Take the business model, for example – PR agencies are used to working on a long-term non-campaign-based basis. The “news bureau” model in traditional media relations would be a decent comparison – it looks to maintain ongoing presence in mainstream media between larger initiatives, similarly to how social engagement approaches look to build relationships with people on an ongoing basis.
So, while many of these points may be true when applied to ad agencies, I would argue they don't all apply to PR agencies, who are structured and financed differently, and that it's a mistake to lump the two together.
What is social media?
If the answer is something that can be defined as a complete stand-alone communication artifact, then I see a need for specialized business that will only compete with itself.
If the answer is, it is communication, but in a new/different form – then I see only a matter of time till scale is applied and it is part of the media mix.
Just white boarding this thought…
I would add that traditional agencies often lack the right culture to get social (or digital for that matter) right. In traditional agencies, creatives rule the day. They often fail to adopt an agile data driven culture needed for digital, or a relationship based culture needed in social.
IMHO the ones with the most to risk in this new disruption are the digital agencies. Social strategies are quickly becoming digital strategies, and they touch all parts of the org, not just marcomm.
I can't tell you how many RFPs we've responded to/won this year from large global orgs who have been dabbling but are now getting serious. They're *all* looking for specialist agencies. Your research perfectly dovetails with our experience in the market.
All I want for Christmas is an @armano infographic… 😉
IMHO the ones with the most to risk in this new disruption are the digital agencies. Social strategies are quickly becoming digital strategies, and they touch all parts of the org, not just marcomm.
I can't tell you how many RFPs we've responded to/won this year from large global orgs who have been dabbling but are now getting serious. They're *all* looking for specialist agencies. Your research perfectly dovetails with our experience in the market.
All I want for Christmas is an @armano infographic… 😉
I invite Jeremiah to be a guest on my BlogTalkRadio show “The Coming Digital El Niño
Traditional Interactive Agencies Face Extinction”: http://www.talk.pharma-mkting.com/show124.htm
Contact me: pharmaguy@pharma-mkting.com
Some really good perspectives brought to light, both in the original post and in the comments below. Thank you.
I actually think one of the most important pieces you have highlighted is the dimension around client maturity. Having been at a large “digital agency” and now being at a “social marketing agency”, many clients still are only interested in touting the number of FB fans, and obsessed with large numbers — whether there is any true engagement, dialogue, value exchange, or not. This is probably as much due to flaws in agencies as much as client maturity. So be it. The clients who are most innovative are quickly embracing social as an integral part of their customer dialogue — everywhere, from customer service, to campaign integration within a product launch, to an ongoing, consistent way to add value. And they are seeing the results in metrics that span “social pulse”, brand preference, and bottom line business results.
@glennengler
I look forward to it Majorie!
Thanks Jeremiah and Altimeter!
A great writing and insight again on a topic that causes much confusion – stated by the flood of comments. We liked especially the point “business goals first “tools and technologies second” and it is what we want to offer @grupobetalabs .
Social media is globally still very immature without established practices. It resembles the beginning of the internet era when the tech guys tried to sell services communicating with clients by using jargon, and having neither understanding nor skills of client businesses.
Inevitably, the large “traditional agencies” can try to close the gap between SM boutiques through training, M&As, other type of consolidation and so on. However, there is a big BUT; social media is different – customer has a large portion of the brand control. Can the same agency offer successfully services for broadcasting (traditional) and cross-casting (social)? We think that this question becomes crucial when clients acquire a better understanding of social media. Of course this can be solved but we have not seen it happening yet.
Happy Holidays!
Markku Nummila
CEO
Betalabs SL
David, agreed. I think many view social as a subset of digital. The reality is that social is a manifestation of something that in many cases requires a new, and often temporary, nucleus to help socialize existing methodologies….marketing, advertising, communications, service, etc.
Agreed – to me it's more about the customers' voice rather than the tools. How do ALL aspects of marketing – or the entire value chain for that matter – react to the customer having a voice as loud (or louder) than their marketing spend? How do organizations inject that voice and those preferences into the machine to optimize it? Digital was about putting the outbound marcom voice onto the web – social is a whole new animal for the entire enterprise.
