Reflections on the changing digital agency environment

We live in interesting times in the digital agency world – a time of constant change in our business landscape that provides both immense opportunity and a real threat to the survival of agencies that fail to adapt.

I’ve spent a lot of time thinking about this landscape over the last year or so. I’ve spoken with team members and peers in Canada, and with senior colleagues across our global network. As I’ve done so, I’ve highlighted five key landscape shifts that are changing the way that agencies and teams like ours need to operate:

1. Newly (re-)accelerated change in social networks
2. Less “social”, more “media”
3. Decline of community management (in some areas)
4. The (actual) year of mobile
5. Ubiquity of rich media

1. Newly (re-)accelerated change in social networks

As I look back at the last decade, often parse it out into three phases.

The first five years – 2006-2010 – were catalysed by constant change. This was the period when the current platforms all launched, and it felt like there was a new social media tool or network emerging every week. It was such a time of change that I would come into work early each day and block off time to catch up on the latest social media news. Companies realized the opportunity presented by engaging with their customers through these new channels, but we were still in a time when simply creating a Twitter or Facebook account would make headlines. Social media monitoring emerged as an important activity for companies during this time, and we saw a number of ground-breaking collaboration initiatives launched (Dell Ideastorm, My Starbucks Idea) that spoke to the power of harnessing two-way interaction.

Between 2010 and 2013 (or so), we saw things slow slightly. The dominant platforms then were largely the same ones as the previous five years, and while the evolution of those platforms required adaptation (Facebook introduced its news feed early in this window, for example) it didn’t feel like the same relentless barrage of constant landscape change. In the agency world we were focused on optimizing how we operated on those platforms – we got into heavy analysis on things like real-time activation, word choice, tone, character counts, day-parting etc.

For the last couple of years we’ve swung back into another window of innovation, driven in a significant part by the rise of smartphones and tablets, and by the major platforms monetizing following their IPOs. We’ve seen new platforms emerge – visual platforms Instagram and Snapchat, messaging platforms like Whatsapp, WeChat, etc. – and quickly amass enough users to significantly change the social media landscape. Meanwhile, the nature of others has been significantly changed by their shift from a focus on community to one on profitability.

The difference with this new wave of innovation is two-fold:

• Social media is no longer a niche phenomenon – it is actively building and shaping brands. While social platforms themselves aren’t highly trusted, we continue to see that “a person like me” remains one of the most trusted sources of information.
• We’re in the midst of a difficult economy – particularly in Canada, where the weakness of the Canadian dollar is driving costs up and profits down for many businesses. Budgets are tight, and there aren’t a lot of innovation-focused dollars to go around.

This means that in the midst of this rapid change, it’s harder and harder for both clients and agencies to innovate and stay up with the latest wave of technology without spreading already stretched budgets even thinner.

2. Less “social”, more “media”

Facebook Zero has impacted more than just the world’s largest social media platform – it has also paved the way for others to follow as they themselves push to monetize. Twitter just rolled out a new “while you were away”-type feature that shows top tweets at the top of your feed (while it’s opt-in now, it will soon be opt-out). Instagram reps have been telling brands for a while not to bother building their own organic followings, which is likely a signal that they’ll eventually follow Facebook’s path (they don’t even have a follower-building ad unit).

This has led to three key changes for agencies.

Social media is quickly pushing brands in the “media” direction and away from “social” – the thing that attracted many people to want to connect with companies in the first place. While the changes have in many ways benefited users – who are gaining increasingly personalized experiences – they are challenging for companies that want to connect with fans from a loyalty and retention standpoint. They cater to a media-buying model that is based much more in the traditional ‘interrupt and amplify’ world than that of community and connection.

(Side point – this may be leading to an erosion of broader trust in social networks)

Companies have re-focused on their own digital properties. We predicted this when we saw Facebook’s about-turn on organic reach, as some large companies debated whether to pull back on their social media activities given the unpredictability of the platforms in which they were investing and Facebook’s perceived bait-and-switch. As it turns out, two other trends piled on top of this: the growth in mobile and – in Ontario, at least– the impact of accessibility-focused legislation – did drive a spike in owned media programs over the last couple of years, as companies shifted some budgets towards those properties.

