Ad Agencies and the Web

I'm watching MadMen right now, and the presentation last Thursday got me thinking about traditional advertising agencies. If the Internet has upset the traditional advertising methods/media, then how have the ad agencies responded? Have they adapted by opening their own IT centers for internet advertising? Did they just fill in their gaps by acquiring internet start-ups? Did any of them actually die?

According to the IbisWorld report on advertising agencies, the largest agencies have become one-stop shops for all their clients' needs. They did this through both internal growth (perhaps by luring away tech talent from other companies) and acquisitions. However, their profitability has been affected substantially by the fact that their clients are seeking cheaper ways to reach customers, such as through direct e-mail. (This is problematic because of the agencies' reliance on commission revenue.) They also got larger by acquiring smaller agencies around the world to provide further one-stop shopping for large multi-national companies.

The smaller niche agencies are also thriving, especially those that specialize in online advertising. This leaves very little work left for the medium-sized firms. Some of those have thus been casualties of the internet age.

It was really interesting to see the impact that the internet has had on the industry. There were even things I had not thought of, like clients demanding more accountability for the results of advertising - something which is easier to measure on the internet.