Jeremiah, you mention resource scaling as a weakness for boutiques but I can tell you it is for many agencies as well. Social-savvy strategists who can brand-plan and provide client guidance in documents worthy of a read by the CEO/CMO are in short supply everywhere. Lots of junior staffers coming up who can knit together a blogger engagement strategy but an overarching socialized enterprise plan? Agencies are in the same resource shortage boat.
How do you classify boutique vs traditional? I do social media efforts for an ad agency of 17 people, but we are a pretty full service shop. Are boutique firms in this instance those offering JUST social media help??
The terms we used are what you see above “Boutique” and “Traditional Agency”. We did not specifically give any parameters but let the buyers respond against those specific terms.
I just sent you an email.
The big agency model is flawed because it is bloated. Historically speaking companies that start during a recession are both more profitable and sustainable than those that open their doors in a flush economy. Internet/digital/web boutiques began during the dot com bubble. Social media and other alterative boutiques born in the downturn know only lean times.
Cheers,
Mark Gallagher
Brand Expressionist®
Blackcoffee®
Agreed, what's different about this market is that we're seeing social media take off during the bottom (I hope) of the recession. It's nearly flip from Web 1.0 round where innovation and growth from agencies was found in late 90s as I recall.
Interesting symbiotic relationship Matt. One question, how long (if ever) till those large agencies figure out how to replicate the services you're providing to them?
From my perspective, Ant's Eye is unique that it has an ethos stemming from customer support and advocacy programs –not just a marketing agency spin off. Thanks Sean for your perspective.
True Dave. We used in the survey “Traditional Agencies” which could mean PR, Digital, Ad, Creative, Media, and whatever else.
Your point is taken, the scope in my analysis should have been broader to assume PR agencies.
Ok, even with that added, traditional PR, while one of the earliest adopters of social, will still compete with smaller boutiques of a more flexible nature.
We did not segment that deep, yet.
More data from my LeWeb keynote, and we have another report coming out soon, and will have more surveys and data surfacing. All Open Research.
http://www.web-strategist.com/…/
We also need to consider boutique agencies ability to tap into more than just the marketing budget.
I come from a boutique agency. And the best success story we have is with a telecom client where we tapped into the PR, R&D, and the marketing budgets. This was an instant win win with record revenues for us and great ROI.
While marketing contributed most to the budget, our ability to serve more than the marketing dept. differentiated us from traditional agencies and secured a bigger SM budget.
Zafer, see comment from Sean below from Ant's Eye View, they are generating revenues from support side of house too.
The answer is a nuanced one in my opinion J, and likely should be a blog post vs.a response here. But there are many reasons that an agency can't, or shouldn't, provide certain depths of specialization. It's not just a matter of can they 'figure out how to replicate'. In general I'd say the question is a flawed one in some ways because it assumes a static picture. Both the boutique and the agency should be moving forward and evolving at relative rates, and depending on the POV always ahead of the other with the relative strengths they bring to the table.
Maturity: Committing the required resources to a nascent industry segment to provide the depth of a boutique who has chosen that specialty doesn't make financial sense initially. As that sector matures and becomes more commodotized an agency can bring that in house while the boutique (hopefully) is now pushing the further edge of what is typically sub-specializations that have emerged. Acquisitions at this stage gain 'scale' in the form of educated resources (bodies) but tend to cease the boundary pushing and focus that made the boutique valuable in the first place.
Brand recognition: Both in the form of an individual or boutique who has become known as a industry thought leader for a particular topic. This isn't something that can be 'replicated', only built over time, and the larger the agency the more impossible it is to do. A large agency must brand itself across broad concepts (methodology, approach, verticals, etc), not depth, so the moment an acquisition is made for reasons of expanding depth that brand recognition of the boutique begins eroding and is eventually absorbed into the larger brand. Again, its initial value is diminished.
Culture: There is only so much top tier talent to go around, and much (most?) of the highly specialized talent struggles to operate within the confines of a large agency. Agencies will always seek the top talent to provide to their clients if that's what is needed (whether they like it or not), and if that happens to mean partnering with a boutique or individual then that's what occurs.