Lastly, this shift is also leading to a new agency dynamic, as different types of agencies find themselves competing in the same space. The blurring of the lines is nothing new (I wrote about this as far back as 2010), but the changing platforms mean these dynamics are continuing to shift. As a result, we’re seeing an ongoing cross-pollination of talent as between media, creative and PR agencies as people move ever more frequently between them and each looks to compete effectively. Depending on the strengths and weaknesses of the agencies in question, this may be net positive or negative for their competitive position.

3. Decline of community management (in some areas)

As push-focused marketing gains more traction on social channels and as social platforms limit brands’ abilities to organically reach the people who have shown affinity for them, many companies are shifting dollars away from community management and into media dollars. While there’s a strong case for social media as a customer service and loyalty platform, the shifting of dollars to media buying is entrenching many companies’ worldviews around social media in the pre-purchase phase of the customer lifecycle – the phase where, much as purists in the early days of social would hate to admit it, community management is ineffective as a results driver.

This shift is particularly noticeable in the consumer goods space, where economic factors and the overall health of the sector are coming into play:

• Marketing budgets are shrinking
• Low-cost content production is gaining traction
• Corporate acquisitions & efficiency plays are causing companies to in-source community management work

In some cases companies are even ceasing to fund Canadian-focused programs at all, instead shifting to consolidated programs across North America. Traditional arguments about Canada’s multicultural – and multilingual – landscape aren’t stemming the flow – Canada is just too small of a market in the eyes of many multinationals to warrant separate investment, so they play the law of averages and bank on enough of their generic North American digital content being relevant to gain some benefit to match against the cost savings. Sorry, Quebec.

This isn’t happening across the board – we’re still seeing community management as an important activity in customer service-heavy industries (e.g. consumer tech companies) where people look online for help, regulated industries which are finally beginning to explore social media and which are required to monitor conversations, and service industries where responsiveness/premium experiences are vital.

In those sectors where it is having an impact, the onus is on agencies on two fronts – educating client organizations on the importance of looking at the full customer lifecycle, and figuring out alternative means of achieving client objectives.

4. The (actual) year of mobile

If you look at any trends deck over the last five years (including my own), they’ve all cited “the year of mobile” pretty much every year.

2015 was actually the year of mobile.

• The emerging social media platforms are overwhelmingly mobile-first; many are mobile-only.
• Mobile use dominates on the older social networks, too.
• Mobile and location-focused services are enabling a new wave of industry innovation.
• Mobile commerce is on the rise.
• On Google, mobile search surpassed desktop search for the first time.
• Google actually tweaked its algorithm to punish non-mobile friendly sites.

Mobile is challenging us in new ways – to plan differently, to design differently, to personalize differently and to track & measure differently. It requires new skill sets, new technologies and new ways of thinking that agencies haven’t needed before. It requires a whole-scale retooling of the agency skill set.

5. Ubiquity of rich media

Another factor that isn’t so much a trend as just a pervasive reality, the days of text-only content are well and truly over. Facebook has long since made the switch to put visual content first. Twitter is following closely behind. Instagram and Snapchat are visual-led. Periscope, which is beginning to gain traction as Twitter integrates it further, is the same.

The implications of this reality are two-fold.

Firstly, the breadth of content required means that gone are the days of community managers commonly handling everything – a modern social channel requires graphic design, copywriting, video production and community management skillsets (not to mention analytics and paid media). While you may be able to find the occasional unicorn who can do all of the above, it would be hard to find someone who can do it all well. Further, as PR agencies onboard skillsets from creative and media agencies, those skillsets are often spread amongst multiple teams. None of this comes cheaply, but that’s increasingly the demand from clients.

Again, this isn’t new – ad agencies have always operated this way, and it’s not new on the PR agency side either – I remember breaking content creation out from community management on a global client’s social media account back in 2012.

Secondly, this exacerbates the tension around shrinking budgets and the focus on nimbleness. Companies are forced to wrestle with the trade-off between high-end, polished content and low-cost content production, and with the increasing importance of native advertising on social media, it’s not a trade-off that comes lightly.

The net impact of all of this is that agencies are again challenged to do more with less, and in more complex environment.

Your mileage may vary

As I mentioned, I’ve spent the last year thinking a lot about these kinds of landscape shifts – these aren’t trends that will affect your next campaign, but they are significant shifts that so much trends as broad-sweeping contextual changes that have the potential to shift agency strategy.

While I can’t share how we’re responding to these shifts at Edelman (that part is my day job), we’re certainly thinking about them and they’re at the forefront of our minds as we look ahead to the next few years.

If you’re not already thinking about shifts like these and their impact on your business, now may be the time.