The flipside to this would be a new 'holding company' approach like a Dachis whereby individual brands are retained and you fill in gaps along the way. The challenge there is really one of integration, how do you make those cultures work effectively amongst one another with a single voice? But that's another topic for another day 😉
Carri, you summarized the required skills more clearly and accurately than anyone I've seen to date. I'd add one set of skills which is typically absent from both traditional and boutique agencies: business transformation (typically developed in management consulting). In addition to the skills you list, the leaders of social transformation need to understand how to transform their organizations internally, or they simply will not achieve enterprise-scale business outcomes through social media. It takes years of large-scale business transformation experience to walk into a major brand and help them define, plan and execute the kinds of internal transformations required to integrate social capabilities across functional areas including PR, Marketing, Customer Service, and all of the others that you listed. And this is one vector of the impending collision between management consultancies and agencies.
Jeremy, your comparison would be complete if you added management consultancies. Every strategy firm and systems integrator is investing heavily to market themselves as savvy in the ways of social business transformation, but the social boutiques are winning in the market against management consultancies in many of the same ways that you describe in this blog post.
Yes, the traditional firms have the relationships, but, ultimately, relationships alone will not win this space. Success in this space requires a blend of skills and expertise from agencies and consultancies, and, in 2010, the consultancies started to hire experienced people away from the agencies.
Even so, expecting agencies and consultancies to blend the required skills is like asking a black horse and a white horse to each transform themselves into zebras; and they have to do it on their own unless we see an agency merge with a systems integrator or management consultancy.
I left Accenture to join Converseon precisely because I believe that a new breed of consultancy is required to help global brands achieve significant business outcomes through social media — a breed that did not exist 2 years ago, and a breed that must develop organically through intense focus on social media and the internal, operational transformation that it requires a brand to undergo.
As you described, such organically developed firms may choose to join the family of an established firm that brings relationships and resources to the table, or such a firm may choose to continue in the market alone. In either case, each of the major agencies and consultancies will ultimately look outside themselves and their hiring pipelines to embed the required capabilities throughout their organizations.
Thank you for starting this conversation and engaging so many thoughtful members of our community.
Chris Boudreaux
SVP of Management Consulting
Converseon
I may do further studies diving into the specific uses of services in social business. The thing is, it can come from many groups: management consulting, analysts, consulting firms, boutiques, digital agencies, ad agencies, media agencies, PR firms, and so on.
Expect more from us on this.
Amazing post, n interesting discussions.
Jeremiah…Thank you! This post is incredibly well timed and reflects exactly what we have been experiencing. The Targeted Group is a niche B2B social strategy firm and we have been amazed at how willing big brands are to engage. For many of the reasons you pointed out, these brands seem to be in the mood for highly focused, specific and efficient initiatives that are well suited to specialists.
Despite what the traditional agency folks here say, the fact is that niche specialist firms are winning big accounts with global brands. Much like a “special ops” group, they are typically hired to activate one or two small highly focused objectives. However, the nature of great social strategy, whether internal focused or external, is that it grows in scale and scope very rapidly. Small work efforts can then grow into global initiatives…often then bumping into the AOR. With traction, results and momentum, the specialist shop is very hard to uproot at that point, much to the surprisse of the traditional agency. They always come to the table at that point and say, “we can do all of that,” to which a common response is, “yes, but they are already doing it and doing it well.”
Don't get me wrong. I am not dillusional…the big agencies are not in real danger. As you pointed out, they will train internally to add real high level capabilities and they will grow through acquisition. But right now, it is a reall fun and exciting time to be a fast growing niche firm.
Thanks again for your research. Having a broader validation of what we are seeing is really great.
Richard Brasser @socmedia365
Jeremiah amazing job. As a boutique owner it has indeed been a fun ride and I feel like I have always worked in “disruptive” roles so it feel very familiar. Here's a few reasons why I feel we are winning.
1. Hustle-Can not be overlooked. I out hustle my competitors on most days
2. Nimble-Able to adapt to clients needs in a way larger agencies simply can't
3. Pricing-We hands down will beat larger agencies all day because we will take on business they would pass on and scale upwards from there.
4. The “Aaron Spelling” Factor-Not mentioned in any posts or your post is the fact that we actually produce content. I hire shooters, editors, predators, etc. This means my account teams can not only work on messaging strategies but they also have a mean iMovie editing game at times.
5. Education-My clients are my students and the conference room is the classroom. We love this and would be teaching if not doing this
6. Experimentation-Our culture and business is built on experimenting with the tools. The engineering of the tools is everything
7. Experience-We have been on the “traditional” agency side, the digital agency side, the client side and even in the record business. Really hard to replicate our mix. We also hire “non-agency” folks because we are intentionally trying to not have the “agency mindset” on our team. I would prefer to hire smart people who understand managing a community vs a former Account person.
8. Love-We top off our business with a love and passion for the craft and the clients that's very different than when I was on the traditional side. Bonds are formed because we genuinely like the people we work with. We are blessed with the ability to choose our clients in a ripe market
You know we love your work.
James Andrews.TV
@keyinfluencer
Everywhere
That's fair, and a common point of comparison between large and small agencies.
Actually, I think that would be an interesting point to research (not really within your field though), because you might (and I do) wonder if, in fact, large agencies with numerous resource that they can bring to bear might be able to respond faster to changes. That's a topic for another day, though.
Cheers,
Dave
Jeremiah, Thx so much for the link. You and the other folks at Altimeter really are rockstars in this space, providing the kind of data so many of us need!
I started thinking a lot about competing with agencies when a prospective client asked us for social media training specifically because we are NOT an agency – we're independent trainers and consultants. This prospect felt that training from an agency would come with baggage; a push for expensive services that they did not want or need. The prospect knew that they wouldn't be knowledgeable enough to sort the clutter and say “No” to any proffered pigs in a poke.
When it comes to an effective presence on the social Web, the importance of quality client training and education cannot be overstated, and that is where we niche educators can sometimes move faster than our competition, to say nothing of having an entrepreneurial hustle that the biggies find tough to match. We HAVE to hustle more – our danged mortgage payment depends on it. 🙂
As a two-woman show with Becky McCray at Tourism Currents, we specialize in a very specific training niche – showing tourism, hospitality and economic development organizations how to make sense of social media for their destination marketing. The first thing I tell clients is that we will teach them to fish, then mostly get the hell out of the way, because no one is better at telling their story than they are. Our going-in position for today's world: “Think hard before you pay someone else to use a free tool to speak with your voice.”
They are the experts, not us and not an agency. The social Web hates middlemen.
Help in a crisis from an agency? Sure, if they're the right fit. Specific projects that make sense? Sure. But we find that the most authentic, knowledgeable, vibrant online voices in tourism generally come from CVBs (Convention and Visitor's Bureaus) who do their own social media. Being forced to do it yourself because of small budgets is actually a blessing, because visitors want to hear from the real deal, the people who have “boots on the ground” at the destination and know it like the back of their hand.
Who always wants to tell me I'm wrong about this? Yep, people from agencies. Who tells me I'm right on? People from CVBs who do their own social media stuff.
Love to our agency-based compadres, but we see ourselves as much more effective and powerful by staying small and independent.
The concept I find most compelling and overlooked in this article is
that clients will demand their agencies begin to work together.
As a woman who makes her living from convincing clients to socialize
their business (whether externally with their audience/customers or
internally with their employees and vendors)
I am always holding the mirror to my business and asking, how
too can I apply these principles of Authenticity, Transparency and
Collaboration to my business practices.
As Social Media professionals, it is our task to lead the way on the
culture of collaboration. The VS conversation is leading us down
the same old path. The idea that either traditional agencies will
eventually be the winner in this game or the boutiques will undermine
the agencies and run off with their clients is keeping us stuck in
the old paradigm.
There is plenty of work to go around, for big and small agencies alike. Practically
every industry imaginable will have to face the truth that marketing,
advertising, pr, business management and sales (to name a few) must
become more social. None of us is in danger of a shortage of clients these days.
But the key to our long term survival, be it a traditional or boutique agency, is in how
well we WORK TOGETHER. It is no longer a DIY world but a DIT (together) one.
We spend all day creating strategies for our clients on how they can and should
collaborate with others and now we must turn that on our profession and change
the conversation from VS to how the heck are we going to make it work together.
No company is an island and with the current demands of digital marketing, a stronger
agency is the one with the most flexible and talented pool of people to draw from
that knows how to navigate the PR firm, the marketing agency and the ad world.
There is no escaping it, collaboration is the future. We can start now to define it and let others
find their way in our wake. Or we can continue to squabble over who the best agency to serve the client
will be. My guess is the agency that learns well to play with other is the one that will end up with
the most clients in the end.
Great points. It's certainly going to happen, as I mentioned in the post above about HR Block
So then your survey is fundamentally flawed if you let the respondent define the primary thing you are comparing. Boutique can mean different things to different people. Unless there are universal definitions I am unaware of.
As a Strategist at a “Traditional Ageny”, I have found everything you describe here to be the case for many of my accounts/clients. But I have also found rising trends/opportunity in Traditional Agencies to rebound after many Boutiques prove ineffective. The explosion of Boutiques you mention is some of the problem here. Let's be real: everybody and their dog is opening up a “ninja/guru/samarai” shop and there isn't always substantive scratch below the surface of a clever name and some college interns manning the twitter calendar. And so fancy-pants Boutiques are winning the gig, but then failing a few years in. Now, some Corporations are at fault because Boutiques are often disadvantaged and not at the table of macro strategy and busines goals, often there is lack of social saavy and leadership at the Corporation and thus no one really knows how to best leverage what they have. So many Boutiques are stuck in the ghetto of social as the Side-Hobby (no resources, not “serious business communications”). Some Traditional Agencies are at fault for the failure of these Boutiques because the political games and pace of business make integrated alignment a challenge, indeed.
A trend I see is Corporations (already confused about social) are having an increasingly hard time deciphering the good, the bad and the ugly amongst so many Boutiques (they ask me to help!) and its creating opportunities for the Big Agency to put some cohesion to the process (at minimum) or take the whole pie back (at maximum). Every brand has a unique need, but I am finding that more brands are looking for a lead dog (strategy and education) to integrate all these disciplines and/or agencies. And Traditional Agencies have to do an honest audit of themselves and decide whether they even want the day-to-day of what a Social Boutique (or PR Agency) is beholden to for their clients – it ain't free money, it demands resources, too and it ain't bad to let another Boutique focus sometimes. For me, I manage (and recommend) a different bespoke model for every brand we serve yet the common thread is: all my clients are looking to me (The Traditional Agency) to be the North Star guidance system even if we're not serving up the day-to-day tactical deployment.
Thanks Aki for your perspective. It's very difficult to sort out the real agencies (boutique and traditional), this is a topic I'll address in future research.
You say a lot of the early social spend is layered on by traditional agencies. These numbers seem too low to be anything robust like say a monitoring or community management product. So the assumption I would make is that they are mostly ad spends and eco-stystem. More specifically: Facebook ads and setting up Facebook, Twitter, Youtube, Blogs.
How are you defining boutique agency?
As a marketer, it can be very difficult to sort through all of the agency options. Currently, those decisions are being made based on social media's perceived importance to the business (with service providers often taking the lead), previous digital and social media experience with existing agencies, and the marketers own comfort level with social media. Marketers are currently being forced to go outside their existing agency roster to get the social media expertise they need and turn to specialists. However, the average brand director already manages somewhere between 5-10 agencies which is not an optimal strategy long-term.
As a result, I believe the real growth will start to come from the agencies that can provide expertise across several marketing disciplines. The key will be for social media or traditional agencies to expand beyond their core competency and get up the learning curve without hurting their credibility with clients as they “learn”. These will become the strategic partners clients will choose to help simplify their plans, create real synergy among communication vehicles, and ultimately drive topline growth.
A great example and similar to my post today The Madison Ave. Crash of 2010 “ Digital never sleeps. Boutique and solutions with key business goal in mind and a plan to achieve them is the future of what the digital web has to offer. Creative content, audience and metrics are the currency for sure.
Great post Jeremiah.
Carri, thanks for bringing up the SEO point. As a member of an SEO team working with several global brands, I know that with our methodology, tools and experience, we provide results for our clients that boutiques or gurus would not have been able to.
From my bias view, SEO and Social Shelfspace is not only beneficial, but critical for brands.
Julio, pardon my ignorance, but what is Social Shelfspace?
Many companies pay top dollar to poll customers on their experiences. Which is good because the voice of the customer can help create a new campaign or change a policy. I, however, believe that the secret sauce is with the employees. When the employees are given the WIIFM (what is in it for me) they become motivated and promoters of the companies goal. The agency can then build on that momentum and the client will get to its goal quicker than without employee support. @live_alpharetta
Fantastic piece of work, I found it really interesting as a social media consultant with clients in the beauty industry. Thank you! Kay
The boutique being hired typically handles one particular niche of a brands social presence, which they would have been hired to do anyways through a larger agency. The only thing that is really changing is that the client does not have to pay the huge mark up of the middle man for that need. Now instead of a larger agency juggling the variety of vendors it is the client who has it added to their workload. Typically after a year of this kind of “cost savings” they revert back to the larger agency to handle the efforts.
We see this with every new platform that comes out and it does not make sense for an agency to have an adopt every new technology policy. They would not be able to keep the lights. Social is what is talked about here but it is only one piece of what is going on the marketing world. We have mobile, enhanced experiences through touchscreen technology and augmented reality, new analytic and data mining tech and so on. Smaller boutiques pop up to cover the need of all these new toys and the ones that survive either are bought and consumed by corporate America or grow to add more traditional services to their lineup and prepare to be surpassed by the new startup with a great new SAAS feature.
The question is as an agency, are you the turtle or hare?
Is there a list that rates the Social Media Boutiques and System Integrators? It could be by ability to fulfill their consulting job, revenue, etc…….
Hi Jeremiah
This is certainly the experience Bendalls Group and Digital Intelligence are experiencing in the Australian market. Clients feel the agency model is restrictive and broken. They want fresh thinking and digital savvy thinking, that can align and help transform current operations, whether marketing or in other parts of their business, such as recruitment or investor relations. They want deep insights, learnings, the ability to digitise their businesses for the future. It means that like many industries (Music, research, DM and so on) the marketing and advertising industry is not isolated from the impact of digitisation on their business models. Its time to rip up the old model and get with the new. Happy new year to all.
Thanks for the post Jeremiah. Opportunities abound here for the smaller agency. They can be more nimble and do not necessarily have the tendency to clutch tightly to the past; as larger agencies must. Building a community with your customers..yes it does take time, and companies must be in it for the long haul.
Totally gladdens my heart as I read this. We are a boutique agency, and have been experiencing exactly what you have written here. Have had some excellent wins from mature companies. And we have managed to scale. We are a 70-member operation, exclusively focused on Social Media, which is at least 3 times as big (if not more) than the social media teams of any traditional agency in India. And we are recruiting – expect to be 100+ by end of March. Yes, mature corporations trust our specialized skills a lot more than ‘more of the same old stuff’ that traditional agencies seem to be giving them.
I particularly like your statement : Dont hire “gurus, samurai’s and ninjas”. Hire people who understand business goals and have the ability to relate to your business needs. This is true while looking for social media agency or a traditional digital agency
thanks, jeremiah, for keeping this going. Prior to starting Converseon, i was at WPP so have experienced the “social boutique” and holding company/traditional agency worlds up close. And to me it boils down to this: the traditional agency world reflects a legacy world that mirrors how clients are generally organized (PR versus marketing, etc) and not how the “real world” works today. It’s an antiquated and inefficient structure. Consumers don’t experience the world as “”paid” or “earned” – they just experience it as it is.
In a social world — at least the ideal state — those false delineations go away. The organization instead should be based around how humans actually communicate: listen, “operationalize,” engage, measure. The best of social organizations are simply scaling human communication through technology. As such, we believe the new model — and the model we have built — is part technology, part management consultancy and part agency. To the industry itself, it can seem confusing…(are you an agency or technology company or…?”). To enterprises, it’s pretty clear, we work to help you leverage the opportunities in social across the enterprise.
Over time legacy structures will give way to the way the world actually is in a social environment. It will take time but we see it happening. We would predict even more: that the future “AORs” will be socially driven entities like the emerging “boutiques” we see now. We are already seeing social agencies becoming digital AORs. It makes sense when viewed as social being a natural heart of digital engagement. We expect this to continue.
Good post and good debate. I think we’re at the very front end of this transformation.
Cheers.
Great article. Greatly appreciate your work
Digging this your highness.
Digging this your highness.
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